Chapter 1: Introduction

SME finance is the funding of small and medium sized enterprises, and represents a major function of the general business finance market in which capital for different types of firms are supplied, acquired, and costed or priced. Capital is supplied through the business finance market in the form of bank loans and overdrafts; leasing and hirepurchase arrangements; equity/corporate bond issues; venture capital or private equity; and asset-based finance such as factoring and invoice discounting. Small & Medium Enterprises, commonly known as SMEs, are relating to three types of sectors,( Service, Business & Industry ) typically labor intensive industries with relatively low capital intensity. For a country like Bangladesh where labor is abundant and capital scarce, SME plays a significant role in employment generation, poverty reduction and overall economic growth of our country. SMEs may not always have the same access to banks and financial institutions as larger firms. Banks are reluctant to expand their SME credit portfolio because lending to SMEs was not considered to be attractive and profitable undertaking. SMEs are regarded as high risk borrowers because of their low capitalization, insufficient assets and inability to comply with collateral requirements of the banks. Administrative costs are also higher because of close monitoring and supervision and credit management of the SME portfolio. Despite all these facts, banks and financial institutions, particularly those in the private sector, have been providing finance to the SMEs and the overall SME portfolio is on the increase. Standard Chartered Bank started its SME financing program in September 2003. It was known as Business Financial Services or BFS. Under BFS, SCB offered a number of products installment loans, overdraft facilities; guarantee etc. Installment Loan, which later became known as Business Installment Loan (BIL) became its most popular product.

Page 1 of 59

In June 2005, SCB segmented its SME portfolio Small Business (SB) and Medium Enterprises (ME). Although the Bank offered the ME segment a variety of products with focus on trade products, the only product available to the SB customers was BIL. To outfit the financing needs of the SMEs and to make financing more available to them, SCB decided to develop a new product, the prerequisite of which was to determine the financing need of this segment. The author was entrusted with the responsibility of undertaking base research to design a new product better suited to the mentioned customer segment. This project served as the internship project for the author as well. There are some offer with BIL to fulfill the customers needs. These offers are called bundle offer. In this offer ,customers can get another product with BIL to fulfill their needs. Personal loan (PL) or Over Draft (OD) are include in the bundle offer with BIL. There is another product relating to SADIQ finance of SME is under process to launch.

1.1.

Rational of the study

This report has been prepared as a requirement of the internship program, after the completion of the MBA program of Jagannath University. The main objective of the internship program is to initialize the students with the actual working experience and an exposure to the world outside the theoretical explanation. This report is based upon the Standard Chartered Bank where, I, Zohaer Morshed was placed for the internship program under the guidance of my faculty advisor Hosne Ara Begum. and organization supervisor Md. Tarik Jamil.

Page 2 of 59

1.2. Competence
1.2.1. Project The scope of this project is limited to make an analysis of the general banking and SME banking procedure of SCB in the Asset Operation and to study the comprehensive process of Business Installment Loan (BIL) and how it works. 1.2.2. Information The models and methods used in this project, unless otherwise stated, has been based on the data obtained from the internal sources, which has been included in the report with the permission of the supervisor, the use of such data being restricted to academic purposes only.

1.3. Objectives of the report

1.3.1. General Objective The general objective for the project is to make an analysis of the general banking and SME banking procedure of SCB in the Asset Operation and to study the comprehensive process of Business Installment Loan (BIL), its disbursement procedure and recovery process. 1.3.2. Specific Objectives The internship project aspired to attain the following specific objectives A small brief of the banking sector of Bangladesh. History of Standard Chartered Bank. To study the existing Small Business (SB) portfolio of SCB The comprehensive process of Business Installment Loan (BIL) and how it reaches to the customer. Lastly recommendation that will improve the whole process.

Page 3 of 59

1.4. Limitations
Although best efforts have been made for the preparation of this internship project and the report of the highest standard, some constraints, as described below, may not have allowed the report to be as proximate to perfection. 1.4.1. Information Constraints It was very difficult for me to get the information and obtain some practical ideas regarding loan department and their expectation and opportunities regarding my topic.

1.4.2. Confidentiality Constraints On a few occasions, the learning from the internship project could not be shared in this report due to confidentiality considerations, especially when it came to information regarding SCBs strategy or information on any of SCBs customers.

1.5. Methodology
This report is prepared on the basis of Information gathered mainly from two different sources. Primary sources Secondary sources 1.5.1. Primary Sources The primary source of information for this report has been the interviews with different business houses which have applied to SCB to avail its SME facilities. 1.5.2. Secondary Sources Information gathered from the database of the Bank has also been used to prepare this report. Different websites have been consulted to have an overview of the SME segment in Bangladesh.

Page 4 of 59

Chapter 2: Organization Overview

Standard Chartered Bank of Bangladesh
2.1. Overview
Standard chartered bank is worlds one of the fastest growing financial institution, it has also a history of over 150 years. Including all subsidiaries, associates and joint ventures SCB has stretched its 1,200 branches in over 56 countries at the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the United States of America. Standard Chartered Bank is Asias top syndication bank and is also strong in debt financing. As one of the worlds most international banks, Standard Chartered Bank employs over 44,000 people representing 89 nationalities, worldwide. The Standard Chartered Group is remarkable banking business. Though its root is from authentic British, its operational division, its set of connections or network and indeed its profit stream are overwhelmingly international. The name Standard Chartered comes from two original banks from which it was founded. One of the banks is the Chartered Bank of India, Australia and China and the other bank is the Standard Bank of British South Africa. The Chartered Bank was founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853 while the Standard Bank was founded by John Paterson in the Cape Province of South Africa in 1862. In 1969, the decision was made by Chartered and by Standard to undergo a friendly merger. On January 30, 1970 the new shares of the Standard and Chartered Banking Group Limited were listed in the London Stock Exchange. Queen Elizabeth II opened headquarters of the Standard Chartered Bank PLC in March 20, 1986. Becoming stronger after merger, Standard Chartered Bank embarked upon serious expansion in Europe and Page 5 of 59

United States. The Standard Chartered Merchant Bank was built up from a number of acquisitions made during the 1990s. In the thirty years, Standard Chartered Bank has experienced continuous growth, which led to its becoming one of the top 100 listed banks in the world. It was also judge the best bank in the Asia-Pacific region in 1993 and 1994 for its rate and excellent service.

2.2. Brief History

The Standard Chartered Group was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa founded in 1863, and the Chartered Bank of India, Australia and China, founded in 1853. Both companies were keen to capitalize on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa. 2.2.1. Timeline of Major Events Both The Chartered Bank and The Standard Bank had rich history of their own. The timeline of major events are as follows The Chartered Bank Funded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853 Chartered opened its first branches in Mumbai (Bombay), Calcutta and Shanghai in 1858, followed by Hong Kong and Singapore in 1859 Traditional business was in cotton from Mumbai (Bombay), indigo and tea from Calcutta, rice from Burma, sugar from Java, tobacco from Sumatra, hemp from Manila and silk from Yokohama Played a major role in the development of trade with the East which followed the opening of the Suez Canal in 1869, and the extension of the telegraph to China in 1871 In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Banks Cyprus Branches. This established a presence in the Gulf Page 6 of 59

The Standard Chartered Bank

Founded in the Cape Province of South Africa in 1862 by John Paterson. Commenced business in Port Elizabeth, South Africa, in January 1863 Was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885 Expanded in Southern, Central and Eastern Africa and by 1953 had 600 offices In 1965, it merged with the Bank of West Africa expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone. In 1969, the decision was made by Chartered and by Standard to undergo a friendly merger. All was going well until 1986, when a hostile takeover bid was made for the Group by Lloyds Bank of the United Kingdom. When the bid was defeated, Standard Chartered entered a period of change. Provisions had to be made against third world debt exposure and loans to corporations and entrepreneurs who could not meet their commitments. Standard Chartered began a series of divestments notably in the United States and South Africa, and also entered into a number of asset sales. From the early 90s, SCB has focused on developing its strong franchises in Asia, the Middle East and Africa using its operations in the United Kingdom and North America to provide customers with a bridge between these markets. Secondly, it would focus on consumer, corporate and institutional banking, and on the provision of treasury services areas in which the Group had particular strength and expertise. In the new millennium SCB acquired Grindlays Bank from the ANZ Group and the Chase Consumer Banking operations in Hong Kong in 2000.

Page 7 of 59

2.2.2. Strategic Alliances and Acquisitions 2005 ushered in a historic year for SCB as it achieved several milestones with a number of strategic alliances and acquisitions that will extend the Banks customer or geographic reach and broaden the product range. Completed, rebranded and successfully integrated SC First Bank in Korea, which to date is the biggest acquisition in SCBs history Completed full integration between Standard Chartered Bank Thailand and Standard Chartered Nakornthon Bank in October, 2005 Formed strategic alliances with Fleming Family & Partners to expand private wealth management in Asia and the Middle East Acquired stakes in ACB Vietnam and Travelex Acquired the business operations of American Express Bank in Bangladesh Acquired a stake in Bohai Bank in Tianjin, China, making SCB the first foreign bank to be allowed a stake in a local bank in China.

2.3. Business & Presence

Standard Chartered derives over 90 per cent of profits from Asia, Africa and the Middle East. Serving both Consumer and Wholesale Banking customers worldwide, the Bank combines deep local knowledge with global capability to offer a wide range of products and services as well as award-winning solutions.

Figure 2: Standard Chartered Bank Presence Figure 2: Standard Chartered Bank Presence

Page 8 of 59

2.3.1. Establishment of Standard Chartered Bank around the world

Country
United Kingdom China, India, Sri Lanka Hong Kong, Singapore Indonesia, Pakistan Philippines Malaysia Japan Zimbabwe The Gambia, Sierra Leone, Thailand Ghana Botswana USA Bangladesh Zambia Kenya Uganda Tanzania Bahrain Jordan Korea Qatar Brunei, UAE Australia Mexico, Oman Peru Jersey Brazil Venezuela Falkland Islands, Macau Taiwan Cameroon Nepal Vietnam Cambodia, South Africa Iran Colombia Laos, Argentina Nigeria Lebanon Cote dIvoire Mauritius

Year Established
1853 1858 1859 1863 1872 1875 1880 1892 1894 1896 1897 1902 1905 1906 1911 1912 1917 1920 1925 1929 1950 1958 1964 1968 1973 1978 1979 1980 1983 1985 1986 1987 1990 1992 1993 1995 1996 1999 2000 2001 2002

Page 9 of 59

Turkey Afghanistan

2003 2004 Table 1: Establishment of Standard Chartered Bank

2.4. BUSINESS HIGHLIGHTS Performance

Our income stream is highly diversified, with five of our markets delivering over $1 billion in income All geographies, with the exception of Americas, UK and Europe, delivered positive income growth with Africa, India and Other Asia Pacific delivering double-digit income growth Wholesale Banking revenues in Singapore crossed $1 billion for the first time Two geographies now generate over $1 billion in profit, and India became our most profitable market with profits of $1.2

Key highlights
Profit before taxation by region 2010

Markets Operating income growth %

5 9 9 10

Country
Hong Kong Singapore Korea Other Asia Pacific

Operating income $million

2,500 1,738 1,698 3,165

Page 10 of 59

Country
India Middle East and Other South Asia Africa Americas, UK and Europe Total

Operating income $million

2,028 2,167 1,246 1,520 16,062

Operating income growth %

12 4 14 (16) 6

Independent Auditors report to the members of Standard Chartered PLC

We have audited the financial statements of the Group (Standard Chartered PLC and its subsidiaries) and Company (Standard Chartered PLC) (together referred to as the financial statements) for the year ended 31 December 2010 as set out in the financial statements and the notes to the financial statements. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Companys members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Companys members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Page 11 of 59

Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards (APBs) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APBs website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion:

The financial statements give a true and fair view of the state of the Groups and of the Companys affairs as at 31 December 2010 and of the Groups profit for the year then ended; The Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; The Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; The financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation

Opinion on other matters prescribed by the Companies Act 2010 In our opinion:

The part of the Directors remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; The information given in the Directors report, which include information presented in the Chairmans statement, the Group Chief Executives review and the Financial and Business reviews that are cross referenced from the Report of the directors, for the financial year for which the financial statements are prepared is consistent with the financial statements; and; Information given in the Corporate governance section with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements

Matters on which we are required to report by exception We have nothing to report in respect of the following. Under the Companies Act 2010 we are required to report to you if, in our opinion: Page 12 of 59

Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or The Company financial statements and the part of the Directors remuneration report to be audited are not in agreement with the accounting records and returns; or Certain disclosures of directors remuneration specified by law are not made; or We have not received all the information and explanations we require for our audit; or A Corporate governance statement has not been prepared by the company.

Under the Listing Rules we are required to review:

The Report of the directors, in relation to going concern; The part of the Corporate governance section relating to the Companys compliance with the nine provisions of the June 2008 Combined Code specified for our review; and Certain elements of the report to shareholders by the Board on directors' remuneration.

Consolidated income statement

For the year ended 31 December 2010

Page 13 of 59

2010 Notes $million Interest income Interest expense Net interest income Fees and commission income Fees and commission expense Net trading income Other operating income Non-interest income Operating income Staff costs Premises costs General administrative expenses Depreciation and amortisation Operating expenses Operating profit before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions Other impairment Profit from associates Profit before taxation 10 11 8 8 8 9 5 5 6 7 3 4 13,500

2009 $million 12,926

(5,030) (5,303) 8,470 4,556 (318) 2,577 777 7,592 16,062 7,623 3,824 (454) 2,890 1,301 7,561 15,184

(5,765) (4,912) (800) (698)

(1,899) (1,822) (559) (520)

(9,023) (7,952) 7,039 7,232

(883) (2,000) (76) 42 6,122 (102) 21 5,151

Taxation

12

(1,708) (1,674) Page 14 of 59

2010 Notes $million Profit for the year 4,414

2009 $million 3,477

Profit attributable to: Non-controlling interests Parent company shareholders Profit for the year 37 82 4,332 4,414 97 3,380 3,477

Earnings per share: Basic earnings per ordinary share (cents) Diluted earnings per ordinary share (cents) 14 14 196.3 193.0 161.81 159.31

Consolidated statement of comprehensive income

For the year ended 31 December 2010

Page 15 of 59

Notes Profit for the year Other comprehensive income: Exchange differences on translation of foreign operations: Net gains taken to equity Net losses on net investment hedges Reclassified to income statement on change of control

2010 $million 4,414

2009 $million 3,477

842 (77) 4

799 (199)

Actuarial gains/(losses) on retirement benefit obligations Share of other comprehensive income from associates Available-for-sale investments: Net valuation gains taken to equity Reclassified to income statement Cash flow hedges: Net gains taken to equity Reclassified to income statement Taxation relating to components of other comprehensive income Other comprehensive income for the year, net of taxation Total comprehensive income for the year

35

83 (5)

(150) 19

786 (284)

455 (580)

42 17 12 (101) 1,307 5,721

14 106 62 526 4,003

Attributable to: Non-controlling interests Parent company shareholders 37 112 5,609 5,721 111 3,892 4,003

Consolidated statement of changes in equity

Page 16 of 59

For the year ended 31 December 2010

Share premium capital account $million $million

Share

Capital and Parent capital Available- Cash flow company Nonredemption Merger for-sale hedge Translation Retained shareholders controlling reserve1 reserve reserve reserve reserve earnings equity interests Total $million $million $million $million $million $million $million $million $million 18 5,617 (5) (83) (1,784) 12,686 3,380 22,140 3,380 555 97 22,695 3,477

At 1 January 2009 Profit for the year Other comprehensive income Distributions Shares issued, net of expenses Net own shares adjustment Share option expense, net of taxation Capitalised on scrip dividend Dividends, net of scrip Other increases At 31 December 2009 Profit for the year Other comprehensive income Distributions Shares issued, net of expenses Net own shares adjustment Share option expense, net of taxation Capitalised on scrip dividend Dividends, net of scrip Other increases At 31 December 2010

948

4,743

44

106

1,667

(88)

98

599

(97)2 (81)

512 1,817 (81)

14 (87)

526 (87) 1,817 (81)

21 1,013

(21) 4,828

18

7,284

(93)

15

(1,185)

311 (739) 15,460 4,332

311 (739) 27,340 4,332

1 580 82

311 (739) 1 27,920 4,414

147

572

5,137

401

42

773

613 (135)

1,277 5,856 (135)

30 (54)

1,307 (54) 5,856 (135)

14 1,174

(14) 5,386

18

12,421

308

57

(412)

296 (745) (9) 19,260

296 (745) (9) 38,212

15 653

296 (745) 6 38,865

Cash Flow Statement

For the year ended 31 December 2010

Page 17 of 59

Group

Company

2010 Notes $million 2009 1 2010 2009 1 $million $million $million Cash flows from operating activities Profit before taxation Adjustments for: Non-cash items included within income statement Change in operating assets Change in operating liabilities Contributions to defined benefit schemes UK and overseas taxes paid Net cash (used in)/from operating activities Net cash flows from investing activities Purchase of property, plant and equipment Disposal of property, plant and equipment Acquisition of investment in subsidiaries, associates, and joint ventures, net of cash acquired Purchase of investment securities Disposal and maturity of investment securities Dividends received from investment in subsidiaries and associates Net cash from/(used in) investing activities Net cash flows from financing activities Issue of ordinary and preference share capital, net of expenses Purchase of own shares
2

6,122

5,151

732

373

39

1,874

1,760 2,962 (13,293) (124) (1,210) (4,754)

(668) (332) 882 614

(228) (227) 328 (25) 221

39 (82,334) 39 59,274 (150) (1,421) (16,635)

(370) 183 (545) (114,076) (129,739) 116,658 22 1,872

(261) 218

(68) (1,000) (2,500) 126,678 11 (3,161) 770 (230) (3,969) (1,800) 331

5,856 (182) 47 (773) 770 (1,549) (956) 13,853 (11,146) (155) (644) 5,121 (9,642) 68,073 1,303 40 59,734

1,817 (103) 22 (872) 2,063 (2,440) (539) 11,577 (8,828) (188) (638) 1,871 (6,044) 73,699 418 68,073

5,856 (182) 47 (104) (4) (315) 3,236 (40) (101) (644) 7,749 8,133 5,798 13,931

1,817 (103) 22 (129) (93) 3,468 (101) (638) 4,243 495 5,303 5,798

Exercise of share options through ESOP Interest paid on subordinated liabilities Gross proceeds from issue of subordinated liabilities Repayment of subordinated liabilities Interest paid on senior debts Gross proceeds from issue of senior debts Repayment of senior debts Dividends paid to non-controlling interests and preference shareholders, net of scrip Dividends paid to ordinary shareholders, net of scrip Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate movements on cash and cash equivalents Cash and cash equivalents at end of year

Company balance sheet

As at 31 December 2010

Page 18 of 59

Notes
Non-current assets

2010 $million

2009 $million

Investments in subsidiary undertakings

23

14,291

12,906

Current assets

Derivative financial instruments

50

441

291

Investment securities

50

2,725

2,725

Amounts owed by subsidiary undertakings

13,931

5,798

Taxation

48

38

17,145

8,852

Current liabilities

Derivative financial instruments

50

90

25

Other creditors

274

229

Deferred income

48

18

18

382

272

Net current assets

16,763

8,580

Page 19 of 59

Notes
Total assets less current liabilities

2010 $million
31,054

2009 $million
21,486

Non-current liabilities

Debt securities in issue

50

8,343

4,770

Deferred income

48

73

91

Subordinated liabilities and other borrowed funds

33

1,730

1,751

10,146

6,612

Total assets less liabilities

20,908

14,874

Equity

Share capital

36

1,174

1,013

Reserves

19,734

13,861

Total equity

20,908

14,874

2.5. Standard Chartered Bank in Bangladesh

2.5.1. Introduction
Page 20 of 59

The Chartered Bank opened its operation in Chittagong in 1947 that was, at that time the eastern region of the newly created Pakistan. The branch opened mainly to facilitate the post war re-establishment and expansion in South East Asia. SCB is the only foreign bank that did not close its door during the liberation war and it helped to reestablish Bangladesh Banks files and database which was damaged during the war. The bank increasingly invested in people, technology and premises as its business grew in relation to the countrys thriving economy. The Chartered Bank opened another branch in Dhaka in 1966, where it is still headquartered. After the merger of the Chartered Bank with the Standard Bank in 1969, the Standard Chartered Bank took up a program of expansion. It increasingly invested in people; technology and premises as its business grew in relation to the countrys economy. In 1993, there was an organizational re-structuring, which led to a substantial expansion of the Banks business. At present the Bank has 18 branches in Dhaka, it also have one offshore banking unit inside the Dhaka Export Processing zone at Savar, one branch in Narayanganj, three branches in Chittagong, one branch in Khulna, one branch in Sylhet, one branch in Bogra. In the year 1999, Standard Chartered has acquired the operation of Grindlays Bank in the Middle East and South East Asian countries. Former Grindlays Bank started its journey in Bangladesh in 1905 under the name of Grindlays Bank. The Bank presently has 26 outlets in 5 cities in the country. The network of SCB Bank in Bangladesh includes: 20 Branches in Dhaka city 1 Branches in Savar 1 Branch in Narayanganj 4 Branches in Chittagong 1 Branch in Khulna 1 Branch in Sylhet Page 21 of 59

1 Branch in Bogra SCB engages itself for providing best quality banking service in retail, commercial and corporate banking segments. The countries top enterprises; multinationals, large local corporations and many financial institutions are served by SCB. With total asset based of BDT 17.5 billion and annual turnover of BDT 1.78 billion, SCB in Bangladesh is among the top performing multinational bank.
2.5.2. SCB Bangladesh at a Glance

Year of Establishment Head Office Service Coverage & Customers Products

1948

SCB House, 67 Gulshan Avenue, Dhaka

Business or Corporate Financial Services

Retail or consumer Financial Services Savings & Deposit services Loan products Corporate & Institutional services
Number of Offices (29)
20 Branches in Dhaka city 1 off Shore banking unit at EPZ in Savar 1 Branch in Narayanganj 4 Branches in Chittagong 1 Branch in Khulna 1 Branch in Sylhet 1 Branch in Bogra

Number of ATM's Number of Bills Pay Centers

40 ATM Booths 4 (Dilkusha, Gulshan, Dhanmondi 2, Banani)

Table 2: SCB Bangladesh at a Glance

2.5.3. Chain of Command

Standard Chartered Bank in every country follows a hierarchy pattern of command. The chief Executive Officer (CEO) for the country reports to the respective regional Manager. Page 22 of 59

All other departmental Heads at the headquarters report to the country CEO. Managers or senior Managers report to the divisional heads. The respective Branch Managers or BSSM are responsible for the performance of their unit. Each branch is organized functionally along line divisions with some support facilities and the manger assigns tasks to his/her subordinate personnel and supervises their performance. Organogram of SCB Bangladesh is shown below:

Chief Executive Officer (CEO)

Head of Corporate & Institution Head of Finance

Head of Consumer

Head of Global Markets Senior Credit Officer Head of Information

Chief Operating Officer Head of Legal & Compliance Head of Corporate & External

Head of HR

Head of GSAM

Head of Institutional

Figure 6: Organogram of SCB Bangladesh

2.5.4. Acquisition of ANZ Grindlays Bank SCB has taken advantage of the expansion opportunities. Buying Grind lays from ANZ now propels it to the number one position amongst the foreign banks in Bangladesh. SCB had also climbed from number five to number one among international banks in India. At Page 23 of 59

1.34 billion U.S dollars, it is hard to complaint that SCB has overpaid. The financial ease is less compelling for ANZ shareholders, as there are advantages to getting out of a strategically peripheral business. This acquisition of Grind lays Bank has added 6000 employees and 4 countries to SCBs existing network of 27,000 employees and 570 offices in 50 countries. The end result is that Standard Chartered, which went into the 1997 Asian Crisis with strong business in Hong Kong, Singapore and Malaysia, emerges with additional core markets in India and Thailand. The deal has made Standard Chartered the largest foreign bank by assets in India, Pakistan and Bangladesh and the second largest in Sri Lanka and the United Arab Emirates. The bank had been seeking to expand in the region since the end of the Asian economic crisis, and has finally become successful in its expansion. The primary goal of the integration is to combine the best of both companies, and put right people in the right jobs on the basis of fairness and equitability. 2.5.5. Acquisition of American Express Bank Standard Chartered Bank successfully completed the purchase of American Express Bank Ltds business and branches in Bangladesh on 31st July 2005. Over a three month transition period ended on 31st October, 2005, and all the assets and liabilities of American Express, including customers deposits and loans had been transferred to Standard Chartered. American Express had ceased to operate as a commercial bank in Bangladesh from 1st November, 2005 and all its branches and cash booths had been converted to the SCB brand and operating platform as on such date.

2.5.6. Business & Support Functions of SCB

The functional areas of SCB are broadly divided in to two major heads Business Functions and Support Functions, details of which have been furnished below

Page 24 of 59

SCB BANGLADESH

Business Function Corporate Banking

Support Function Service Delivery

Custodial Services Treasury

Corporate Affairs

Finance & Administration Credit

Institutional

Consumer Banking Card Division

Information Technology Legal & Compliance Human Resource

Group Special Asset Management

Figure 7: BUSINESS & SUPPORT FUNCTIONS

Chapter 3: Conceptual Framework

Consumer Banking
Page 25 of 59

SCB Consumer Bank (CB) delivers banking solutions to individual clients. CB has the following units Personal Loan (PL) o Cash Line finance (CLF) o Flexi o Islamic personal finance (IPF) o Staff PL SME Banking & LAP o Business Installment Loan (BIL) o Loan against property (LAP) o Over draft (OD) Auto (AL) o Auto Loan(AL) o Islamic auto finance (IAF) o Staff auto loan Mortgage (ML) o Mortgage loan (ML) o Sadiq home finance (SHF) o Staff house building finance (SHBL) Wealth Management (WM) National Sales (NS) Shared Distribution (SD) Consumer Credit & Collections (CCU) Credit Information Burro (CIB)

The first four are known as the value centers (VC). WM is the liability VC, while the other 3 are the asset VCs. VCs are the owners of the respective products and subproducts. They are also responsible for development of new products, promotion & sales

Page 26 of 59

of all their products and maintenance of their portfolio. The last one is the most important part nowadays in every bank because of the order of Bangladesh Bank`s new regulation. SD & NS are distribution channels. CCU is the support function. Each unit is described in brief in the following section.

3.1. PERSONAL LOAN (PL)

This VC is the owner of personal loan (PL). The sub products include gift card, travel cards, unsecured/ partially secured personal loans, Islamic finance etc.

3.2. SME BANKING

This VC is the owner of all products offered to the SME clients. The major product of this unit is Business Installment Loan (BIL). SME VC also offers trade products (LC, LATR, RL, LBD etc.) to its client.

3.3. AUTO
Auto VC is the owner of 2 products - AL & IPF, and all the sub products. They are also responsible for all the legal matters pertaining to these products.

3.4 MERTGAGE
Mortgage VC is the owner of 3 products ML,SHBL & SHF, and all the sub products. They are also responsible for all the legal matters pertaining to these products.

3.5. Wealth Management (WM)

This VC is the owner of all liability products offered by SCB to both its corporate & individual clients. The range of product includes different savings accounts, transactional accounts, savings schemes etc.

3.6. NATIONAL SALES (NS)

Page 27 of 59

Each VC has its own sales team. NS is the coordinator of all the sales teams. There are about one thousand DSRs, who are contractual employees of the Bank, working under NS. DSRs are supervised by FTEs in charge of respective sales teams.

3.7. SHARED DISTRIBUTION (SD)

SD is the owner of all 26 branches and 35 ATMs of SCB. They are also responsible for maintaining the strategic alliance with Dutch Bangla Bank Limited (DBBL) to share their 140 ATMs. SCB branches are responsible for selling all the products and services offered by the Bank.

3.8. CONSUMER CREDIT & COLLECTION (CCU)

Consumer Credit reviews and approves credit facilities proposed by the asset VCs for their clients. Credit is responsible for deciding on how much risk exposure to take on any customer. Collection unit is responsible for monitoring repayment of loan facilities extended to various customers and recovery of default facilities. They are also authorized to take legal actions against the defaulter customers if deemed necessary. Collection tries to reschedule the whole process if the customer is unable to make proper installments. If there are a number of defaults they try to reschedule by lowering the interest rate, other liabilities to be reduced, settle loan amount, reduction of processing fees and stamp charge to reduce EMI (Equal monthly installments). Standard Chartered bank also offers the following loans for their consumers. These are briefly discussed below.

3.8 CREDIT INFORMATION BURRO (CIB) It is the most important department relating to the Bangladesh Bank (CIB). All kind of great amount of loan must contain CIB according to BB regulation.
PERSONAL LOAN Page 28 of 59

As the name indicates, a personal loan is a lump sum advance to a borrower to meet his personal requirements. The debt is repayable in installments spread over a period of time. Operations are not permitted on the loan account, as in the case of cash credit or- an overdraft account. The loan amount may range from BDT 60,000.00 to BDT 10, 00,000.00. The customer can choose to repay the loan in 12 to 60 equal monthly installments depending on the loan amount. Personal loan is given for the following reasons: Purchase of miscellaneous household appliances; Purchase of Personal computers; Purchase of Audio-Video equipment; Purchase of Furniture; Hospitalization of other emergency medical needs; House Renovation; Purchase of office equipment/ accessories; Office Renovation; Marriage in the family; Advance rent payments; Holiday expenses; Education or professional training; CASH LINE Cash line is a secured credit facility against Fixed Deposits, ICB Unit Certificates. The loan taker can borrow up to 90% of his / her / their security value and enjoy the benefits of readily available funds even as their investment continues to earn interest for them. Cash line has the right solution to the customers when they have an urgent need for cash that couldn't be met because their money was all tied up in investment. FLEXT LOAN Flexi loan from Standard Chartered Bank is a loan facility that has been customer designed to fit the customers needs. This loan is partially secured personal installment Page 29 of 59

loan to salaried executives, businessmen and self employed professionals. It lets the customer enjoy a higher standard of living while providing the customer convenience of repaying the loan over a maximum period of 60 months. The loan amount varies between a minimum of BDT 1, 00, 000, 00 and a maximum of BDT 40, 00, 000, 00. AUTO LOAN Auto loan is a fixed loan facility given for the purpose of purchasing an automobile. The loan is secured by the automobile/vehicle. This loan lets the customer drive their dream car while providing the customer the convenience of repaying the loan over a maximum period of 48 months for reconditioned vehicles and 60 months for new vehicles. HOME LOAN Home loan of SCB offers an attractive lowest rate of 9.98%, with no hidden cost, Personal security deposit or guarantee is not required to avail this respective loan. This loan can be applied by any personal who is a job holder, business person, national citizen staying abroad who has monthly income of only BDT 25,000. Besides the applied person must be 25 years. Moreover 80% cost of the new home can be taken as loan from the bank, where the amount can be maximum 75 lacks. The recent loan processing and documentation fee is only 2% of the loan amount. BUSINESS LOAN The business loan of standard chartered bank is one of the most flexible of its kind available in the market. It will help to meet the financial needs for business expansion. It can make long term investments with business loan and build up the equity by repaying the loan in convenient monthly installments. This facility can be avail through simple documentations and against competitive cash security. The detail description of the business loan has been described in the report afterwards.

Page 30 of 59

Chapter: 4 -SME Banking (Business Installment Loan) in Standard Chartered Bank

4.1. Introduction SCB started financing in the SME segment in September 2003. It was known as Business Financial Services (BFS). Under BFS, several products were offered installment loan, which later became known as Business Installment Loan (BIL), overdraft facilities, guarantees etc. Business installment loan (BIL) is a term loan to fund the expansion of business. The repayment of the loan is through Equal Monthly Installments (EMIs) which makes it very convenient for the borrower to repay the loan. SME products of SCB have build with the objective to support small & medium enterprises of Bangladesh. The target market for SME credit is: Professional Sector (Doctors, Engineers etc) Business Sector (Advertising agencies, consultants etc) Trading Sector (Retailers, wholesalers, supply chain) Manufacturing sector

4.2. Purposes for Business Installment Loan (BIL)

Business Installment Loan (BIL) can serve the customer with following purposes: Long term working capital finance Asset finance (Plant & Machinery) Business Expansion Office Premises Renovation Purchase of medical equipments and office equipments Other similar business needs

Page 31 of 59

4.3. Eligibility Criteria for BIL Business or self employed professional not within the exclusion or restricted list of SCB Annual Turnover (sales) between BDT 60 lacks and 60 crore Net income from the business more than BDT 56,000/= per month (reflected on the Bank Statement) At least 3 years of business or professional experience in the same business Business should be in its own or rented premises for 3 years and they can change once their premises within last two years Business and proprietors residence must have land phone Age of proprietors or major share holder should not be less than 25 and not more than 60 years Debt Burden Ratio should not exceed 60% Required loan amount should be between 10 to 70 lacks Two top-up allowed for a BIL and each of them should be given after 12 months of last approval 4.4. Business Installment Loan Features This loan will help to meet the financial needs for business expansion. One can make long term investments with this business loan and build up the equity by repaying the loan in convenient equated monthly installments (EMI). One can avail this loan through some simple documentation and against competitive cash securities.

Maximum Loan: BDT 12,000,000 (12 millions) only Minimum Loan: BDT 1,200,000 (Twelve Lacs) only Interest Rate: 13.5% (Variable) per annum Page 32 of 59

Tenor: 3 Years - 5 Years (i.e. 36 to 60 EMI payments) Cash Security: 30% to 50% of the loan amount

30Eligibility Any Business fulfilling the following criteria can apply for this loan: At least 3 years or more experience in the same business Minimum annual turnover of BDT 12,000,000 (One crore twenty lacs) only

Documents The following denotes the documents required for any business to apply for this loan: Private Documents 1 2 3 4 5 6 7 8 9 10 Credit Checklist Income assessment sheet Trade license Memorandum of article of association Partnership deed Rental agreement Board resolution Bank statement of other banks Credit report from other bank Bank statement verification report Yes Yes NO NO N/A N/A Yes Yes Yes Yes Yes Yes Yes Yes Yes NO NO NO NO NO NO NO NO NO N/A N/A N/A N/A N/A N/A N/A N/A N/A Limited Company N/A

from other bank 11 Copy of the offer letter of the credit

Page 33 of 59

facility 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 No liability certificate Summary of share capital Verification sheet Doc providing 3 yrs of BZ. Age Doc providing 3yrs of current location Copy of tax return NORKOM check sheet DE-Dup check sheet and access Photocopy of the photo ID Score card Physical visit report CIB report and undertaking Utility bill Photograph of the procreator BBPG checklist Credit card repayment checklist Copy of IRC Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
2Table 4: Required Documents

Yes Yes Yes Yes Yes

NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Charges Loan Processing Fee: 1% of the approved loan amount Early Settlement Charge: 5% on outstanding amount if repaid at any given time before maturity of the loan

Page 34 of 59

VAT and Stamp Charge: All charges and fees are subject to 15% VAT, to be paid by the customer. Stamp charge will be at actually to be paid by the customer. 4.5. Loan Against Property (LAP) At Standard Chartered we strive to meet the needs in a competitive and dynamic business environment. We understand that, as an SME, this requires quick access to cash, and the flexibility to leverage of assets to fuel for business growth. Standard Chartereds Loan Against Property provides the liquidity need to grow the business or meet cash flow requirements. The loan enables to leverage the property to obtain financing. Features Loan against property is very flexible and is designed to meet the different financial needs of business. Want to expand the business leveraging on existing property? With Loan Against Property can undertake long term investments for expansion. In the process Loan Against Property also enables to build up business equity by repaying the loan in monthly installments.

Maximum Loan: BDT 28,000,000 (taka two crore eighty lac) only Minimum Loan: BDT 1,400,000 (taka fourteen lac) only Interest Rate: 13.5(Variable)% per annum Tenor: 3 Years - 10 Years (i.e. 36 to 120 EMIs payments)

Maximum % of loan amount against market value of the property:

For Commercial Property 60% of propertys current market value, For Residential Property 70% of propertys current market value

Page 35 of 59

Eligibility To be eligible to apply for this loan, the applicant must fulfill the following criteria:

At least 3 years of experience in same business A minimum annual turnover of BDT 7,000,000 (Taka Seventy Lac) only

Documents The following denotes the documents required for any business to apply for this loan: Private Documents 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Credit Checklist Income assessment sheet Trade license Memorandum of article of association Partnership deed Rental agreement Board resolution Bank statement of other banks Credit report from other bank Bank statement verification report from other bank Copy of the offer letter of the credit facility No liability certificate Summary of share capital Verification sheet Doc providing 3 yrs of BZ. Age Yes Yes Yes Yes NO NO NO NO N/A N/A N/A N/A Page 36 of 59 Yes Yes NO NO N/A N/A Yes Yes Yes Yes Yes Yes Yes Yes Yes NO NO NO NO NO NO NO NO NO N/A N/A N/A N/A N/A N/A N/A N/A N/A Limited Company N/A

16 17 18 19 20 21 22 23 24 25 26 27 28

Doc providing 3yrs of current location Copy of tax return NORKOM check sheet DE-Dup check sheet and access Photocopy of the photo ID Score card Physical visit report CIB report and undertaking Utility bill Photograph of the procreator BBPG checklist Credit card repayment checklist Copy of IRC

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

NO NO NO NO NO NO NO NO NO NO NO NO NO

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Property Documentation Requirement

A. For Government/Leasehold Land: 1. 2. 3. developer 4. 5. 6. Power of Attorney (if any) Power of Attorney Acceptance Letter from lesser of the property Mutation (any one) Lease Deed/ Ownership Deed (photocopy) Baya Deed for at least 25 years, if any (photocopy) Development Agreement/ Joint Venture Agreement with the land owner/

* Mutation Letter from RAJUK/ CDA

Page 37 of 59

* Mutation Letter from National Housing Authority (NHA) * Mutation Letter from Ministry of Works 1. 2. 3. 4. 5. Duplicate Carbon Receipt (DCR) with Mutation Order Sheet Up to date Municipality Tax Receipt Up to date Land Tax Receipt Non-Encumbrance Certificate (NEC) Approved Plan/ Layout Plan and Approval Letter by

RAJUK/CDA/Concerned Authority 6. Any other documents as advised by the banks lawyer

B. For Private/Freehold Land: 7. 8. 9. developer 10. 11. 12. 13. 14. 15. 16. Power of attorney (if any) Recent Survey Report (i.e. Math Parcha Duly attested) CS, SA, RS Parcha (PS, BS, RS Parcha- only applicable for Chittagong) Mutation Parcha and Mutation Proposal Sheet Duplicate Carbon Receipt (DCR) with Mutation Order Sheet Up to date Municipality Tax Receipt Up to date Land Tax Receipt Ownership Deed (photocopy) Baya Deed for at least 25 years, if any (photocopy) Development Agreement/ Joint Venture Agreement with the land owner/

Page 38 of 59

17. 18.

Non-Encumbrance Certificate (NEC) Approved Plan/ Layout Plan and Approval Letter by RAJUK/ CDA/

Concerned Authority 19. Charges

Any other documents as advised by the banks lawyer

Loan Processing Fee: 1.5% of the approved amount Valuation Fee: BDT 5000 per property Legal fee: BDT 7000 property Early Settlement Fee: 5% on outstanding amount if repaid at any given time

before maturity of the loan

VAT and Stamp Charges: All charges and fees are subject to 15% VAT, to be

paid by the customer. Stamp charge will be at actual to be paid by the customer.

4.6. Trade and Working Capital Financing

Here at Standard Chartered Bank needs and offers go hand in hand. If the business requires various combinations of banking facilities then Trade and Working Capital Financing is here to provide the perfect blend. The lists of benefits that Standard Chartered Bank offers to face needs are:

Letter of Credit Loan Against Trust Receipt (LATR) Revolving Loan (RL) Local Bill Discounting (LBD) Page 39 of 59

Term Loans Bank Guarantee Shipping Guarantee Foreign Exchange Forward Overdraft Facilities

Features The beneficial features of Standard Chartereds Trade and Working Capital are:

Facilities of up to BDT 120,000,000 (taka twelve crore) only for single customers

and up to BDT 150,000,000 (taka fifteen crore) only for groups

Fast access to trade lines and transactions Dedicated experts to support with all your banking needs Easy access to operational accounts Competitive rates for foreign exchange services Wide options of instruments to serve as security or collateral Acceptable collaterals: Property, Cash/Bond/FD, Stock Hypothecation, Personal

Guarantee, Corporate Guarantee, etc.

Eligibility To avail these benefits a business must fulfill the following criteria:

Minimum Annual turnover of BDT 200,000,000 (Taka twenty crore) only Page 40 of 59

3 years of business experience

Transaction Service To bring out the best option for your business deposits, Standard Chartered Bank offers its SME Transaction Services. We have formulated a matrix of tiers with respective features that are bound to show up with the most beneficial transactions. Standard Chartered Bank offers three types of accounts. These are SME Business Priority Account, SME Call Account and Business account. Each of these account types are subdivided into Business Plus, Business premium and Business Priority segments. The following tables highlights all features and charges of the all the SME transaction services.

4.8. Business Priority Account

As you deserve the best, we offer you Business Priority Account through which you will enjoy the privileges of personalized and superior account services for your business. Benefits

Tiered Interest Rate Online Banking facility across all Standard Chartered branches Access to ATMs (Sole Proprietorship Only) Internet Banking and SMS Banking Evening Banking Facility in select Branches 24-hour Contact Center (Sole Proprietorship Only) Experienced Relationship Manager to take care of all your daily banking

requirements

FREE Issuance of Pay Order and Demand Draft Page 41 of 59

FREE Online Intercity Transaction Facility FREE Over-the-Counter Transaction FREE Monthly Account Statements FREE Daily e-Statements FREE Exclusively Designed Personalized Cheque Book A host of other exclusive privileges offered by Priority Banking, including free

valet parking, discounts, fee waivers and privileges

Eligibility By maintaining a minimum half-yearly average balance of BDT 1,000,000, any of the following type of business entities & individuals can benefit from Business Priority Account

Sole Proprietorship Partnerships Self-Employed Professionals Limited Liability Company (LLC) Local Development Organizations (Only Liability Relationship)

4.9. Business Premium Account

The Business Premium Account has been designed to create a relevant and exclusive package that will make your business thrive. By becoming a Business Premium Accountholder, you can enjoy the following distinctive services: Benefits

Page 42 of 59

Tiered Interest Rate Online Banking facility across all Standard Chartered branches Access to ATMs (Sole Proprietorship Only) Internet Banking and SMS Banking Evening Banking Facility in select Branches 24-hour Contact Center (Sole Proprietorship Only) Team of Relationship Managers FREE Exclusively Designed Personalized Cheque Book FREE Online Intercity Transaction Facility. FREE Over-the-Counter Transaction FREE Monthly Account Statements FREE Daily e-Statements

Eligibility By maintaining a minimum half-yearly average balance of BDT 500,000, any of the following type of business entities & individuals can benefit from Business Premium Account

Sole Proprietorship Partnerships Self-Employed Professionals Limited Liability Company (LLC) Local Development Organizations (Only Liability Relationship)

Page 43 of 59

4.9. Business plus Account

Standard Chartered has put together the custom-made Business Plus Account especially designed to support the ambitious growth of SMEs such as you. By becoming a Business Plus Accountholder, you can enjoy the following distinctive services: Benefits

Tiered Interest Rate Online Banking facility across all Standard Chartered branches Access to ATMs (Sole Proprietorship Only) Internet Banking and SMS Banking Evening Banking Facility in select Branches 24-hour Contact Center (Sole Proprietorship Only) Free up-gradation from normal Current Account to Business Account FREE 1st Cheque book FREE Out-Station Cheque Collection

Eligibility By maintaining a minimum monthly average balance of BDT 250,000/-, any of the following business entities can benefit from Business Plus Account

Sole Proprietorship Partnerships Self Employed Professionals Limited Liability Company (LLC) Local Development Organizations (Only Liability Relationship)

Page 44 of 59

4.10. Straight 2 Bank

Efficiency and responsiveness are two of the driving force of any business. Beholding these two fundamentals Standard Chartered Bank offers the Straight 2 Bank service to all SME customers. Banking was never as easy as Straight 2 Bank. Straight2Bank is positioned to become the key channel for all SME Banking clients by providing enhanced product offering, greater geographic reach, time efficiency, improved operational support model, and comprehensive secured platform. Straight 2 Bank is an online service through which you can view your bank statements and make certain crucial transactions like fund transfer, DD instruction etc. You can also view your daily transactions, which is updated every half an hour! Enjoy the true essence of real-time banking. Enjoy banking with Standard Chartered anytime, anywhere!

4.11. Door Step Banking

In todays competitive business environment time is money, and money saved is money earned. With this idea the SME Banking team brings you Doorstep Banking, a customizable service that allows you to securely conduct banking transactions without leaving your doorstep, which in turn saves your precious time. Doorstep Banking is a cash/cheque pickup and delivery service from different cash collection and payment points of your business. This service saves your regular commuting time to our branches for cash transactions. It is also very safe as the transportations of the cash/cheques will be done using bullet proof armored vehicles, which will be present at your preferred pickup/delivery points at a very affordable price.

4.12. TARGET MARKET

Page 45 of 59

Standard Chartered Group (SCG) defined SME as an entity with annual turnover from USD 100,000.00 to USD 10 million. The corresponding LCY amount is adjusted every year. SCB soon realized that the segment that the Bank has targeted for its SME products was two broad to be serviced by one set of product. So, in 2005, the target market was further segmented into the following two sub segments. i. ii. Small Business (SB) Medium Enterprise (ME)

The sub segments were also defined by annual turnover.

4.12.1. Small Business SBs are business entities with annual turnover from USD 0.10 million to USD 10 million. SBs are traditional businesses (small manufacturers, traders, service providers) who do not maintain any formal financial statements. While financing in this segment, no formal financial analysis can be done. SCB has developed its income assessment method to derive the debt service capacity of the customers in the SB segment. The assessment method was developed with only one product in mind installment loans. As a result, other products could not be offered to this segment unless the facility was fully secured with cash equivalent securities accepted to SCB. Here it should be mentioned that the definition of Small Enterprises provided by BB differs from the one provided by SCG. But, to be compliant with the local regulator, SCB Bangladesh has incorporated guidelines provided by Bangladesh Bank (BB) in financing SME customers. 4.12.2. Medium Enterprise Page 46 of 59

ME are business entities with annual turnover from USD 0.33 million to USD 10 million. The customers in the ME segment maintains formal financial statements, if not audited ones. The management financial statements can be used for formal financial analysis and a range of products could be offered to this segment.

4.13. PRODUCTS OFFERED

SCB offers several products to its SME Customers. Following is brief description of the major products offered to the SME customers.

4.13.1. Business Installment Loan (BIL) BIL is a partially secured facility offered against cash equivalent security. Security amount (either 50% or 30% of the total facility offered) and the tenor depend on the length of borrowing relationship of the applicant with SCB. The facility is offered for long term working capital expansion and is repayable in installments and payable on every three months. 4.13.2. Overdraft Facility Overdraft (OD) facility is offered for the smooth day-to-day operation of a business. Interest is accrued and payable on every three months. OD facility is offered against cash equivalent security. For OD facilities, loan to security ratio always has to be within 95%.

4.13.3. Letter of Credit (LC) Page 47 of 59

This facility is offered for the import/purchase of machineries/raw materials/finished products from foreign/local suppliers. LC is offered against partial/full cash margin depending on the credit grade of the borrower. 4.13.4. Revolving Loan (RL) RL is usually offered mainly to make duty payments. Like LATR, tenor of RL varies from 60 days to 120 days. The payment mode and security requirement is the same as LATR. Of all the products offered to the SME segment, BIL has been the most profitable one.

4.14. BIL process in Standard Chartered Bank Sourcing

Both branches and sales people source BIL application. Branch people mainly target the existing customers who go door to door as sales people to find new customers for BIL. Although SCB has four sales teams but their area of operation is not limited by geographic area. Any sales people can source customer from any area who met minimum requirements for the loan. While analyzing BIL application, credit has to be more careful about the loan, which is sourced by sales people, as there are chances of miss selling.

Initializing
Before submitting the loan to credit support, Sales Team Manager (STM) or Branches Sales & Service Manager (BSSM) is responsible to check whether the documents are in order or not. If the documents are in order, they send the file to credit support & upload information in Loan Locator.

Credit Support
Page 48 of 59

After receiving the application in credit support, support staffs update Loan Locator and calculate the bank statement. They keep note if any discrepancy observed in the bank statement. They also maintain MIS for further information of an application

Credit
Then the application sends to credit. In credit all the documents checked very carefully. Credit also talks to customer to get further comfort about the nature of business & profit margin. If the documents found in order, credit calculates Debt Burden Ratio (DBR). If DBR supports loan, credit send the file for verification. If further documents required clarifying the business or any other information required, credit deferred the application. If DBR do not support loan or credit do not feel comfortable with the loan, credit can decline the loan. In both deferred and declined cases, source can appeal. But in case of declined case, source has to appeal to higher authorities. In deferred cases, when the application resubmitted with proper documents, credits reassess the loan and send for verification.

Verification
Verification is done by external agencies. Here all the customer information verified and the agency provided a summary of all information. Verification agency also verifies bak statement and collects credit report from concern banks. CIB report is also collected from Bangladesh Bank to identify all the existing credit facilities availed by the customer. If all the report found in order, then approval checklist is prepared by credit. Otherwise the loan application can be deferred or declined again. De-duplication check is done by credit so that the customer cannot take more than one loan at a same time. SLR check is done by credit to identify whether the customer is involved in any international crime organization with SCB. To clarify the business condition of the client to the credit department, the verification agencies take photographs of business premises and stalk that.

Approval
Page 49 of 59

If all the documents have positive result, then approval checklist is prepared by credit, which include summery of all reports and all calculation. Then include the checklist at the top of the file. All the other documents are also included in the file. Afterwards the person who prepared the checklist signs it. Ten another credit officer checks and signs the documents to support it. Then a senior officer with proper credit approval authority signs the document to approve the loan.

Disbursement
After approval the application is send to Asset Operation department for disbursement of loan. Sometimes some condition may be included in approval checklist. Asset operations check all the documents and fulfill all the condition of approval and finally disburse the loan to customer account. They update the customer information about the loan in company database which is EBBS server.

4.15 Key Responsibilities of Asset Operation

The main task of Asset Operation is to make a documentation of the different types of loans being disbursed. For a loan to disburse different activities are involved and these activities are performed by the employees of the asset operation. The asset operation consists of different teams such as- Personal loan team, Mortgage loan team, BIL team and Auto loan team. I was in the BIL team where my coworkers did all the activities that are needed to make a business loan for the small as well as the medium enterprises disburse. The loans that are being disbursed can be both a new loan and a top-up loan (i.e. second loan being made by the same client). I was assigned to do all the activities that were needed for the pre-disbursement and post-disbursement of loans.

The activities involved in pre-disbursement of loans are as follows:

Page 50 of 59

Checking- A whole document of file is being sent to the asset operation after being approved by the credit section. Credit Collection Unit (CCU) is responsible for deciding on how much risk exposure to take on any customer. Collection unit is responsible for monitoring repayment of loan facilities extended to various customers and recovery of default facilities. All through the month approximately 30-40 checklists are received by the asset operation sent by the CCU and these are being checked by the BIL team. I was assigned to check the documents by looking through the checklist. In order to check the documents the things which I had to make sure of are as follows: System Input - SCB has a company database which is EBBS server in which employees make a computerized documentation of all the information acquired. Asset operations check all the documents and fulfill all the condition of approval and finally disburse the loan to customer account. After that they update the customer information about the loan in company database which is EBBS server. Dealing the source - Both branches and sales people source BIL application. Branch people mainly target the existing customers who go door to door as sales people to find new customers for BIL. Any sales people can source customer from any area who met minimum requirements for the loan. These sources come to the department all through the month who wish to make their customers loan to be disbursed. I had the responsibility to deal with these sources. I used to directly contact with them and make notes about their desires and demands.

The activities involved in post-disbursement of loans are as follows: Sending PDCs (Post Dated Checks) to Alico Building The checks which are received are sent through courier service to Masud Ahmed of IP department in PDC unit of Alico Building which is situated in Motijheel. Banking Arrangement (BA) letter - Informing customers that there need for loans has been granted by sending a Banking Arrangement (BA) letter.

Page 51 of 59

Stamping- Extra money is charged for stamping, If personal guarantee (PG) is required then Tk.470 will be charged and if PG is not required then Tk.320 will be charged. Before stamping I had to make sure whether the customer had to give PG or not. I was given stamps to stick them to the loan documents since they are charged to the customers.

Filing- If everything is completed then filing and packaging of the documents are done to keep them safely into the vault. Filing is done for a safe-keeping as there may be a possibility of rechecking of the documents or revalidating the customers information.

Keeping the files to vault- Finally the packed documents are sent to vault where hundreds of documents are kept in order. The vault is a highly secured place where only existing employees and interns have an access to it. Interns can only get an access in the vault only if an employee is present.

Page 52 of 59

* Submit Documents to Credit Support * Update Loan Locator

* Income Calculation * Dispatch * MIS Maintain

Credit 1: * Initial Assessment * Either Declined or Deferred or send for verification * Update Loan Locator * Maintain MIS

Credit 2: * Reassess Loan * Prepare Approval Checklist Credit 3: * Provided Support to Approval

Branch Branch Applicant Loan Locator Sales Team Verification * Verify Business Premises * Bank Statement * Existing Credit Facilities Credit 1 Credit 2

Disburse loan to customer Asset Operation

Credit 3

Credit 4

Credit 4: * Approval by authorized Person * Approval by second Approver

Figure 8: BIL Approval Process

Page 53 of 59

Chapter 5: Findings and Recommendations

Findings:
As the security size is the highest among all consumer banking products, all sources are very serious with BIL. So credit has to deal with lots of appear cases. Verification agencies sometimes take more time to submit report which makes the process longer. Processing time sometimes even longer due to delayed submission of CIB report. Very few applications come with all relevant documents at the first submission. Re-verification is not done regularly due to time constraints. There is an absence of proper mechanism to measure each employees performance separately which might lead to social loafing. Attachments and training for credit employees are not given for a long time to control workload. There are no formal training programs for credit support employees, all have to go for on the job training. Risk level increases when BIL is approved under Level 2 or Level 3, but interest rate is same as Level 1.

Page 54 of 59

Recommendations:
Structure should be developed to deal with appeal cases. SCBs target customers type or level is too high to maintain. As Bangladesh is a developing country, so rather providing loan to establish businesses, bank should also target young entrepreneurs. Interest rate should be lower in level 1 than level 2 and level 3. More training should be given to sales people to ensure equality submission of application. Proper learning & development plan should be developed for credit employees and applied accordingly. Training programs should be developed for credit support employees Performance of verifications agency should be monitored tightly to reduce verification time. Some charges can be added for appeal cases to discourage appeal with lower quality application. Re-verification policy should be applied properly. Minimum loan amount should be bit less than 10 lack to attract small business. More business loan products should be introduced.

Page 55 of 59

To grab the market the number of booth and branches should be increased. The loan availed person should be constantly visited by the sales person. Asset operation sometimes takes more time to approve documents which makes the process longer. Attachments and trainings for asset operation employees are not given for a long time to control workload. SCBs target customers type or level is too high to maintain. As Bangladesh is a developing country, so rather providing loan to an established business, bank should also target young entrepreneurs.

Interest rate should be lower to encourage more clients to take loans from SCB. Re-verification policy should be applied properly. Minimum loan amount should be less than 10 lacs to attract small business. The turnover should be less than the required amount in order to encourage small business. More business loan products should be introduced.

Page 56 of 59

Chapter 6: Conclusion
It is generally recognized that SMEs have a significant role in employment generation, poverty reduction and overall economic growth, especially for a developing economy like that of Bangladesh. Availability of finance is thought to be a major constraint to formation and growth of SMEs in Bangladesh. Most of the enterprises in Bangladesh cannot expand because of lack of fund or capital. SME banking of Standard Chartered Bank is helping these ambitious organizations to enhance and grow even better. As we know in BIL the repayment of the loans is done through Equal Monthly Installments (EMIs) which makes it very convenient for the borrower to repay the loan. Those who are unable to make immediate repayment can pay by installments. The installments can be done either by 48 months or by 60 months. Security amount (either 50% or 30% of the total facility offered) and the tenor depend on the length of borrowing relationship of the applicant with SCB.

It was a great pleasure for me to have internship in Standard Chartered Bank. Without such a practical exposure, it would not have been possible for me to acquire such a Page 57 of 59

practical knowledge. During the internship I have observed the function of SCB that may help me to be a professional banker in future. I have learned the different products that are offered by SCB and since I was working under Asset Operations which deal with SME banking I got to know a lot about it. Out of the above discussion a conclusion can be drawn which the present customer is dealing procedure is quite well at this moment and the computerized transaction makes the system efficient and effective.

Bibliography

SME Asset Operation Manual, SCB SME -Credit Procedure Manual, SCB Consumer Banking Policy, SCB Record Management Team ( RMT), SCB Annual Reports & Accounts of Standard Chartered Bank Standard Chartered Bank website (www.standardchartered.com) Help of internet

Page 58 of 59

Page 59 of 59