CHAPTER 1 INTRODUCTION OF INDUSTRY

Banking is one of the most sensitive businesses all over the world. Banks play very important role in the economy of a country and Pakistan is no exemption. Banks are custodian to the assets of the general masses. The banking sector plays a significant role in a contemporary world of money and economy. It influences and facilitates many different but integrated economic activities like resources mobilization, poverty elimination, production and distribution of public finance. It is purchase of car or building of home, banks are always there to serve you better. It is play ground or any educational or healthy societal activity the money of banks nurtures them. It is an industrial project or agricultural development of the country the sponsor-ship of banks is very much involved. Banks play very positive and important role in the overall economic development of the country. Pakistan has a well-developed banking system, which consists of a wide variety of institutions ranging from a central bank to commercial banks and to specialized agencies to cater for special requirements of specific sectors. The country started without any worthwhile banking network in 1947 but witnessed phenomenal growth in the first two decades. By 1970, it had acquired a flourishing banking sector. Nationalization of banks in the seventies was a major upset to domestic banking industry of the country, which changed the whole complexion of the banking industry. With irrational decision at the top all the commercial banks were made subservient to the political leadership and the bureaucracy. Specialized banking institutions were already working in the public sector. The new accountability paradigm changed the business ethics in the banking industry, and with this change started the disaster. Nationalization of banking industry was accompanied by violent changes in the external value of rupee. The commercial banks thus lost their assets management equilibrium, initiative and growth momentum. They ceased to be a business concern and became big bureaucracies. This was accompanied by indiscreet loaning under political pressure. 1

They suffered from three terminal diseases: non-performing loans; higher intermediation cost; and loss of initiative and entrepreneurship. The rise to Labor Unions and Officers Associations made life tough and working conditions ugly to honest, dedicated and industrious workers in the realms of domestic banking industry. The era of nineties was the climax of privatization, deregulation and restructuring in the domestic banking industry and financial institutions. The Muslim Commercial Bank was the first bank to privatize. Followed by Allied Bank limited, United Bank Limited and now the Habib Bank Limited have been privatized. One thing good for that particular period was the recruitment of fresh officers in the domestic banking industry through well-organized policies of Banking Council. With the decay of Banking Council there was flood of insincere, nonprofessional, incompetent candidates directly appointed/ recruited in all the domestic banks of the country.

Public Sector Commercial Banks

Nation Bank of Pakistan First Women Bank Limited The Bank of Khyber The Bank of Punjab

The government of Pakistan permitted small private sector banks to operate, which indulged in doubtful policies to promote business. The public sector banking, which constituted the backbone, thus continued to suffer because of their approach, size and carried over liabilities. Mehran Bank is the prime example of that kind of lax banking in the country, which ultimately merged into National bank of Pakistan i.e. last resort of domestic banking industry.

Local Private Banks

Askari Commercial Bank Limited Bank Al-Habib Limited MyBank Limited Faysal Bank Limited Habib Metropolitan Bank Limited 2

Platinum Commercial Bank Ltd Prime Commercial Bank Limited Saudi Pak Commercial Bank Ltd PICIC Commercial Bank Limited Soneri Bank Limited Allied Bank Limited MCB Bank Limited KASB Bank Ltd Atlas Bank Limited

In the meanwhile, western banks started entering into the business. They, with the support of ruling elite, concentrated on the big business, leaving the routine business to the local banks. This reduced the profitability of the local banks.

Foreign Banks
ABN Amro Bank Al Baraka Islamic Bank The Bank of Tokyo Mitsubishi CITI Bank Credit Agricole Indo Suez Deutsche Bank Doha Bank DIB Bank Hong Kong Shangai Banking Corporation IFIC Mashreq Bank PJSC Oman Bank NIB Bank Standard Chartered Bank

Specialized Banks
Zarai Taraqiati Bank Ltd. Industrial Development Bank of Pakistan 3

Punjab Provincial Cooperative Bank Limited

CHAPTER 2 PROFILE OF MCB BANK LTD.

MCB today is one of the leading banks of Pakistan with a deposit base of about Rs. 230 billion and total assets of around Rs.300 billion. MCB has been engaged in extensive management and operational restructuring to streamline its operations and to achieve cost efficiencies. After privatization, MCB is now in a consolidation stage designed to lock in the gains made in recent years and prepare the groundwork for future growth. The bank has restructured its asset portfolio and rationalized the cost structure in order to remain a low cost producer. MCB now focuses on three core businesses namely Corporate, Commercial and Consumer Banking. Corporate clientele includes public sector companies as well as large local and multi national concerns. MCB is also catering to the growing middle class by providing new asset and liability products. The Bank provides 24 hour banking convenience with the largest ATM network in Pakistan covering 30 cities with over 197 ATM locations. The Banks Rupee Traveler Cheques have been market leaders for the past six years and have recently launched their Gift Cheque Scheme.

Mission Statement
At MCB we are committed to being the best financial services provider globally and locally. Our breadth of experience, leading-edge capabilities and financial strength create value for all our stakeholders: clients, investors, employees, and society as a whole. Though the Bank continues to evolve and change, the key to our success remains constant: focus on customer needs, spirit of innovation, and a broad range of expertise combined with technological power and financial strength delivered by diverse, highly skilled professionals across the globe.

Vision Statement
4

Our vision is to Challenge and Change the way you bank. MCB Banks team of committed professionals is dedicated to maintaining long term customer relationships through outstanding service and convenience.

Our Values
Trust We are the trustees of public funds and serve with integrity & commitment. Ethical behavior is of critical importance to us. We adopt full compliance with internal and external policies and procedures, operating within the legal framework Customer Focus We continuously seek to exceed our customers expectations, forging and maintaining long term relationships Innovation We strive to be the market leaders in innovative products and services offering customized financial solutions with flawless execution Team work The diversity of our people is our strength. We inspire and challenge each other working together to achieve synergy Achievement Our people are our most valuable asset. We are committed to a result oriented culture. Our goals are clear and merit is the only criterion for reward Social Responsibility As responsible citizens we contribute to the social welfare of the community.

MCB MANAGEMENT

Chairman President & CEO Established Subsidiary Employees Offshore Banking Unit Head Office

Mian Muhammad Mansha Mr. Muhammad Aftab Manzoor 1948 MCB Asset Management Company The number of employees in Branch 11000. MCB Offshore Banking Unit, Manama, Bahrain. MCB Tower I.I. Chundrigar Road, Karachi, Pakistan Phone: (92-21) 111-000-111

Branches

950 Domestic, 3 Overseas Branches

CHAPTER 3 RETAIL BANKING

Definition: Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth.

MCB Retail Banking Products

Bank Accounts Khushali Bachat Account Savings Account Current Account Foreign Currency Account Online Services ATM services Mobile Banking Call Center Bill Payments Virtual Banking Travelers Cheque Rupee Traveler Cheque Cards Smart Card/Debit Card Credit Cards Remittance Pay Orders Demand Drafts Mail Transfer Telegraphic Transfer Online Funds Transfer Loans Personal Loan Auto Loan 7

CHAPTER 4 CONSUMER BANKING

Most commercial banks have ventured into consumer finance. They provide funds for the purchase of consumer durables, computers, automobiles and even housing. Automobiles are covered either through leasing or auto loans, being undertaken by leasing companies and moharabas or separate divisions within financial institutions. Housing finance is still mostly confined to two companies, namely House Building Finance Corporation and International Housing Finance Limited. Habib Bank, ABN AMRO Bank, PICIC Commercial Bank and National Bank of Pakistan are busy in consumer banking. Ours is the age of Financial Derivatives and consumer banking is one of them, which has globe market of over US$30 to 35 trillion. Consumer banking is low risk, high volume and high growth business. It requires lots of investment and systems to make sure that experience is error free, timely and wonderful at every point in time. In consumers banking you got to be very fast, take risks. You got to build Infrastructure and you have to be technology oriented. Its a much disciplined process in which you need to have an appetite for investments. Corporate banking is the backdrop on which consumer Banking has been made. All it has done is that it has taken the principles of corporate banking, broken it up and used tools like technology, customer behavior, and use of high- end computing techniques to make that decision making which is judgmental. Its like working in a factory, and delivering products. Its a high energy business. It is a way to grow economy and the economy always grows either by consumption o by other elements. And consumption needs finance and finance needs certain set of skills. In consumer banking you need prudent people, prudential norms and high integrity. Everybody can buy technology products and copy manuals. The main thing is that you have to create the willingness to take chances among your customers, and for that you have to innovate new ideas to attract your customers. 8

Mortgage Loan Business Sarmaya Loan

REVIEW OF CONSUMER BANKING IN PAKISTAN

Over the last 5 years, Pakistan witnessed a phenomenal growth of consumer banking. This unprecedented development has followed privatization of nationalized banks, banking reforms brought about by the State Bank of Pakistan and an increasingly marketing-oriented approach primarily aimed by banks at a large urban consumer base. Be they large or small bank, multinational or local, each one of them is geared towards making its mark in an already competitive environment that is the outcome of consumer banking. Multinational banks such as ABN AMRO, Citibank and Standard Chartered have the support of the knowledge base and funds of their foreign principals which made them first to introduce products, services and innovative technologies to their consumer base. Hot on the heels were the newly privatized banks, UBL, HBL and MCB which have embarked in consumer financing activities in not just big cities but smaller ones too, by virtue of their huge branch network. In doing so, they have generated huge volumes of business while at the same time driving down the prices of the products they offer. For instance, in 2002, HBL consumer banking portfolio was worth less than a billion rupees. By the end of 2004, it is worth Rs. 17 billion. Similarly, since 2003 when it was privatized, UBL has launched 12 to 14 new products and according to its Former Deputy Chief Executive, each one of them has been a market leader on month-to-month acquisition volume. And where the local banks such as Soneri, Askari and Union lack in technology, they make up by offering similar services at a much lower costs in urban centers. While the foreign banks have played the pipers role when it comes to introducing new products, they have targeted the same segment which may be one of their limitations in this area. On the other hand, industry experts predict that the real growth will come from local giants such as the UBL, HBL and MCB which have the 9

necessary experience and knowledge of customizing products to specific local preferences.

Prodigious Advertising
One factor that has led to an incredible upsurge of consumer financing products has been the drastic reduction in the qualification benchmarks for premium products such as credit cards. For instance, back in the 1990s when consumer banking was still in its undeveloped phase, only three banks were offering credit cards and they were all multinational concerns. That was the time when the size of the total portfolio was a mere 200,000 cards. The scene all of a sudden changed when Bank Al Falah launched a no fee credit card and its consumer base ballooned to 100,000 new consumers. The success of no fee credit card was followed by low interest packages on automobile loans and home loans. Things would never be the same again. Today, by investing prodigiously on advertising and sales promotion efforts, banks have created awareness about their product menus in a huge way. Now personal loans have longer tenures and posses easy payment options, along with many other inducements. Yet with so many banks offering the same product, how does one bank differentiate its portfolio from its competitors? The answer lies in differentiation, which in turn is created by continuous innovation and of course a deep insight of consumer needs and requirements be the advertising is BTL or ATL. Apart from that, customer relationship management is one area in which the banks need to raise their bar especially when loyalty thresholds are low. Many consumers have expressed their reservations about the low level of service and dont think twice when it comes to switching over to other banks. The lesson: Never trust a bank on face value or simply what they boast in ads.

The Image Factor

When all is said and done, banks still have to concentrate on continuous product development to retain their customers. The logic is simple: While advertising helps to build the image, it is the product that sustains that particular image. Banks also need 10

to remember that while advertising works big time to attract both old and new customers, word-of-mouth remains the most effective way of communication for their products and offerings. So while big names continue to spend their huge advertising budget to promote their products, they also face competition from smaller banks (with less advertising budget) whose terms and conditions may turn out to be more attractive especially for consumers with less money. At the end of the day, however, it is the quality of service and quick turnaround time that will make the consumer an ardent customer of any banks products and services. It has been nearly five years since banks started emphasizing on consumer financing and although majority of our population do not have the means to cash in on this development, there are many and especially the rising middle class who have started utilizing their services for improving their lifestyle. Currently, the default rate is low. For instance, in the auto-financing sector, the recovery rate is around 97% and even if the customer is unable to pay up, with a mortgage the bank can always forecloses ones property. Some industry experts, however, say that the real test of default will come once the products started ageing and people will start getting tired of long loan repayments. Now what does the future hold for consumer financing? Have the banks done enough homework to create awareness about their products through right strategies? Some top notch banks continue to hire professionals who have worked laboriously on brand development and building identities for their products. And to a great extent they have succeeded, although the sky remains the limit when it comes to exploring the full potential of consumer banking because a large portion of urban Pakistan still remains untapped. Aggressive marketing along with an effective and innovative mix of ATL and BTL has to continue at an impressive pace. The best, however, is yet to come.

11

CHAPTER 5 MCB CONSUMER BANKING

MCB is probably one of the first local banks to extensively explore the opportunities prevailing in the consumer banking area. MCB has also entered into other consumer financing products which include: Auto Financing Personal Loan House Financing Scheme (Pyara Ghar) Business Sarmaya

All the above mentioned products and services are aimed at making the bank the most preferred provider of quality financial and asset building products and services. While the large MCB branch network makes it convenient for customers, its real strength is attractive rate on interest.

Auto Loan
MCB Deal in Auto Loan since Oct 2000 with name of CARCASH In 2 different categories that is Auto finance & Auto Lease. & after that in 2002 the name was revised & starts new business with name of CAR4U.

Auto Finance
The auto finance brand was launched in January 2004 with a new brand name of MCB Car4U. In last eighteen months the brand has come a long way which is evident from the portfolio review given below. The brand, before it was re-launched as Car4U, had less than 2,539 cases. In essence, the re-launch on January 12th 2004 can be considered as the main launch. The product was launched with a tagline of 12

your power move! The slogan portrayed power moves in all aspects of life to our potential customers and was illustrated by a check-mate situation on a chess board. Post-launch, due to higher brand recall and greater awareness, the number of cases grew by almost 75% in 18 months.

Auto Lease
Leasing is treated as a separate product. Car4U only engages in financial leases. The accounting treatment of financial leases differs from traditional financing. Car4U transfers cars at the end of the leasing period to the lesser at the residual value. The installments (rentals) paid during the tenure cover the disbursed amount as well as the banks spread. If a customer chooses to pre-pay his/her loan; the entire outstanding moneys to settle the disbursed amount are retrieved from the customer. Leasing involves an inherent risk. The car is owned by MCB but driven by the customer. This risk is mitigated by insurance, credit checks, and verification. The risks involved with leasing are not any greater than those associated with financing. As per the agreement the customer is responsible for the payment of taxes, duties, and all other costs associated with the ownership of the vehicle. First year insurance is taken up front from the customer along with the down payment, while the insurance for subsequent years is amortized in to the installments.

Personal Loan
MCB introduce Personal Loan in way back 2002 with the name of Easy Personal Loan. But this product was fail. The failure of MCB Easy Personal Loans (EPL) was due to absence of a non-operational system which led to problems in Collections resulting in high delinquencies. Surprisingly, about 70% of the portfolio consisted of MCB Staff Personnel and still the delinquency rate was more than 10%. Now again MCB launched it Personal loan scheme in May 2006 with the different strategies & policies. The addition of PL in the MCB product suite will not only strengthen the banks image as an upcoming dominant player in the market, but also provide the much needed profitability boost that the portfolio requires in the 13

absence of any unsecured product. The market potential for PL is huge and the demand for the product is reasonably high, only 30-35% of actual market has been captured.

Mortgages Loans
The term loan brand was launched on 12th April 2004 with a tagline of Ab tu ghar ki baat hai. The tagline was multi facet bringing out the local status of the bank, accessibility and convenience along with the literal meaning. The brand before launch had less than 50 cases so in essence it can be considered as a main launch. MCB is offering Mortgages in three different sections: 1- Home Purchase 2- Home construction 3- Home Renovation

Business Sarmaya
MCB introduce the Business Sarmaya in March 2005. This is Running Finance product. To avail this Running Finance facility, customers have to pledge his property. The maximum limit of this loan is 20 million.

14

CHAPTER 6

Problems of Domestic Banking Industry of Pakistan & Global Trends

a) Knowledge of Risk Management is missing The main purpose of financial and banking organization is to create valuable system by interacting with its environment, customers, constituents, suppliers, technology, competition, economy, government, etc. A valuable system is created by the conversion of available resources i.e. human, financial, physical, and intangible assets into goods and services that fulfill the needs of the customers and save the best interests of the banking and financial organization. Risk management performs all these diversified but integrated work to achieve maximum out-put. Managing risk is actually managing the organization: planning, organizing, directing, and controlling organization systems and resources to achieve objectives. Managing risk must come from within and act to change the organization and its response to changes in the environment. Now many domestic banks are hiring experts of risk management to secure their precious assets. MCB Bank Limited has also created risk management group at head office and as well as regional level to save the best interests of the bank and enhance the chances of investments. b) Total Quality Management: Paradigm Shift Ours is the age of cutthroat competition, scarcity of resources, technological advancement, integration of financial services, expansion of economic markets and 15

cultural diversity. In these complicated and conflicting financial and economic scenarios the need of TQM in the ranks of domestic banking industry is indispensable. The middle management should need to have basic understandings about complicated management processes, crisis management tools, marketing/product strategies, financial and treasury management techniques, financial discipline, soundness and transparency of banking system, human resource administration and above all genuine leadership qualities to adequately operate within a highly sensitive and complicated industry. There is urgent need of having TQM in the realms of banking industry of the country. At the dawn of WTO and increasing chances of investment banking among the SARRC countries the TQM is the need of the hour, Our commercial banks must pay attention to this shift and start thinking strategically for providing high quality products and services to customers. According to a study from Business Communications Company, Inc. The Changing Global Commercial Banking Industry Structure, total commercial banking assets are expected to climb at an average annual growth rate [AAGR] of 7.1% from $6,772 billion in 2001 to $9,537 billion in 2006. The banking industry should determine where improvement is needed, how service can be improved and where operating system breakdowns occur, why they occur and how they can be avoided.

16

Core Problem in MCB Consumer Banking

As MCB is one of the largest private banks in Pakistan, many key issues are still unresolved. The bank started its initial consumer operations from Karachi at low level in 2000 and shifted its operations to Lahore in 2002. Before starting its full fledge consumer banking division the consumer banking operations were carried out at branch level. During all this period we observed a lot of things. Some of our observations are as under: 1) Attendance: I noticed that all the employees mark their attendance themselves. I used to observe that whether all the employees are coming on time or not. I noticed that some people from the sales department used to come very late. And there isnt any proper check on them. 2) Responsibility level of employees: The best thing I found here in MCB was that a part from a few employees all other workers are fully responsible and dedicated towards their work. No matter how long they have to stay at bank, they are performing their work honestly and with full dedication. 3) Co-ordination of different departments: During our research we went through different departments and I found that coordination among different departments was not good at all. So this thing needs to be improved. They should try to improve co-ordination among themselves in order to avoid minor problems. Another thing that I observed was that the concerned people take much time in resolving different discrepancies. 4) Cleanliness: Also noticed that cleanliness and neatness on the 4th floor is okay but its really bad on the 3rd floor. Sweepers are not as responsible as they should be. 3rd floor 17

is very congested, stinky and gives a look of fish market. There is not enough space. Washrooms condition is really pathetic on the 3rd floor. Comparatively 4th floor is much better than the 3rd when it comes to neatness and cleanliness.

5) Overall impression of the customers: Some of the customers were satisfied, majority of them were not, and a few of them were very chronic. There are many reasons for their dissatisfaction: a) Most of the customers used to get hyper because of the miss commitments from the sales department. And thats why there are a lot of complaints from customers side. b) Some of the customers had a very chronic behavior due to the parking problem, as they are not available with enough space to park their cars. c) Another thing that really disturbs the customer is that sometimes sales department does not provide complete information to the consumers, and they complaint that we were not informed about that particular product properly. 6) Customer dealing: Customer dealing is really good when it comes to patience. Sometimes customers misbehave a lot, but the staff here tries their level best to deal with them patiently and politely, and this is something that should be appreciated. 7) Record keeping: I found that there was not enough space for keeping files or other papers. I saw that different files and papers were placed in the conference room, and this is not the proper place for them. So you should try to make a large record room in which files could be placed orderly. 8) Employees are leaving: During my research I overheard that employees from the sales department were resigning because of the poor salaries. So you should take into notice this thing as well. 9) Customer satisfaction survey: 18

I noticed that a customer satisfaction survey to get their feedback is conducted. This is really good. In this way you can have an idea about the needs and requirements of the consumers and if they are satisfied with your services or not. 10) Lack of training: There is no proper training for the employees. There should be proper training sessions for them to polish their potentials and for more improvement.

Short Term and Long Term Issue

1) Technical Problems; All its branches are not online. 2) Commercial Banking; It has de-motivated employees as there is a network of almost 1000 branches that has a much diversified culture. 3) Some of them are very modern; some are backward especially in remote areas, where most of the work is done manually and equipments such as computers and fax machines are available in these areas. 4) Short-Term; Internal restructuring in organization, 60 to 70 % is done. In 1992, When MCB was taken over by Mian Mansha; the Banks performance was not good at that time. Top management was then hired from Citibank, ABN AMRO and other foreign banks. The recruitment decision made by the Chairman 14 years ago is bearing fruit today. Due to the exceptional managerial efficiencies, procedures and policies the bank has managed to reach sky rocketing profits. They are now more focused on organizational change; they are retiring old employees since they are in need of young, energetic and people with new ideas. The idea is to hire young professionals so as to train them overtime and place them in the middle management so as to increase the efficiency and performance of the bank in the long term.

Research Methodology
The methodology used in our research project is primarily derived from secondary data, web portals and reports published by the R&D department of the consumer banking group from time to time. We have conducted research through special previous annual audit reports and by conversing with internal consumer banking experts. 19

Research Tool
The research tool used in this project report is Questionnaires from Consumer Banking Group staff.

Sample Size
The sample size of the research conducted is 24.

CHAPTER 7 Situation Analysis & Trends

For the purpose of this project we prepare a questionnaire for MCB Consumer. This was filled by MCB Consumer employees of different departments. The format of that questionnaire was in Annexure. According to that questionnaire our analysis are as follows: Our first heading in questionnaire is Consumer. Under this heading we have three different questions about the consumer. 1) Consumer a) Do you think rising markup rates effect customer ability to pay?

20

14 12 10 No. of people 8 6 4 2 0 1 2 3 Options 4 5

This graph shown that most of the employees think that there is some effect on the consumer by raising the mark up rates but its not much. The trend of consumer financing remains the same but might be rising rate of the business will not as much as earlier. b) Do you think that SBP regulatory policies effect have a harmful effect on customer/bank?

14 12 10 No. of People 8 6 4 2 0 1 2 3 Options 4 5

As all

we are

aware that SBP is

continuously changing its regulatory policies for consumer banking and all the banks are bind to adopt those changes. So most of the employees think that the SBP policies will not affect on the bank as well as on customer because of both 21

are bounded to adopt those changes & those changes are for the safety of the banks for the customer and for the Govt. c) Do you think that rising inflation is also a problem for business (bank)?
16 14 12 No. of People 10 8 6 4 2 0 1 2 3 Options 4 5

Here is again trend is almost the same as we seen in previous 2 questions. No doubt inflation is serious problem for every one. & due this inflation mark up rate of banks are going higher & higher. & return is going lower. 2) Product The 2nd segment of our questionnaire is Product. & in this segment we ask four different questions of MCB product. a) Is your price/markup competitive as compared to other banks?
Competitivity of Pricing
Dont Know 0%

No 4%

Yes 96%

96% said that MCB mark up rate/pricing is better then their competitor banks. & only 4% think that MCB mark is not competitive with other banks. As our review the 96% who said that the mark up rate is competitive with other banks, have a 22

strong reason that MCB booked almost 1200+ Cars, more than one million of Mortgages & 1000+ of personal loan every year. b) Did the bank offer fix rates on your products?
Number of Questionnaires

0% 4%

Yes No Dont Know

96%

In this question trend is again the same as previous question. Here 96% says that MCB is not offering fixed mark up rate. Mark up rate can be vary as per state bank instructions or own banks will. Bank can re-price its products on every year closed. Where as 4% says that bank is offering fixed rate which shows the unawareness of the staff. C) Do you offer pre-payment penalty free offers?
Penalty Free Prodcuts

25 20 15 10 5 0

Yes

No

Dont Know

100 % people say that bank is not offering penalty free products. Either customer pay off his loan in very first year or either in the last of approved tenure. Customer must pay the penalty on his remaining principle. Also the rates of the penalty vary from year to year. 23

d) Do you think that there is customer influencing advertisement of your product?

0% 13% 0%

1- Low 17% 2- Yes but not much 3- Average 4- Good 5- Yes Excellent 70%

As we all are aware that there is great influence of advertisement on the customers of any kind of product. Like other banks MCB is also advertise their products thru different channels (TV. Radio, Boards). 70% think that the advertisement of MCB products is averagely influence the customer. The marketing staff did not manage well to promote the products. 17% think that the advertisement is good. Where as only 13% think that the advertisement of MCB products put a great impact on customer. 3) Coordination between Branches & Consumer Division The 3rd segment of the questionnaire is the relation & coordination of MCB Consumer & MCB Commercial Branches. As the strong network of any organization is helpful for its growth. In this scenario our questions are as follows. a) Supporting Level of Branches to Consumer Division.
Coordination of COAD & Branches
0% 8% 4% 1- Low 29% 2- Above Low 3- Average 4- Good 59% 5- Excellent

. 24

How much branches support to Consumer section of MCB. 59% said that the branches support is average which is very high rate. as consumer section cant issue the Pay orders & demand draft so they need the support of branches in this regard & if the supporting level is average than its indication to the management to check out the issues. b) Branch behavior towards consumer division customer.
Number of Questionnaires

0% 8% 13% 13%
1- Very Poor 2- Poor 3- Average 4- Very Good 5- Excellent

66%

Again 66% said that the same thing as in previous question. Even 13% said that the behavior is very poor. c) Role of Branches in promoting the Consumer Products.

Number of Questionnaires

13%

0%

17% 1- Very Poor

17%

2- Poor 3- Average 4- Very Good 5- Excellent 53%

53 % said the Role of branches of MCB Bank to promote the MCB Consumer products is on average, where as 13% think that the branches are playing well to promote the Consumer products. 4. Customer Satisfaction 25

The most important segment & most important thing of any organization Customer Satisfaction, we put 6 different questions in this section. a) Are your customer services/collection/recovery/sales doing their jobs well?

0% 4%

29%

1- Very Poor 2- Poor 3- Average 4- Very Good 5- Excellent

67%

So 67% said that these depts. Are working properly & performing their jobs in a good manner. & 29% said the working of these Depts. is on average. And there are only 4 % said who said that they are going to be poor 7 below the bench mark. b) Are your customers satisfied with the services provided by you?

Number of Questionnaires

4% 46%

1- Low 2- Not Much 3- Average 50% 4- very Much 5- Highly satisfied

This is a self testing question. & 50% are confident that they facilitate the customer in good manner & customer is happy with relation to MCB. 46% said that customer is very much satisfied 4% said that Customer is highly satisfied with the services, where as 50% said that they are on average. But over all its a good trend. 26

c) Are walk-in customer services centers available in all major cities?

8%

17% Yes N o D ont Know

75%

8% are unaware about this. 17% said yes which also has shown the unawareness of the employees that they are not known about the existence of a department.

d) Is there any proper call center for Consumer Assets?

4%0%

Yes No Dont Know

96%

4% said that there is not any proper any call centre of COAD. Means 4% are unaware of about the call centre. Might the reason of this unawareness is that call centre of COAD is not much active. e) Is your verification department working properly? 27

Number of Questionnaires

13% 1- Very Poor 21% 66% 2- Poor 3- Average 4- Very Good 5- Excellent

66% are said that customer verification Dept is doing their jib in good manner. Where as 21 think that their working is on average & 13% think that they job is poor. Might be these are the sales persons or collection people who think like this because sales is also dependent on the verification Dept if they clear the customer then the further processing of that case will be done. And on the other side if collection people are collecting the installments of any customer then they will also think like that the customer was not verified in proper way. f) Is there any improvement required to retain the customer?
0% 4%

Yes No Dont Know

96%

Here 96% said there is further improvement required to retain the customer. We got the different suggestion for this question that which kind of improvement required. The summary of those suggestions is that to build up proper customer services dept in every bossiness area & especially in remote areas. Also a good training required of sales people. 5- Training of Sales Force

28

This is also a very important segment of the questionnaire. We all aware of the importance of the Sales team of any organization. If your sales working well then youre got the unlimited profit.

a) Is sales force completely trained?

Training of Sales Force

8% 13% 29% 1- Very Poor 2- Poor 3- Average 4- Very Good 29% 5- Excellent 21%

79% think that sales people are not properly trained they are on average or below average, where as 21 % think that they very good & above the average. Might be these are the sales people who said by yourself that they are on the best. b) Have you been providing adequate training to your staff?

Staff Training

4% 29%

8% 1- Very poor 25% 2- Poor 3- Average 4- Very good 5- Excellent

34%

29

34% said that they had to provide the training but on average. 29% said they provide very good training to his or her staff and 4% said that the training for his staff is excellent. c) Have you been providing adequate training?
Your own Training

8% 17%

0%

25%

1- Very poor 2- Poor 3- Average 4- Very good 5- Excellent

50%

50% staff said they got training but on average bases. 17% are very well trained where as the 25% said they poorly training means not efficiently trained.

d) Commitment level of your sales forces to meet the targets?

4% 0%

8% 1- Very poor 2- Poor 3- Average 38% 4- Very good 5- Excellent

50%

30

50% said that sales force is very much committed to achieve the targets. Where as 38% put them on average rank. Over all 86% said the sales force of MCB Consumer is on average or above the average to achieve their assign targets. e) Do Sales force cross sell all products?

Cross Selling of Sales

4% 4% 29% 1- Low Level 2- Above Low 3- Average 42% 4-Above Average 5- High 21%

42% said that they are on average to do the cross selling of all the products. And 50% said they are they are below the average to do the cross sell of all the consumer products.

6) Responsibility Level of Employees This is also a self-testing segment. Where employees test their selves that where they are: a) Punctuality of Employees.

31

9 8 7 6 5 4 3 2 1 0 1- Very poor

2- Poor

3- Average

4- Very good

5- Excellent

As we can see most of the area is below the very good point, which shows that punctuality of employees is not good & on average or below the average point. b) Responsibility towards their work.

0% 29% 1- Very poor 2- Poor 54% 17% 3- Average 4- Very good 5- Excellent

54% said that employees are taking responsibility of their works on averagely. 29% said they doing excellent job and employees are fully responsible. And 17% said that employees are taking responsibility in good manners. Amazing there is not any employee who selects the option below the average. c) Level of Commitment with organization.

32

13%

0%

17%

Low Above Low Avergae Good Excellent

41%

29%

41% said that employees of Consumer banking are committed with the organization in good manners, where as 29% think that commitment level is on average. So above the average is 54% & on average or below the average its 46%, which shows that employees commitment with the organization. d) Honesty and Loyalty towards their job.

Honestly & loyality of employees

0% 21% 33% 1- Low 2- Above low 3- Average 4- Good 5- Excellent 46%

46% vote that employees are honest & loyal towards their job more that average and 33% vote that the honestly & loyalty level of the employees is excellent. Only 21% think that its on average. The trend shows the clear picture of the honesty & loyalty of Consumer employees.

7) Employees Turn over Ratio a) Is organization aware of the reason for employee turnover? 33

0% 4% 21% 25% 1- Not Aware 2- Aware but Not Much 3- Aware Averagly 4- Much Aware 5- Highly Aware

50%

71% employees think that management is well aware about the turnover of the staff. The major reason of the turnover is the new induction of the banks in consumer sector and higher the experienced person from different banks on higher salary & grades. b) Is organization/management introducing incentives for employee retention?

0%

13%

1- No 2- Not Much 3- Average

58%

29%

4- Very good 5- Excellent

58% think that management take good action to retain his experienced & value added employee by giving them incentives/salary increment or by promoting them in next grade.

8) Motivation of Employees 34

Motivation is strong factor in the success of any organization. If employees are not motivated then no organization can achieve its goal & objective. a) Are your employees self motivated?

8%

0%

8% 21% 1- Low 2- Not Much 3- Average 4- Very Much 5- High

63%

71% think that staff is highly motivated & fully dedicated towards their jobs. Where as 21% think that self motivation is on average. b) Does management take proper action to motivate the employees?

8% 8%

0%

13% 1- Low 2- Not Much 3- Average 4- Very Much 5- High 71%

71% people think that management action is on average to motivate the employees. Its shows that they have complain with the management. c) Is the management providing good leadership? 35

8%

0%

8%

1- Very poor 2- Poor 33% 3- Average 4- Very good 51% 5- Excellent

51% people think that leadership is on average. 35% think that leadership is very good. 8% think that leadership is excellent. And only 8% people look much angry with the provided leadership. e) Are employees satisfied with their jobs timing?

0% 33%

8% 1- No 2- Not Much 3- Average 46% 4- Very Much 5- Very Highly

13%

37% think that employees are very much satisfied with their timings. But amazing figure is 67% think that employees are not satisfied or they are averagely satisfied of which 46% said employees are not much satisfied with the job timings.

f) Are employees satisfied with their salaries/benefits? 36

8% 8%

0% 29% 1- No 2- Not Much 3- Average 4- Very Much 5- Very Highly

55%

55% employees think that employees are averagely satisfied with their benefits/remuneration. & 29% are not much satisfied with their benefits/remuneration. It is also serious indication for the management that employees are not satisfied with the remuneration and might be the major reason of their turnover. 9) Working Environment a) Are the working conditions comfortable of all offices?

17%

1- Very Poor 42% 2- Poor 3- Average 4- Very Good 5- Excellent 41%

41% think that working conditions are average & 42 % think that working conditions are very good. Its mean little effort can make them more satisfied about the conditions. b) Is environment suitable for work? 37

8% 25% 21% 1- No 2- Not Much 3- Average 4- Very Much 5- Very Highly

46%

46% think that environment is average class, where as 21% think that environment is very good for working. 25% think that environment is good but as much and might be these are the people who are in remote areas. 10) System/Manual Work/Documentation a) Does System of your division support you in all manners?

4%0% 29% 29% 1- No 2- Not Much 3- Average 4- Very Much 5- Very Highly

38%

38% think that systems they are using support them at average. 29% think that system supports them a lot & same ratio is saying that system is not supporting much as they required. Its mean the medium range of system is using. b) Is there proper check and balance in place? 38

13% 0% 17% 1- Very poor 2- Poor 29% 41% 3- Average 4- Very good 5- Excellent

17% think that check & balance in consumer is very low, and 41% says that there is average check & balance. But 42% think that check & balance is more than average or excellent. 58% voted that check & balance is at average or below the average. c) Is your daily working fully automated?

4% 0% 33%

8% 1- No 2- Not Much 3- Average 4- Very Much 55% 5- Very Highly

55% says that automation is there but on average. But 33% said that daily working is very much automated. Only 8% think that working is not automated. Graph shows that consumer section is going on the process of automation time by time. d) Is there unnecessary documentation? 39

0% 46%

8%

13%

1- No 2- Not Much 3- Average 4- Very Much 5- Very Highly

33%

Graph shows that 46% employees think that there is unnecessary documentation, so management also thinks over it & reduce this thing. e) Processes & Policies are completely clear and well defined?

13%

0%4% 1- No 2- Not Much 45% 3- Average 4- Very Much 5- Very Highly

38%

45% says that policies & process are defined but not as clearer as required mean its on average. 36% says that process & policies are very much & very clearly defined but peoples are not much aware. 40

11) Record Management a) Is there proper record keeping in the division?

13%

0%

13% 1- Very poor 2- Poor 3- Average 4- Very good 5- Excellent

37%

37%

Here data is not much scattered, almost equal ratio between average & very good. Its mean a little concentration make the data more secure. b) Is record in safe custody?

17%

0%

8% 17%

1- No 2- Not Much 3- Average 4- Very Much 5- Very Highly

58%

75% said that record is very much in safe custody. But 25% said that its on average or not much. We believe that these 25% are from the remote areas. 41

c) Is record available on short notice?

8%

0% 4%

1- No 33% 2- Not Much 3- Average 4- Very Much 5- Very Highly 55%

55% says that availability of record on short notice is very good, where as 33% think that its on average. But over all trend shows that availability of record on short notice is good. d) Is there any backup data available of record?

8% 8%

4% 1- No 2- Not Much 3- Average 59% 4- Very Much 5- Very Highly

21%

42

59% says that there is no scanning of record or data 21% says that not much data scanning. Trend shows that there is not any tradition of data scanning.

CONCLUSION
As lots of banks are offering the same product, how does one bank differentiate its portfolio from its competitors? The answer lies in differentiation, which in turn is created by continuous innovation and of course a deep insight of consumer needs and requirements. There is a need to bring the concept of diffusion of innovation in banking, which means that after launching a new product or idea, how you can diffuse that innovation among your consumers. You should keep in mind consumers needs and requirements along with his financial background. Its a five step process which includes: Awareness Interest Persuasion Evaluation Confirmation

While launching any new product, you should have something interesting and appealing and that would create interest in your customers. And then you will be able to persuade them. After that they will evaluate that idea with their background and then they will be in a position to take the final decision.

43

Do not provide only that information to your consumers which you want them to know. Provide your customer with detailed information.

RECOMMENDATIONS & SUGESSTIONS

In the view of findings & situation analysis, the following recommendations are suggested. Better Coordination: In order to create a better coordination the management should try to organize regular meetings. They must realize there employees that they are representative of the bank for its betterment. It will also build a check on the employees work. Client Participation: For giving new services, the bank must involve the clients opinion. This is to gain their sympathy & ensure them that they are important for the bank. Ideas from Employee(s): Ideas from the employee(s) should be taken in developing products, services to improve the efficiency and employee morale. Importance of time: How much important the time of clients must be noted by employee because foreign banks give a very quick response to clients. But in local banks it is noted that sometimes employees are busy in there own gossip or work. Management must have notice on it. Innovations: New investment schemes must be offered for to attract clients towards your bank. Management must know about clients changing demands.

44

Consumer Financing: The term and conditions for giving loans are very strict; it must be lenient and flexible. . Consumers Feed Back: On regular basis the customers feedback is very important. There must be a suggestion form just to know about the customers complaints and management must take action on it. It is good for bank reputation.

Areas Where Improvements is needed

Internal & External Audits (concept of financial discipline, accountability, good corporate governance, professionalism and impartiality) Communications Skills. No ambiguity should be left. Clear and comprehensive instructions Transparency in all matters especially in financing Aggressive marketing strategies in retail and commercial banking Institutionalization of Human Resource Management (best man should be posted to best assignment, refreshing courses, seminar on emerging banking and financial problems etc. etc.). Humanistic administration, because human is supreme than any entity. (Promotion policies, award & reward) etc. etc. Research and Development facilities (Domestic market research, economic analysis, strategic insight of major economic and financial accords, international markets knowledge, rigorous planning and development, loss & prevention mechanism)

There should be central compliant cell in the bank in order to reduce peoples complaints and foster the ratios of productivity. . Money laundering and white-collar crimes are on the rampant. Aggressive and comprehensive mechanism should be set-up to save the domestic banking industry of the country.

General working conditions ought to be improved.

45

Limitations of Research
Some key limitations of research are as follows: Shortage of time Working professionals Should obey the rules & regulations of MCB Bank Ltd. Reservations regarding disclosure of key information Limited access to the Hubs of Consumer Asset Division Limitation to reach Senior Executives Senior Executives were not interested to fill out the questionnaire Workload of four courses in the current semester. Obligations to the profession Difficult to conduct research in working hours

46

Bibliography

Websites
www.euromoney.com www.mcb.com.pk www.sbp.org.pk www.map.org.pk www.mediamonitors.net

News Papers & Articles

The Daily News The Daily Dawn Daily Business Recorder 47

Time Magazine

Annexure Questionnaire on MCB Consumer

This questionnaire is being prepared to accomplish the Research Project on MCB Consumer Banking. The subject project will be filed to University of central Punjab without declaring the confidential material & issues of MCB. Your kind cooperation will help us a lot to accomplish this project. Encircle 1 for low & 5 for high rating.

1- Consumer
a- Do you think rising mark up rates effect customer ability to pay b- Do you think that SBPs regulatory policies effect (harmfully) on Customer/Bank c- Do you think that rising inflation is also a problem for business(Bank) 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5

2- Product
a- Is your price/markup competitive with other banks b- Do you offer fix rate on your product c- Do you offer penalty free products d- Do you think that there is customer influencing advertisement of your product
Yes Yes Yes No No No Dont Know Dont Know Dont Know

3- Coordination between Branches & Consumer Division

a- Supporting level of Branches to Consumer Division b- Branches behavior to Consumer Divisions customer c- Role of Branches in promoting the Consumer products

1 1 1

2 2 2

3 3 3

4 4 4 48

5 5 5

4- Customer Satisfaction

a- Is your customer services/collection/recovery/sales doing their jobs well b- Are your customers satisfied with the services provided c- Is customer services walk in centers available in all the business cities d- Is there any proper call center for Consumer Assets e- Is your verification Dept working properly

1 1
Yes Yes

2 2

3 3
No No

4 4
Dont Know Dont Know

5 5

1
Yes

3
No

4
Dont Know

f- Is there any improvement required to retain the customer,

please support your answer. If Yes, then why? If No, then why?

5- Training of sales force

a- Is sales force completely trained b- Have you been providing adequate training to your staff c- Have you been providing adequate training(s) d- Commitment level of your sales force to meet the targets d- Sales people do the Cross selling of all products

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

6- Responsibility level of employees

a- Punctuality of employees b- Responsibility level of employees towards their work c- Level of their commitment with organization d- Do they perform their job with honesty & loyalty

7- Employees Turn Over Ratio

a- Is organization aware of the reason for the turn over of employees b- Is organization/management doing things for employee to retain them

8- Motivation of Employees
a- Are your employees self motivated b- Does the management take proper action to motivate the employees c- Is the management providing good leadership d- Are employees satisfied with their jobs timing e- Are employees satisfied with their salaries/benefits

9- Atmosphere of the offices

a- Is the atmosphere comfortable of all the offices b- Is the environment suitable for work

10- System/Manual Work/Documentation

49

a- Systems of your division supports you in all manners b- There is proper check & balance in place c- Most of the work is automated d- Is there unnecessary documentation e- Processes & Policies are completely clear & well-defined

1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5 5

11- Record Management

a- Is there proper record keeping in the division b- Is Record of Assets in safe custody c- Is record available at short time notice d- Is there any backup of available of the record like scanning etc.

Name: Title: Date: Note: Name & Title is not necessary to mark.

50

Management Hirarchy President

Head of Retail Banking

Head of Consumer Banking

Head of Credit & policies

Head of Consumer Asset/Business

Country Manager Collection Secured

Country Manager Collection UnSecured

Country Manager Recovery

Country Manager CIU Secured

Country Manager CIU Un-Secured

Regional Collection Manager South

Regional Collection Manager North

Regional Collection Manager Central

Regional Credit Manager South

Regional Credit Manager North

Regional Credit Manager Central

Same as RCM of Secured 3 RCM unsecured reporting to Collection Manager Un-secured

Same as RM of Secured 3 RM unsecured reporting to CIU Manager Un-secured

Head of Consumer Asset/Business

Head of Operations & IT

Marketing/ Advertisement

Manager Accounts

National Sales Managers

Manager Autos

Manager Personal Loan

Manager Mortgages & BS

RSM Autos Sales

RSM Personal Loan Sales

RSM Mortgages & BS Sales

There are further 3 RSMs of each product reporting to RSM Sales

51

Research Project
MCB BANK LIMITED CONSUMER BANKING
Project report submitted in partial fulfillment of the requirements for the degree of

MASTER OF BUSSINESS ADMINISTRATION (EXECUTIVE) By ADEEL ARSHAD L1F04MBEX0011 USMAN MAILK L1F05MBEX1061

The Project report of Mr. Adeel Arshad & Mr. Usman Malik is approved:

Prof. Kashif Ud Din Khan Advisor Research Project Cell

Prof. Abdul Rauf Co-Assessor Research Project Cell

52