SME Report

SME financing of BASIC Bank Limited
EXECUTIVE SUMMARY
An internship program is very important & essential for acquiring experience through learning
and spreading the scope of Knowledge. I have done my internship program in BASIC Bank
Limited Main Branch, Credit Department.
This internship Report is aimed at providing a comprehensive picture to the areas of SME
financing of BASIC Bank Limited. The Report has been divided in to five parts. These are: 1)
Introduction, 2) Overview of SME 3) Overview of BASIC Bank Limited, 4) Analyses, 5)
Comparative position with other bank, 6) Findings, Recommendation, Conclusion and
References.
BASIC Bank is one of the leading specialized Bank of Bangladesh. The Bank is fully owned
by the government of the Peoples Republic of Bangladesh. The main objective of the Bank is
to provide all banking services to the Small and Medium businesses. The Bank also
participates in various Social and Development programs and also takes part in
implementation of various policies and promises made by the Government and Bangladesh
Bank.
At present the industry sector (manufacturing) plays a very important role in the economic
development of the country. Before that Agriculture was the back bone of the economy of
Bangladesh. In FY 2003-2004 the combined contribution of all sub-sectors of agriculture to
GDP was around 22%, whereas the contribution of industry sector and service sector are 28%
and 50% respectively. The growth rate of manufacturing sector registered 7.1 for the 2003-

2004 and after that the growth rate in manufacturing sector rose to a significant mark by 8.43
for the year 2004-2005. A tremendous growth in the manufacturing sector indicates
prospective growth of the industry in the upcoming years. Government is expecting that if the
programs and roadmap is implemented properly and effectively for SME development the
growth in industrial sector may be achieved by 10 percent for the year 2015.
Government has formulated and adopted the Industrial Policy-2005 where SMEs has been
earmarked as thrust sector for alleviation poverty, generating more employment and
sustainable
industrial development in a planned and balanced manner and thereby accelerating economic
growth in Bangladesh. In the existing policy framework pursued by the government the
development of SMEs issue has been given priority and government has accepted SMEs as
an indispensable player in growth acceleration and poverty reduction. Because there are
about 50,000 SMEs presently operating in Bangladesh. It represents 90% of all industries.
Various categories of SMEs contribute between 80-85% of industrial employment and 23%
of total civilian employment.
The threats for SMEs development are also complex. The use of obsolete and simple
technologies is one of the common features of SMEs, resulting in low productivity, low
quality and small markets. Access to credit and equity capital is an important element for
establishment of an enterprise. But small and Medium Enterprises sector has limited access to
credit. Financial institutions tend to favour large enterprises. Besides traditional lending
method, which is more security/collateral oriented high rate of interest, compound interest
rate, corrupt practices etc. discouraged SME business operators to take institutional loans.
SMEs product have a limited domestic market due to poor financial standing of the
consumers. For this reasons entrepreneurs have to find foreign markets which is very
competitive. In the export market SMEs products have to face tough competition with the
products of other countries in respect of price and quality. Thus the key challenges for SMEs
development in Bangladesh may be summarized as lack of capital, inadequacies of physical
infrastructure, inadequacies of markets/ incomplete markets and other hostile/ inimical
conditions such as low access to business service, low awareness, low lobbying capacity etc.
Almost three decades have elapsed since Bangladesh emerged as a political entity in the
global scenario. Now government has attached top priority to the development of SMEs in
Bangladesh through which we can expect a truly empowered, science-oriented prosper
Bangladesh.
Chapter-1
Introduction of the Report
1.1 ORIGIN OF THE STUDY

With a view to achieving the Millennium Development Goals (MDGs) or the targets of the
National Strategy for Economic Growth, Poverty Reduction and Social Development,
commonly known as the Poverty Reduction Strategy Paper (PRSP), the development
process of Bangladesh must strive to expand employment creation opportunities very rapidly.
To achieve these goals the Government has attached highest importance to the development
of SMEs in Bangladesh. The developments of SMEs are now the main thrust area and engine
behind the process of rapid industrialization of Bangladesh. The growth of SMEs itself have a
very complementary role for the growth of large scale industries which have leading role in
promoting industrial linkages at a greater extend with bigger market share through export
earning and employment generation.
BASIC Bank Limited is one of the leading specialized banks in Bangladesh. Its pioneer role
in handling SME financing is praiseworthy. With wide network of branches in different
districts, it is singularly handling the largest volume of SME business. BASIC Bank Limited is
playing an important role toward the growth and economic development of Bangladesh.
Dhaka University provides an opportunity to complete a very much theoretical and practical
oriented BBA program. Since, its mandatory for the BBA students to gather practical
knowledge through the Internship program; I have completed this program being attached to
BASIC Bank Limited at Main Branch (Motijhee) for a period of 3 months. The sole aim of
the Internship Program is to blend my academic knowledge with that of practical ones and
give me an insight into the Management of organization in real life situations & finally to
submit a report to the Department. The topic of the report is SME Financing of BASIC
Bank Limited. The report mainly covers the organizational overview, performance of the
bank, credit policy for SME financing, SME financing of the bank. It is expected that the
report will highlight the task performed and experience gained during the practical orientation
program.
1.2 OBJECTIVES OF THE STUDY

1.2.1 Broad Objective
The prime objective of the study is to gather practical knowledge regarding SME financing
and BASIC Banks contribution in SME financing.
1.2.2 Specific Objectives

To get an overall idea about the SME and its activities in Bangladesh.
To understand the market need of SME banking
To get an overall idea about the SME financing of BASIC Bank Limited.
To apply theoretical knowledge in the practical field.
To describe the organizational structure, management, background, functions and
objectives of the bank and its contribution to the national economy.
To achieve overall understanding of BASIC Bank Limited.

To analyze the financing systems of the bank to find out the contribution in
development of SME.
To understand the problems of SME development and try to recommend for
mitigating the existing problems.
1.3 SCOPE OF THE STUDY

The study is very relevant and significant for developing and understanding how BASIC
Bank Limited plays an important role in the development of SME in our country. And SME
plays an important role to eliminate the poverty of our country. This report consists of my
observations and on the job experiences during the internship period. This information is
collected from various sources, which are directly related with SME. The Bangladesh Bank is
the main source of SME strategic policy in Bangladesh.
1.4 METHODOLOGY OF THE STUDY

The report is prepared on the SME financing and BASIC Banks contribution in SME
financing. To conduct the overall study, at first I explored the sources of primary and
Secondary information and data.
1.4.1 Sources of data

As mentioned earlier, primary and secondary sources of data has been used.
1.4.1.1 Primary Data
Official records of BASIC Bank Limited
Interview with the officers and clients.
Direct observation.
Expert opinion.
1.4.1.2 Secondary Data
Annual Report of different banks.
Working Papers.
Official Files.
Selected books.
Other manual information.
Websites.
Various publications on the Bank.
Newspaper reports in this concern.
Bangladesh Bank Circulars

1.4.1.3 Data Processing & Analysis
Collected information have then processed & compiled with the aid of MS Word & Excel.
Necessary tables have been prepared on the basis of collected data and various statistical
techniques such as Tobit Regression Analysis & Multiple Regression Analysis have been
applied to analyses on the basis of classified information. Detail explanation and analysis
have also been incorporated in the report.
1.5 LIMITATIONS OF THE STUDY

To provide current information and to make the report read-worthy, support from various
sources is a must. In spite of my best effort, I could not collect some information required at
the time of the study. So this study is not free from the following limitation:
Lack of previous experience to prepare this type of report and it is totally new to me
as an intern.
Unable to dedicate sufficient time to make an in-depth study on such an important
issue. It is quite difficult to write about any organization within 3(three) months.
Another limitation of this study was bank's policy of not disclosing some data and
information for various reasons, which could be very much useful.
Updated information of the topic is not available. So the report contains old data
about the topic.
Unavailability to required published documents.
To protect the organizational confidentiality some parts of the study are not in depth.
Chapter-2
SME in Bangladesh
2.1 DEFINITION OF SME

SMEs in Bangladesh are defined for purposes of industrial policies by the Ministry of
Industries (MOI). Historically, this definition has been in terms of fixed-investment brackets,
and a dual-mode definition is in place, separate for manufacturing establishments, and service
establishments.
2.1.1 Definition by Ministry of Industries (MOI)

In Industrial Policy-2005 the Ministry of Industries defined the SMEs under the following
criteria,
(Amount in million Tk)
Sl.
No.
1.
Industry Name
2.
Non-manufacturing
Manufacturing
Enterprise
Name
Small
No. of Workforce
Not more than 50
Medium
Not more than 150
Small
Not more than 25
Medium
Not more than 50
Table 2.1- Definition of SME by MOI
Cost of Asset excluding land

and building
0.05 million to 15 million
15 million to 200 million
2.1.2 Definition by Bangladesh Bank

But Bangladesh Bank has given a definition in order to keep uniformity between the financial
institutions about the SME.
(Amount in million Tk)
Sl.
No.
1.
2.
3.
Industry Name
Enterprise
No. of Workforce
Cost of Asset excluding land
Name
and building
Manufacturing
Small
25-99
Medium
100 - 250
Micro
10-24
Cottage
10-24
Non-manufacturing Small
10-25
Medium
50-100
Micro
Not more than 10
Not more than 0.05 million
Cottage
Not more than 10
Not more than 0.05 million
Women
Proprietor of a proprietary business or the owner of at least 51 percent of
entrepreneurs
a partnership or a private company registered under joint stock
companies
Table 2.2- Definition of SME by BB
2.2 SME SECTORS IN BANGLADESH

(i)
Agro-process, agro-based and agro-supportive industries
(ii)
Glass & Ceramic Industry
(iii)
Artificial flower making
(iv)
Computer soft ware and ICT;
(v)
Microelectronics;
(vi)
Food processing and food staffs;
(vii) Floriculture;
(viii) Gift items;
(ix)
Poultry and cattle;
(x)
Jute goods;
(xi)
Electrical appliances,
(xii)
Leather and leather goods;
(xiii) Pottery;
(xiv) Light engineering and metal-working;
(xv) Staffed toys;
(xvi) RMG, knitwear etc.;
(xvii) Aquaculture;
(xviii) Automobiles;
(xix) Horticulture and
(xx) Medicinal plants culture;
(xxi) Pharmaceutical/cosmetics/toiletries
(xxii) Solar energy, Bio-gas and Effluent Treatment Plant
(xxiii) Printing & publishing industry
(xxiv) Poultry Firm and Dairy Firm
(xxv) Healthcare and diagnostics
(xxvi) Educational services
(xxvii) Fashion-rich personal effects, wear and consumption goods
(xxviii)
Rice Mill
(xxix) Plastics and other synthetics
(xxx) Textiles; and
(xxxi) Tourism.
(xxxii) Other industries: Foods of animal, Umbrella, Packing Board, Red oxide, Soap, TV
antenna, Lock & Key, Jam, Jelly, Bakery etc.
However, in the Export Policy 2003-2006, the Government had identified the following five
sectors to have "High Priority":
Software and ICT products;
Agro-products and agro-processing products;
Light engineering products (including auto-parts and bicycles);
Leather goods; and
High value-added readymade garment.
The Export Policy 2003-2006 classified the following products as the "special development
sector:
Pharmaceuticals;
Cosmetics and toiletries;
Luggage and fashion goods;
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Electronic products;
C-R coil;
Greeting cards and calendars;
Stationery;
Silk cloth;
Handicrafts; and
Herbal medicine.
2.3 NUMBER OF SMES

No one knows for sure how many SMEs there are in Bangladesh today. It was around 1978
that the BSCIC (Bangladesh Small and Cottage Industries Corporation), under the Ministry
of Industries, conducted a survey to find out the number of cottage and small industries of the
country. In spite of the question about the validity and dependability of the survey, in absence
of any other effort by the Bangladesh Bureau of Statistics (BBS) or any other agency, this
initiative did provide a useful benchmark but it was never updated. The International
Consultancy Group (ICG) of the UK, in collaboration with the Micro Industries Development
Assistance and Services (MIDAS), conducted in 2003 the National Private Sector Survey of
Enterprises in Bangladesh with funding from the Department of International Development
(DFID) of the UK Government, the United States Agency for International Development
(USAID), the Swiss Agency for Development and Cooperation (SDC) and the Swedish
International Development Cooperation Agency (SIDA). The survey results drew the
conclusion that there were approximately 6 million micro, small and medium enterprises
(MSMEs) in Bangladesh, which included enterprises with up to 100 workers employing a
total of 31 million people, equivalent to 40% of the population of the country of age 15 years
and above. Based on the Economic Census, the total number of SMEs is estimated at 79,754
establishments, of which 93.6% are small and 6.4% are medium. The survey also found that
the industrial structure of SMEs consisted of primarily wholesale and retail trade and repairs
(40 per cent), production and sale of agricultural goods (22 percent), services (15 percent),
and manufacturing only (14 per cent).
Figure 2.1-Composition of SMEs

The latest BSCIC estimates suggest that there are currently 55,916 small industries and
511,612 cottage industries excluding handlooms. Including handlooms, the number of
cottage units shoots up to 600,000 units indicating numerical superabundance of the SCIs
in Bangladesh.
Quoting informal Planning Commission estimates, the SMDF puts the number of medium
enterprises (undefined) to be around 20,000 and that of SCIs to be between 100,000 to
10

150,000. Total number of small businesses according to IFC data is 71,701.According to a
survey done in 2006 the total number of SME is 6.8 million.
Whatever the correct magnitude, the SMEs are undoubtedly quite predominant in the
industrial structure of Bangladesh comprising over 90% of all industrial units. The SMEs
make up 75 percent of the domestic economy.
2.4 GROWTH OF SMES

The share of SME in the number of establishments in the 10+ size group has slightly declined
from 96.5% in 1986 to 93.02% in 2003. There are 49 thousand SME in 1986 and it becomes
80 thousand in 2003. There are 2 thousand large industries in 1986 but the number increase to
6 thousand large industries in 2003.
Figure 2.2- Growth Percentage of SMEs

SME has grown from 7.69% in 2001-02 to 10.28 % in 2006-07. Due to the policies and
measures taken by government the SMEs will increase in the future.
11

1986
2003
Micro
<10
Small
10-49
Medium
50-99
SME
10-99
Large
100+
Total
10+
All
Micro
<10
Small
10-49
Medium
50-99
SME
10-99
Large
100+
Total
10+
No. of
Establishment
(thousand)
As % of all
2117
47
49
51
216
8
3489
75
80
86
97.6
2.16
0.11
2.27
0.11
2.38
100
97.6
2.10
0.14
2.24
0.17
2.4
As % of 10+
90.9
4.67
96.55
4.45
100
87.21
5.81
93.02
6.98
100
Source: Bangladesh Census of Economic Activities 1986 to 2003

Table 2.3- Growth of SME from 1986 to 2003
Figure 2.3- Growth Percentage of Manufacturing SMEs

While SME sector has a growth of 10.28 % in 2006-07, the manufacturing sector SME has a
growth of 11.19% in 2006-07. The manufacturing sector SMEs also expected to grow at 15%
till 2015.
2.5 DEMAND AND SUPPLY GAP OF SME FINANCING

2.5.1 Overall SME Credit Demand Analysis
The market size for loans to SMEs is estimated to be nearly Tk255 billion, with 225,786
potential clients. This estimate is based on the following calculations:
An estimated 5.9 million micro, small, and medium-sized enterprises in 2003
which, based on population growth, suggests 6.8 million such businesses in 2006.
Only 2.5 million of the 6.8 million enterprises are estimated to have annual profits
above Tk50, 000.
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Survey findings indicate that 84% of enterprises want to borrow. Of these, only about
half will be both willing and able to borrow at a given time (based on the assumption
that 70% of firms that want to borrow are creditworthy and that 70% of these are
borrowing at the same time). This means that 1 million micro, small, and mediumsized enterprises are potential borrowers.
About 78% of these enterprises are micro, 17% small, and 5% medium-sized.
The potential lending volume for each segment is calculated by multiplying the
number of enterprises in that segment by the average loan for that segment. Average
loans are determined by the mean for each segment as defined by this reportTk50,
000
Tk300, 000 for micro enterprises; Tk300, 000Tk1, 000, 000 for small
enterprises; and Tk1 millionTk5 million for medium-sized enterprises. This result
assumes that the midpoint of each segment corresponds to the average expected loan
for each segment.
Estimated credit demand of SMEs of Bangladesh
Segment
Share of
Total (%)
Number of
Enterprises
Average Loan
size (Tk)
Lending Volume
(Tk billion)
Market
Share (%)
Micro
78
805,477
175,000
140
35
Small
17
179,366
650,000
117
30
Medium-sized
5
46,420
3,000,000
138
35
Total
100
1,031,263
3,825,000
395
100
Source: Ferrari, A. 2008. Increasing Access to Rural Finance in Bangladesh: The Forgotten
"Missing Middle." Washington, DC: World Bank.
Table 2.4- Overall Credit Demand of SMEs of Bangladesh
2.5.2 Overall SME Credit Supply Analysis

As of June 2009, six banks are estimated to have 95% of the market share for SME lending
nationwide, which equals a total of Tk84.5 billion. The remaining banks and financial
institutions in Bangladesh hold an estimated 5% market share for SME lending. This suggests
an estimated total current supply of SME credit (SME loan principal outstanding) of Tk 88.8
billion.
Table:
Bank
Principal Outstanding as on 2009 (Tk billion)
BRAC Bank
33
Islami Bank
33
BASIC Bank
9
Eastern Bank Limited
3.5
Dhaka Bank
3
Prime Bank
3
Total SME Lending (Principal Outstanding)
84.5
Estimated Market Share of Above Six Banks
95%
Total Estimated SME Credit Supply
88.8
Source: Asian Development Bank estimates.
Table 2.5- Estimated Credit Market for SMEs of Bangladesh
13

2.5.3 SME Credit Demand & Supply Gap
According to the survey the SME credit demand is Tk 255 billion and the supply is Tk 88.8
billion. The gap between demand and supply is Tk 166.2 billion. Government should take
steps to meet up the huge demand for SME credit. Other private commercial banks should
launch SME related loan products in order to meet the Small and Medium Enterprises credit
demand.
2.6 REFINANCING OF SMES BY BANGLADESH BANK

The Government has taken up programs to provide financial assistance to expand SMEs
through commercial banks. In addition to this, IDA has provided US$10 million and the
Government of Bangladesh has provided Tk.116 crore through Enterprises Growth and Bank
Modernization Project (EGBMP). Moreover, in an attempt to provide incentives to the
sector, ADB has been providing an additional US$30 million to Bangladesh Bank. Detailed
refinancing of Bangladesh Bank, IDA and ADB to various financial institutions and banks is
shown in Table:
Name of
Banks/FIs
Refinanced
Amount Refinanced (In crore Taka)

Working
Capital
Total
Loan
No. of Beneficiary Small & Medium

Enterprises (In Thousand)
Industrial Commercial Service Total
Loan
Loan
(a)Bangladesh
Bank
(b) IDA
235.00
Mid
Term
Loan
555.83
Long
Term
Loan
250.85
1041.67
2804
6651
1743
11198
64.74
112.80
93.84
271.38
981
1306
486
2773
(c) ADB
144.48
132.27
58.19
334.94
800
2096
368
3264
2597
17235
Total
444.22 800.9 402.88 1647.99
4585
10053
Source: Bangladesh Bank
Table 2.6- Refinancing of BB, IDA and ADB
So total loan amount disbursed is Tk. 1647.99 crore and the total numbers of beneficiary
small and medium enterprises are 17235.
2.7 ROLES OF SME

The growing economic significance of the SMEs as sources of new business creation and
employment generation in the developed and developing country is remarkable. The re-
14

emergence of the SMEs in Bangladesh makes economic case for fostering development of
these industries stronger than ever before.
2.7.1 Creating Employment Opportunity

It is recognized that SMEs have a significant role in employment generation, poverty
reduction, and overall economic growth in Bangladesh. The SMEs typically constitute labor
intensive industries with relatively low capital intensity. As such for a country like
Bangladesh which is labor abundant and capital scarce, SMEs have a natural comparative
advantage. Therefore, particular attention needs to be given to policies that promote SME
activities with increased participation of women and for developing entrepreneurship in
formal and informal sectors. In recognition of the strategic importance of SMEs in promoting
industrial growth, employment generation and poverty alleviation, the SME sector has
already been declared as a priority sector and various measures have been initiated to help
maximize growth of SMEs which in turn would help in generating employment and reducing
poverty in the country over time.
Year
1981
1991
2001
2003
Average Annual Growth Rate

(% change)
Employment 322110
523472
808959
1718000 10.43%
Source: Bangladesh Economic Review, 2003.
Table 2.7-Creation of Employment opportunity by SMEs
From the above table it is seen that from the 1981-2003 the employment rate is increasing
which is playing a very important role in removing unemployment and poverty alleviation
providing employment to 4 out of 5 industrial workers. SMEs including micro enterprises
account for some 81.2%, while only 0.15% of all business enterprises employ a full 18.8% of
the employment of all business enterprises outside agriculture. The sector now provides
employment to roughly 5 million workforces, which accounts for 82% of the total industrial
labor force and generate between 45% to 50% of the total manufacturing value added.
Figure 2.4-Percentage of Location wise & Sector wise employment by SMEs

15

From the above it is seen that about 63.76% employment is created at urban areas and
36.24% at rural areas. But the other service activities have created 42.38% employment than
that of 37.50% by manufacturing sector.
2.7.2 SMEs contribution in GDP

The contribution of SMEs in the GDP is remarkable. According to the survey conducted at
2003 SMEs contributed BDT 741 ($ 12.5) billion or nearly 25 per cent of the GDP (BDT
2,996 billion) in 2003.
Source: Economic Review, Ministry of Finance, GOB, 2008

Figure 2.5-Percentage of contribution of Large and Small Industries in GDP
Bangladesh maintained its upward strides in economic growth duly manifested by positive
developments of the major macro-economic indicators by SME through 1999-2008. SMEs in
manufacturing and services combined have 19 percent share of GDP in the last decade.
16
Figure 2.6- Sector Wise GDP Contribution of SMEs

Reference: Appendix- Table-1
2.7.3 Women Employment

A close view on some major indicators shows the existence of high gender difference in
economically active population in Bangladesh. Out of a total labor force of 40.7 million in
2000, females constituted only 8.6 million (21 per cent) which rose to 12.1 million (24
percent) of total labor force of 49.5 million in 2006. The share of female employed labor in
total employed labor is very similar (20 percent and 24 per cent for the two years
respectively). This shows that 29.4 million out of 35.1 million persons (84 per cent) who are
not in the labor force are women.
Female
A.
Male
Total
Sector
Formal
1.6
8.6
10.2
Informal
9.7
27.5
37.2
Total
11.3
36.1
47.4
1.3
5.3
6.6
0.1
0.1
Self-employed
1.8
18.1
19.9
Unpaid family worker
6.8
3.5
10.3
Irregular paid worker
0.2
0.8
1.0
Day laborer
0.7
7.9
8.6
Domestic worker/maid servant
0.3
0.3
Others
0.2
0.4
0.6
Total
11.3
36.1
47.4
B.
Regular paid employee
Employer
Status
(Amount in Million Taka)

Source: Bangladesh Economic Review 2006-2007
Table 2.8-Employment status of female and male workers in SMEs
Large number of unemployed women can engage themselves in the economic activities.
Investing small amount of capital this women can start small & cottage industry and help the
family and the economy. From different sources it is clear that among the employment
women are participating largely in small and cottage industry.
17
2.7.4 Contribution of Small Manufacturing Industries

Small manufacturing enterprises are mostly concentrated in food and allied products, textiles
and clothing, leather, ceramic light engineering, electrical and electronic goods production.
Small manufacturing enterprises, however, account for more than half of employment in the
manufacturing sector .Between 1996-97 and 2001-02, small manufacturing enterprises
exhibited a fluctuating pattern in their growth while large enterprises showed a steady growth
pattern. Small manufacturing enterprises are very largely concentrated in the food and allied
products industry with 55.5 percent share. This industry is dominated by rice milling which
accounts for 64 percent of all establishments in the industry.
Year
Value Added in
Large Industry
(Million Tk.)
Value Added in
Small Industry
(Million Tk.)
Yearly Compound Rate of Growth

(%)
1989/90
1990/91
1991/92
1992/93
1993/94
1994/95
Annual Average from
1989/90 to 1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
Annual Average from
1995/96 to 1999/00
Annual Average from
1989/90 to 1999/00
111126
117817
126462
137846
149220
166297
134795
5037
48316
51929
55925
60334
65220
54460
Large Industry
6
6.7
7.4
8.4
8.4
8.4
Small Industry
7.3
7.4
7.5
7.6
7.7
7.7
175732
182704
199668
208033
217083
196644
70619
76091
81240
81849
85122
7/884
5.7
4.8
6.3
5.8
5.8
5.5
8.3
8
7.6
5.8
5.5
5.5
162908
65607
6.9
6.6
Source: Ahmed, M.U

Table 2.9-Value Addition by Large & Small Industries in Manufacturing Sector
18
Figure 2.7- Growth rate of Value Addition by Large & Small Industries in
Manufacturing Sector
2.7.5 Income Generation

An informal estimate by Planning Commission of Bangladesh has reported that the SME
sector accounts for more than 80% of private establishments, approximately 80% of
industrial units and employs 23% of the total labor force of the country, and about half of the
gross industrial output. It also suggests that SCIs are responsible for giving birth to 59% of
the new industrial enterprises in Bangladesh during 1980s. About three quarters or more of
the household income in both urban and rural areas is provided by the MSMEs. The high
level of income contribution was attributed to the fact that the enterprises worked ten hours
per day, 28 days per month for eleven months a year.
Source: ICG/MIDAS, 2003

Table 2.10-Location wise income generation by SMEs
There were approximately 6 million micro, small and medium enterprises (MSMEs), which
included enterprises with up to 100 workers employing a total of 31 million people,
equivalent to 40 per cent of the population of the country of age 15 years and above. About
three quarters or more of the household income in both urban and rural areas is provided by
the MSMEs
2.7.6 Solving Unemployment Problem

The perception of the labor market substantially changes when underemployment is taken
into account in assessing the status of the labor force in Bangladesh. A survey conducted on
the information of hours worked shows that a total of 15.1 million (which is about 35 per cent
of the employed labor of 44.3 million) were underemployed in 2003. This shows an
19

extremely high level in the number of the people who work less than 35 hours per week. Also
the information shows high incidence of underemployment in rural areas and among the
female labor force. During 2003, the share of the employed labor force who worked less than
35 hours per week was nearly 36.4 percent in the rural areas compared with 26.7 percent in
the urban areas and was as high as 72.3 percent among females against 23.1 percent for
males. Of the total number of underemployed labor, nearly 47 per cent were females. This
large number of underemployed people can engage themselves in SME sector.
2.7.7 Contribution in export sector

The growth of SMEs in a number of industries, particularly in the field of plastic, food,
footwear, rubber products, chemicals, job printing and certain categories of metal based
products. Plastic industry has not only succeeded in substituting imports but has also been
able to penetrate the export market in specific range of products such as drums and bulk
containers etc. The industry has also been producing items that are considered deemed export,
e.g. accessories for the garments industry etc. Similar export successes have also been
achieved by imported metal based engineering product industries. Ready-to-wear garments
and processed foods, the corresponding percentages would be close to 50-60%, and 65%,
respectively.
Figure 2.8- Percentage of SMEs with direct exports and/ or imports in 2006-2008
By creating mutually exclusive categories (e.g. enterprises only exporting) one can see that
importing and exporting very often coincide within the same enterprises. Of all enterprises
that either import or export, more than 40% are active with both modes.
2.7.8 Raw materials and machinery for large industry

Most of the SME produced raw materials and machinery for the large industries which plays
a vital role in growing up large industry and economy. Thus foreign currency is saved.
2.7.9 Proper Use of Local Resources

SME needs less capital than large industry. Most of the industry flourished based on the local
raw material and locally produced element. As a result the proper utilize of local resources
are made. At the same time it saves foreign currency of our country as well as ensuring profit.
20

2.7.10 Balanced growth of industry
Usually large industries are grown in the town and some selected proper areas. As a result
only few industry areas are developed. But SME can reach other areas of the country. So now
balanced economic & sector wise growth is possible.
2.8 DEVELOPING COUNTRY SME

There are many countries which are developing giving concentration on the SME sector. Here
some of the country positions in SME are given below to have an overview about the
contribution of SME in GDP, employment generation and export.
2.8.1 SME in China

SME are a vital force for the sustained development of the Chinese economy. SMEs account
for 99% of all enterprises in China. SMEs are already making contributions to the growth of
GDP, Fiscal revenue, employment creation and export. The contribution of SMEs in Chinese
economy is shown below according to the year of 2006:
Ratio
Contribution in %
SMEs/ Total enterprise
98.98%
SMEs total asset/ All Enterprises
55.15%
SMEs production/ All Production
68.7%
SMEs jobs/ Total jobs
74.53%
New Jobs
71.88%
Export earning
69.20%
Source: Developing Country SMEs, 2006.
Table 2.11-Contribution of SMEs in Chinese Economy
2.8.2 SME in India

The small and medium enterprises today constitute a very important segment of the Indian
economy. SMEs sector has emerged as a dynamic and vibrant sector of the economy. Today,
it accounts for nearly 35% of the gross value of output in the manufacturing sector and over
40% of the total exports from the country. In terms of value added this sector accounts for
about 40% of the value added in the manufacturing sector. The sector's contribution to
employment is second highest next to agriculture. SMEs Sector plays a major role in India's
present export performance. 45%-50% of the Indian Exports is contributed by the sector.
Direct exports from the sector account for nearly 35% of total exports. Besides direct exports,
it is estimated that small-scale industrial units contribute around 15% to exports indirectly.
This takes place through merchant exporters, trading houses and export houses. They may
also be in the form of export orders from large units or the production of parts and
components for use for finished exportable goods. The exports from SMEs sector have shown
excellent growth rates in this decade. The product groups which dominate the exports from
21

SMEs sector include sports goods, readymade garments, woolen garments and knitwear,
plastic products, processed food and leather products.
2.9 PROBLEMS OF SME

At present SME sector is facing a lot of problems in Bangladesh. Some major problems are
as follows;
Resource scarcity
In Bangladesh scarcity of raw materials hinder the ability of SME to be export oriented and
limits its ability to reach more advanced stages of international business.
High employee turnover
Due to limited growth of SME most of the skilled employees leave SMEs. Levy (2003)
observed that SMEs are knowledge creators but poor at knowledge retention.
Absence of modern technology
One of the main barriers for the development of SME in Bangladesh is inadequate
technologies. Many SMEs have failed to adopt modern technology.
Poor physical infrastructure
Inadequate supply of necessary utilities like electricity, water, roads and highways hinder the
growth of SME sector. Moreover unfavorable geographical conditions increase the
transportation cost.
Financial constraints
Availability of finance hinders the growth of SMEs in Bangladesh. Bangladeshi bank
considers SMEs as high risk borrowers because of their inability to comply with the banks
collateral requirements. Only about 15-20% of the owners of SMEs own any immovable
property. Bankers issue loan on the basis of ownership of immovable property as collateral
risk. As a result it automatically excludes rest 80% SMEs from the list of privileged clients
of the banks. Whatever collateral SMEs can manage gets used up in talking the term loan
leaving them with no means to seek working capital loans from banks. Because of low access
to institutional financing SMEs rely on inefficient financing services from informal sources.
A study (2004) by Micro Industries Development Assistance and Services (MIDAS) revealed
that sources of finance are mostly friends and family member in case of SME. MIDAS tried
to identify the sources of funds of SMEs. These are:
Sources of funds
Informal sector
Percentage of finance
41%
22

Family members
NGO
Bank
20% (interest free)

4% (with interest)
17%
18%
Table 2.12-Sources of funds of SMEs
Lack of uniform definition

In Bangladesh the definition of SME has changed overtime in different industrial policy
announced by the government in different year. Absence of uniform definition makes the
formulation and implementation of SME policy difficult.
Lack of information technology
Miah (2006) has observed that SMEs have very limited use of information technology (IT).
Accounting package is used by 1-2% of the SMEs. The use of computers is revealed by say
15% of the SMEs, while the use of the Internet for business purposes applies to say 8-10% of
SMEs.
Lack of entrepreneurship skills
Conservative attitude towards risk, lack of vision, ability to make plan and implementing
those hinder the growth of SME in Bangladesh.
Participation of women entrepreneurs
Equality of opportunity is a major problem for SME. Female entrepreneurs are treated
discriminately. They are not well represented in business organization. Government does not
provide adequate institutional assistance for women entrepreneurs.
Access to Market and lack of awareness regarding the importance of marketing tool
For SME, owing a retail space is very expensive in the major cities in Bangladesh. As a result
many customers are not interested to buy products and services from SMEs. Because they
cant judge the quality until they physically examined the product. Most of the cases SMEs in
Bangladesh are not able to use the Integrated Marketing Communication (IMC) tools. But
these tools play the role of important stimulus to motivate the customers and retain them. The
country does not have enough marketing capability and resources to invest in marketing.
Bureaucracy
Wang (1995) observed that the inadequate government supports are top ranking constraints
for SMEs. Unnecessary layers of Bureaucracy and red-taps reduce the competitiveness of
SME and raising the cost of transactions and operations.
Absence of transparent legal system
The absence of an effective and transparent legal system discourages SMEs in exploring into
risky ventures of business. There are a number of unnecessary formal requirements to start
and run business that create high compliance costs and become barriers to SME development,
growth and market entry.
Lack of commitment to innovation and customer satisfaction
Ernesto (2005) stated that to keep in pace with international competition, firms of all size are
challenged to improve and innovate their products processes constantly. But in Bangladesh
SMEs are still not relating the importance of satisfying and retaining customers by offering
novel and desired benefits.
23

Lack of quality assurance
Govt. has failed to frame a national quality policy, provide adequate support systems and
establish a national quality certification authority. As a consequence SME of Bangladesh has
failed to ensure the quality of their products and services both in local and international
market.
Fierce competition with the cheaper foreign goods
Fierce competition with the cheaper goods of China, Taiwan, Korea, India, and Thailand also
pose threat to SME in Bangladesh
2.10 STRATEGIES TAKEN FOR THE DEVELOPMENT OF

SMES
Bangladesh Bank has already introduced several schemes and programs to flourish and
expand SME Enterprises. Refinance scheme funded by Bangladesh Bank, IDA and ADB has
been facilitated for the development of SME Sector. Besides, to ensure institutional financial
facilities under easy conditions Bangladesh Bank has taken diverse steps; like opening of
Dedicated Desk for SME and SME Service Centre in the banks and special facilities for
the women entrepreneurs. But reality is that expected outcome has not been achieved so far in
this sector.
Include all segments of people in the growth process through facilitating credit to the sectors
where less attention has been given due to present market mechanism, specially, in
agriculture and SME sector. Reasonably, a new department namely SME and Special
Programs Department has been established in Bangladesh Bank recently which will be
solely responsible for policy formulation, facilitating fund, monitoring and development of
entrepreneurship in the SME sector.
The guidelines formulated by the newly created department for compliance of the banks and
financial institutions for the development of SME sector are enumerated below:
For the first time in Bangladesh, an indicative target for SME loan disbursement has
been set for 2010 by the banks and financial institutions considering SME development
as one of the most important development agenda of the country. According to the
target, SME loan shall be disbursed to the small, medium and women entrepreneurs.
Following the 'Area Approach Method' banks/financial institutions will try to attain
their indicative targets separately by dividing it as branch wise, region wise & sector
wise.
Each bank/financial institution shall follow a separate business strategy in financing
SME loan with least formalities in executing documentation to ensure easy and speedy
loan sanction and disbursement process.
Priority shall be given to small entrepreneurs.
For small entrepreneurs credit limit will be ranged from Tk. 50,000 (Fifty thousand) to
Tk.50, 00,000 (Fifty lac).
For more participation of women entrepreneurs in industrial development of the country
and for conducting business activities by women entrepreneurs in large number, priority
shall have to be given to potential women entrepreneurs in respect of SME credit
disbursement.
24

Banks & Financial Institutions shall put highest priority in receiving loan application
from small and medium women entrepreneurs and settle the loan disbursement process
within very reasonable time from the date of acceptance of the application.
Each bank and financial institution shall establish a separate Women Entrepreneurs
Dedicated Desk with necessary and suitable manpower, provide them training on SME
financing and suitably appoint a lady officer as chief of dedicated desk. Branch wise list
of Women Entrepreneurs Dedicated Desk should be sent to SME and Special
Programs Department of Bangladesh Bank within two months from the date of
declaration of this policy and program.
Banks and financial institutions may sanction up to Tk. 25, 00, 000 to women
entrepreneurs against personal guarantee. In that case, group security/social security
may be considered.
The success in SME loan disbursement will be considered as yardstick for further
approval of new branches of the concerned bank. License for New Branches will be
issued for financing the priority sectors like SME and agriculture from 2010 in the
name of SME/Agriculture Branch instead of SME Service Centre; in order to
involve banks in financing priority sector like SME and Agriculture.
Each bank/financial institution shall fix the interest rate on SME loan sector/subsector
wise. However, bank/financial institution will inform Bangladesh Bank sector/subsector wise rate of interest immediately and ensure disbursement of refinanced fund to
the clients (women entrepreneurs) at Bank rate +5% interests.
Training programs shall be arranged for the entrepreneurs.
25
Chapter-3
Overview of BASIC Bank Limited
26
3.1 HISTORICAL BACKGROUND OF BASIC BANK LIMITED

The BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited)
established as a banking company under the erstwhile Companies Act 1913 and launched its
operation in 1989. It is governed by the Banking Companies Act 1991. The Bank started to
operation as a joint venture enterprise of the then BCC Foundation with 70 percent shares and
the Government of Bangladesh with 30 percent shares. The BCC Foundation being
nonfunctional following the closure of the BCCI, the Government of the Bangladesh took
over 70 percent shares of the BCC Foundation on 4th June 1992 and became 100 percent
owner of the Bank. The Memorandum and Articles of Association of the Bank stipulate that
50 percent of loanable funds shall be invested in small and cottage industries sector
Registered Office
Bana Shilpa Bhaban

73, Motijheel Commercial Area
Dhaka-1000, Bangladesh
Head Office
Sena Kalyan Bhaban (5th, 6th, 7th & 12th floor)

195, Motijheel Commercial Area
Dhaka-1000, Bangladesh
August 2, 1988
January 21, 1989
Mr. Sheikh Abdul Hye Bacchu
Mr. Kazi Faqurul Islam
Syful Shamsul Alam & Co.
Incorporation
Commercial Operation
Chairman
Managing Director
Company Auditor
Table 3.1-Information of BASIC Bank Ltd.
3.1.1 Capital structure

Authorized capital
Tk. 2000.00 million
Paid up capital
Tk. 1964.65 million
Total Reserve and Surplus up to 31.12.2010 Tk. 2509.78 million
The Bank is required to transfer 20 percent of its net profit before Tax to Capital Fund as per the
Banking Companies Act 1991.
27

Table 3.2-Capital structure of BASIC Bank Ltd.
3.1.2 Corporate Strategy

Financing establishment of small units of industries and business and facilitate their growth
Small Balance Sheet size composed of quality assets.
Steady and sustainable growth.

Adoption of new banking technology.
To employ funds for profitable purposes in various fields with special emphasis on
small scale industries.
To undertake project promotion on identify profitable areas of investment.
To search for newer avenues for investment and develop new products to suit such
needs.
To establish linkage with other institutions which are engaged in financing micro
enterprises.
To cooperate and collaborate with institutions entrusted with the responsibility of promoting
and aiding SSI sector.
3.2 CAPITAL STRUCTURE AS PER BASEL II

At the end of the year 2010 Banks capitalization stood at 7.90 percent for tier 1 and 9.41
percent for total capital against the total risk weighted assets exceeding the required
minimum levels of 5 percent and 9 percent respectively. Thus the Bank was able to maintain
the confidence of investors and depositors while providing a lucrative return to the
Government, the sole shareholder of the Bank. Details of the capital structure are as follows:
Particular
Core Capital (Tier 1)
1. Paid up capital
2. Statutory Reserve
3. Other reserve and surplus
Total of Tier 1 Capital
Year
2010
2009
1964.66
1455.30
1824.69
1559.66
469.99
583.44
4259.34
3598.40
Supplementary Capital (Tier 2)

1. % general provision on unclassified loan and off balance sheet exposure
2. Assets revaluation reserve and exchange equalization
Total of Tier 2 Capital
Total Capital
Risk weighted assets
706.18
107.55
813.73
5373.07
53907.00
525.46
169.70
695.16
4293.56
31850.69
28
Capital Ratios to risk weighted assets

Tier 1 Capital
7.90%
11.30%
Tier 2 Capital
1.51%
2.18%
Total Capital
9.41%
13.48%
Table 3.3-Capital structure as per BASEL II & Capital Adequacy Ratios
3.3 CREDIT RATING

Credit Rating Agency of Bangladesh Limited (CRAB) has assigned AA2 (Double A two) in
the long term and ST-2 in the short term for the year 2010. Commercial Banks rated 'AA'
have very strong capacity to meet their financial commitments.
Year
Long Term
Short Term
Credit Rating Agency
2010
2009
AA2
AA
ST-2
ST-1
CRAB
CRISL
2008
AA-1
ST-1
CRISL
Table 3.4-Credit Rating of BASIC Bank Ltd.

They differ from the highest-rated Commercial Banks only to a small degree. AA is judged to
be of very high quality and is subject to very low credit risk. Commercial Banks rated ST-2
category are considered to have strong capacity for timely repayment. Commercial Banks
rated in this category are characterized with commendable position in terms of liquidity,
internal fund generation, and access to alternative sources of funds is outstanding.
3.4 ECONOMIC VALUE ADDED (EVA) STATEMENT

The EVA is an estimate of the amount by which earnings exceed or fall short of the required
minimum return for shareholders or lenders at comparable risk. Economic Value added
(EVA) is the most recent innovation in measuring corporate performance. It is also the best
measure of a firm's intrinsic value and the best tool of measuring Management and Owners'
interest.
Particulars
2010
2009
Shareholders equity
4474.44
3923.95
Add: Cumulative provision for loans and Off-balance sheet items
1440.73
1048.86
Total
5915.17
4972.81
Average Shareholders equity
5443.99
4389.27
Earnings
29

Profit after tax
Add: Provision for loans and Off-balance sheet items during the
year
Total
Average Cost of Equity (based on average rate of Sanchay
Patra issued by the Bangladesh Government) plus 2% risk
premium
Cost of Average Equity
Economic Value Added
660.94
391.88
648.85
246.38
1052.82
12.64%
895.23
14.00%
688.12
364.70
614.50
281.73
Table 3.5-EVA Statement of BASIC Bank Ltd.
3.5 VALUE ADDED STATEMENT

The value added statement of BASIC Bank Ltd. show how the value is created and
distributed among different stakeholders of the bank.
Particulars
Value Added
Income from Banking Services
less: Cost of services and supplies
Value Added by the Banking Services
Non-banking income
Loan written-off and provision
Total Value Added
2010

%
2009
%
6120.55
3452.60
2667.95
5162.30
3076.44
2085.86
(391.88)
2276.07
(246.38)
1839.48
Distribution of added value

To employees as salary and allowances
883.33
39
457.33
To Govt. as income tax
664.24
29
673.10
To statutory Reserve
265.03
12
264.40
To Expansion and Growth (Retained
463.47
20
444.65
Earnings+ Depreciation)
Retained Earnings
395.90
384.46
Depreciation
67.57
60.19
Total Distribution of added value
2276.07
100
1839.48
Table 3.6-Value Added Statement of BASIC Bank Ltd.
25
37
14
24
100
3.6 SWOT ANALYSIS

3.6.1 Strength
Low interest rate compared with other public and private commercial banks interest
rate
Customization and flexibility in credit products
30
No loan processing fee & commitment fee

Substantial grace period in term loan as per cash flow of the project
Sufficient repayment period
Full package of financial services of a project
Focused on high retention rate of customers
Classification is low and hence cost of fund is low. Besides administrative cost is low.
Apart from government low cost deposit, BASIC Bank receives low cost fund from
Bangladesh Bank, various international development bank and development agency
for relatively longer period
3.6.2 Weakness
Averseness to finance in large scale industry
Loan pricing is not risk sensitive
Commercial credit like transport loan, home loan is discouraged in the bank.
Loan processing time is a bit longer
Conservative approach in lending operations
Marketing effort is insufficient
Political influence
3.6.3 Opportunities
Government is expanding SME in other sectors. So there will be more opportunities
to explore new SME sectors.
3.6.4 Threat
Overall cost of fund may rise in case of completely free market playing condition.
Consequently prices of the loan will also rise.
Other public and private commercial banks have started SME finance
Industrial depression
3.7 RESOURCES
BASIC Bank Limited is well prepared to and capable of meeting the demand for a broad
range of banking services. It has got adequate resources, both human and physical, to provide
the
customers
with
the
best
possible
services.
3.7.1 Physical and technological resources

At present, there are thirty four conveniently located branches throughout Bangladesh. There
are twelve branches in the capital city of Dhaka, seven in Chittagong and one each in
Narayanganj, Narsingdi, Gazipur, Rajshahi, Saidpur, Bogra, Khulna, Jessore, Sylhet,
Moulvibazar, Comilla, Rangpur, Tungipara, Barisal and Sirajganj. It also expects to open 23
new branches and 15 SME centers. The bank has connection with Q-Cash network of over
350 ATM booths which covers 19 Banks. Major features of these branches are:
Fully computerized accounts maintenance.
Well decorated air conditioned facilities
31

A fully operational computer network which is currently being implemented. The work of Local Area
Network (LAN) and Wide Area Network (WAN) installation having reliable and secured communication
between the branches and the Head Office is in progress to facilitate any Branch Banking and ATM
Services.
Money counting machine for making cash transactions easy and prompt.
Fifteen out of twenty six branches are authorized dealers of foreign exchange.
Figure 3.1-Number of Branches of BASIC Bank Ltd.
3.7.2 Human resources

BASIC has a well-diversified pool of human resources, which entails personnel with high
academic background. Also, there is a positive demographic characteristic. Most employees
are comparatively young in age yet mature in experience. As at end 2010 the total employee
strength registered as 964. The Bank follows a strict recruitment policy in order to ensure that
only the best candidates are recruited. For fresh recruitment, comprehensive written test and
viva voce are being conducted through the renowned institutions like IBA, BIBM, BIM etc.
The Bank, so far, has recruited seven batches of entry-level management staff, all of whom
have got excellent academic background. In 2010 the bank recruited 221 fresh employees at
various grades from different academic background.
Figure 3.2-Number of Employees of BASIC Bank Ltd.
3.7.3 Monetary or Financial resources
32
Figure 3.3-Borrowing and Deposit of BASIC Bank Ltd.
33
3.8 BRANCHES OF BASIC BANK LIMITED
34
3.9 PRODUCTS OF BASIC BANK LTD.

3.9.1 Loan Products
At the time of sanctioning concerned officials has to be clear about the credit products of the bank so that proper papers are obtained with the
application and necessary analysis is done on the basis of the product. Unless any new product adopted/ recommended by the Bank it shall keep
on financing projects/ business concerns/ NGOs through the products listed as under:
Loan Products
Funded Facilities
Term Loan
Short Term
Working
Capital
Non-funded Facilites
Micro
Finance
BASIC
Kalyani
Long Term
Mid Term
SOD
(Personal)
Secured
Overdraft
SOD
(Industrial)
Trade
Finance
Cash Credit
(CC)
CC
(Hypothecation
Import
Loan
Payment Against
Documents
CC
(Pledge
)
Acceptan
ce
Back to
Back L/C
Export
Loan
Loan Against
Trust Receipt
Loan Against
Imported
Merchandise
Performanc
e
Guarantee
Preshipment
Loan
Letter of Credit
Bid Bond
Shipping
Guarantee
Bank Guarantee
Supplier
s Credit
Guarante
Customs
Duty
Guarantee
Postshipment
Loan
Packing Credit
Foreign Bill
Purchased
Loan Against
Documentary Bills
Loan General
Against Cash
incentive
35

3.9.2 Deposit Products
Like all other commercial banks, BASIC bank Ltd also offers current deposit account,
savings deposit accounts, special noticed deposit scheme & fixed deposit accounts with
attractive interest rate and loan available facility. But there are some special bank accounts
that provide the customers with special benefits like high interest rate, doubling the monetary
benefit etc. Some of the special accounts are:
a. BASIC Double Benefit Scheme:
Under this scheme, one can deposit a certain amount of money for a period of 6 years and
will get back the double amount that he/she deposited.
b. BASIC Monthly Benefit Scheme:
The depositor of this account will get the regular benefit of savings account. The special
feature of this account is if the customer deposit taka one lac (Multiples), he/ she will get one
thousand (multiples) monthly.
c. BASIC Premium plus Current Account:
This is a special current account. Though current account does not contain interest, this
BASIC Premium plus Current account offers customer interest. Moreover there are no
remittance charges for this account.
d. BASIC Fortune Plus:
This is a special saving account. It offers a wide range of deposit accounts containing
different maturity. It gives higher interest rate than other deposits and also gives the
opportunity to take loan up to 80% of the deposited money.
36
Chapter-4
Performance of BASIC Bank
Limited
37
4.1 PERFORMANCE OF BASIC BANK LIMITED

4.1.1 Shareholders Assets
At the end of the year 2010, total assets of the bank stood at Taka 61,569.39 million against
Taka 45,308.31 million in previous year registering an increase by 35.89%. As expected,
loans and advances comprised the largest share in the assets portfolio of the Bank constituting
83 percent. Investment and Cash were the second and third largest constituents being 12
percent and 5 percent of the assets portfolio respectively.
Figure 4.1-Comparisons of Asset portfolio of BASIC Bank Ltd.
4.1.2 Shareholders Liabilities

At the end of the year 2010, total liabilities of the bank stood at Taka 57, 094.95 million
against Taka 41, 384.37 million in previous year registering an increase by 37.96 %. Total
deposit of the Bank at the end of 2010 stood at Taka 49,259.60 million (86.28% of Total
liabilities) compared to Taka 34,501.70 million (75.50 % of Total liabilities) in 2009.
Figure 4.2-Comparisons of Liabilities of BASIC Bank Ltd.
38

4.1.3 Shareholders Equity
The bank started its journey with paid-up capital of Tk. 80.00 million in 1989 and the same
had increased to Taka 1,964.65 million in 2010. The bank has decided to issue 1 bonus shares
for every 5 shares and the paid-up capital of the bank would thus be raised to Taka 2,357.58
million if the proposed bonus share is approved.
Figure 4.3-Shareholders Equity of BASIC Bank Ltd.
4.1.4 Income & Expenses

The Banks total income was 18.56% higher than that of previous year. Interest income from
loans and advances increased by 11.86% while incomes from investment decrease by 14.48%
due to lower yield on Government Treasury Bond. Income from commission and other
operating income increase by 43.95% and 600% respectively than that of previous year.
The total expenditure was Taka 4,403.49 million in 2010 compared to Taka 3,593.95 million
in 2009.Total expenditure increased by 22.53% due to increase of interest expenditure and
new pay scale allowed to the employees of the Bank. Higher Interest expenses were resulting
from increased interest expenses for fixed deposit, borrowings. Besides, rent, electricity and
insurance, stationary, printing and advertising contributed to such increase. Hiring of space
for Savar branch and Tungipara Branch etc also contributed to increase of rent expenditure.
39
Figure 4.4-Profitability of BASIC Bank Ltd.
4.1.5 Export/Import
The Bank handled total import business of Taka 42,205.80 million and export business of
Taka 23,998.47 million in 2010 compared to Tk. 33,976.60 million and Taka 19,887.70
million in 2009. Major items of exports were ready made knit & woven garments, sweater,
jute & jute products, leather and leather goods, handicrafts, potatoes etc. Items of import
included mainly industrial raw materials, garments accessories, capital machinery, raw
cotton, electronic consumer goods, chemicals, tires and tubes, reconditioned vehicles, bicycle
spare parts, food items such as rice, wheat, maize, garlic, onion, sugar, chilly and other
essential commodities.
Figure 4.5-Export & Import of 10 years of BASIC Bank Ltd.
40

4.1.6 Loans & Advances
Loans and advances consist of industrial loans, commercial loans, micro credit, Small
Enterprise Financing, Loan for women entrepreneurs, Agro based industry financing,
Agricultural loan and bills etc. which increased by 58.37 percent to Taka 46341.51 million in
2010 compared to Taka 29,261.53 million in 2009.
Figure 4.6-Loan portfolio and distribution of BASIC Bank Ltd
4.1.7 Deposits
Total deposit of the Bank at the end of 2010 stood at Taka 49,259.60 million (86.28% of Total
liabilities) compared to Taka 34,501.70 million (75.50 % of Total liabilities) in 2009. Total
amount of deposit is increased by 42.77 percent. During 2010, the fixed term and SND
deposit was Taka 42,447.22 million against Taka 30,489.73 million in 2009. Savings bank
deposit increased to Taka 1,328.22 million in 2010 compared to Taka 1,165.84 million in
2009. Deposit in current and other accounts including bills payable was Taka 5,481.16
million compared to Taka 2,846.12 million in 2009.
Figure 4.7-Geographical Location wise distribution of Deposit
41
4.2 RATIO ANALYSIS

4.2.1 Operating Efficiency Ratio
Operating efficiency ratio measures how much expenses were made to earn the income.
BASIC Bank has incurred expenses of 71.95% to earn a total income of tk. 6120.53 million.
Figure 4.8-Operating Efficiency ratio of BASIC Bank Ltd.
4.2.2 Loan to Deposit ratio
Figure 4.9-Loan to deposit ratio of BASIC Bank Ltd.
Interpretation
Loan to deposit ratio show how much amount of deposit collection is being utilized in credit
making. From the chart and graph we can see that BASIC Bank Ltd is performing well in
deposit utilization as the ratio is in increasing trend.
42

4.2.3 After Tax Return on Equity
Figure 4.10-After Tax Return on Equity of BASIC Bank Ltd.
Interpretation
After tax return on equity shows the return that goes to the equity provider. From the graph
we can see that BASIC Bank Ltd has an after tax return on equity of 14.77% which is less
than the previous year. So bank has to earn more profit after tax in order to give a higher
return on equity.
43
Chapter-5
SME Credit Policy of BASIC Bank
Limited
44
5.1 SME CREDIT POLICY OF BASIC BANK LIMITED

BASIC Bank Limited has to provide at least 50% of the banks loanable fund for financing
Small and Medium Scale Industries as per Memorandum and Articles of Association of the
Bank. It also gives equal concentration to finance to commercial business including trade
finance. The policy details general principles that are designed to follow by all sections of
credit officials and executives associated with all kind of funded or non-funded financing
activities in order to finance Small and Medium Enterprises. The entrepreneur of small
industry concern/ project requiring financial assistance from BASIC need to fulfill the
following criteria:
5.1.1 Appraisal criteria
Standard loan application form is issued only after the promoter is found credit
worthy and acceptable after evaluation of information submitted in First Information
Sheet.
Viability of each and every project recommended for financing is subjected to
thorough scrutiny and detailed appraisal. The report must cover the basic areas of
project viability.
Project should be designed with appropriate machinery.
Project should have necessary infrastructural facilities and environment aspect shall
be carefully examined.
Market prospect and potential should be ensured at competitive prices.
Debt service coverage ratio should be at least 2.5 times at the optimum level of
production.
The project should have satisfactory breakeven point and margin of safety.
The period of loan should be determined based on cash flow potential and payback
period and shall not normally exceed 5 years.
5.1.2 Security criteria
Registered mortgage by way of creating first charge/ mortgage on the land,

building/structure of the project.
Hypothecation/ pledge of machinery, equipment and other inventories and floating
charge on all other assets.
For leasehold land or rented premises the security coverage should be available in the
form of acceptable collateral of urban properties.
Comprehensive insurance coverage on the project assets and goods.
Life insurance on the life of the promoter/sponsor of the project to the extent of 20%
of individual shareholding
Deposit of share certificate of sponsor equity.
5.1.3 Maximum investment & assistance
Aggregate loans and advances shall not exceed 10 times the banks net worth or 65%
of customer deposits whichever is lower. Of this generally 50% shall be deployed in
financing small industries both as term loam against foxed assets and working capital.
The growth in the number and amount of loans and advances should not exceed the
capability of the banks manpower in terms of close monitoring and supervision.
45
No credit shall be extended to customer entity which exceeds in total commitment

more than 10% of the Banks capital and free reserve except with the approval of the
board of directors.
All credit extension to one customer or group exceeding Tk. 3.00 crore or equivalent
shall require the prior approval of the board.
Loan should be dispersed to cover wide sector of industries. However loans to a
particular sector shall not exceed 25% of its total loan at any given time
5.1.4 SME Credit Assessment
Borrower Analysis: The majority shareholders, management team and group or

affiliate companies are assessed. Any issues regarding lack of management depth,
complicated ownership structures or inter-group transactions are addressed, and risks
are mitigated.
Industry Analysis: The key risk factors of the borrowers industry are assessed. Any
issues regarding the borrowers position in the industry, overall industry concerns or
competitive forces are addressed and the strengths and weaknesses of the borrower
relative to its competition are identified.
Supplier/Buyer Analysis: Any customer or supplier concentrations are addressed, as

these could have a significant impact on the future viability of the borrower.
Historical Financial Analysis: An analysis of a minimum of 3 years historical

financial statements of the borrower are presented. Where reliance is placed on a
corporate guarantor, guarantor financial statements are also analyzed. The analysis
addresses the quality and sustainability of earnings, cash flow and the strength of the
borrowers balance sheet. Specifically, cash flow, leverage and profitability are
analyzed.
Projected Financial Performance: Where term facilities (tenor > 1 year) are being
proposed, a projection of the borrowers future financial performance is provided,
indicating an analysis of the sufficiency of cash flow to service debt repayments. Loans
are not granted if projected cash flow is insufficient to repay debts.
Account Conduct: For existing borrowers, the historic performance in meeting

repayment obligations (trade payments, cheques, interest and principal payments, etc) is
assessed.
Adherence to Lending Guidelines: The Banks Head of Credit or Managing

Director/CEO does not approve Credit Applications that do not adhere to the banks
Lending Guidelines/credit policy.
Mitigating Factors: Possible risks include, but are not limited to: margin sustainability
and/or volatility, high debt load (leverage/gearing), overstocking or debtor issues; rapid
growth, acquisition or expansion; new business line/product expansion; management
changes or succession issues; customer or supplier concentrations; and lack of
transparency or industry issues.
46
Loan Structure: The amounts and tenors of financing proposed are justified based on
the projected repayment ability and loan purpose. Excessive tenor or amount relative to
business needs increases the risk of fund diversion and may adversely impact the
borrowers repayment ability.
Security: A current valuation of collateral is obtained and the quality and priority of
security being proposed is assessed. Loans are not granted based solely on security.
Adequacy and the extent of the insurance coverage are also assessed.
Name Lending: Credit proposals are not unduly influenced by an over reliance on the
sponsoring principals reputation, reported independent means, or their perceived
willingness to inject funds into various business enterprises in case of need. These
situations are discouraged and treated with great caution. Rather, credit proposals and
the granting of loans are based on sound fundamentals, supported by a thorough
financial and risk analysis.
5.1.5 SME Project appraisal

When a small and medium firm approaches for loan to BASIC Bank Ltd it has to make a
project profile consisting of project details, product, profitability, management aspects,
forecast about future marketability of the product, risk involved. After getting the project the
bank analyses the projects viability from the following perspective:
5.1.5.1 Management aspect
Managerial feasibility refers to the assessment of ability of management personnel in
managing a project efficiently. The management personnel should have:
Technical skill to use knowledge, method and technique (acquired from experience,
education and training) to perform the job.
Human skill to maintain interpersonal relationship within or outside of the
organization.
Conceptual skill to understand the complexities in overall organization.
Entrepreneur/promoter has to be creditworthy and competent enough to run the proposed

industry. Besides the management of the proposed project, manpower planning, bio data of
key personnel and organogram are analyzed to appraise the management feasibility.
5.1.5.2 Marketing viability
Marketing aspect is very crucial part of project appraisal. BASIC Bank ltd considers the
following points for assessing marketing feasibility:
Product mix
Demand supply gap
Market prospect for the product at competitive price
Distributional channel, promotional activities.
47

5.1.5.3 Technical viability
BASIC Bank has been practicing the concept of project based lending rather than traditional
security based lending approach. Technical team is essential in assessing technical aspect of
a project. Most of the projects are typically capital intensive and engineering supervision
prior to approval of credit is a prerequisite. Head office is having a technical team under
industrial credit division whose exclusive job is to assess the technical matters. The project
submitted by the borrower is judged from technical point of view effectively. Following items
are considered to assess technical viability:
Location of the project

Land, land development and civil construction
Availability of required machinery and its technology
Rated capacity and attainable capacity of machinery
Installation of machinery
Raw material requirement, raw material availability, sources of raw materials.
Manufacturing process and its flow diagram
Safety provision
Project completion schedule
Availability of infrastructural facilities such as road and transport
Availability of utilities such as gas, electricity, water etc.
Climatic position in the project area.
Availability of required labor.
Political factors such as government patronage, industrial [policy of government.
Proximity to complementary project.
5.1.5.4 Financial viability

Various financial tools and techniques are used in testing financial viability of project such as:
a.
Capital budgeting:
Under capital budgeting technique there are two methods- non discounted method and
discounted method. Under non discounted method bank use the following method:
Payback period: the period within which the volume of investment is expected to be
returned from the project. Payback period must be less than the tenure of the term loan.
Generally BASIC Bank Ltd prefers projects having payback period less than 5 years.
Under discounted method time value of money is considered. Here the following calculations
are being used:
Net present value: It is the difference between present value of expected inflow or benefit
and that of outflow or investment. Under this method expected future benefits are being
converted into present value using reasonable rate of discount. A positive NPV at the rate
25% discount rate is a must.
Internal Rate of Return (IRR): It is a rate at which the present value of inflow equates the
present value of outflows. IRR tells the minimum required rate of return from an investment.
48

Acceptable IRR is being determined by considering the opportunity cost, cost of capital, the
prevailing maximum return in the economy etc. IRR should preferably be not less than 25%.
Profitability Index: It is calculated by dividing present value of inflow with the present
value of outflow. A project can be accepted if PI>1.
b.
Breakeven analysis:
Break even analysis is commonly known as the Cost- Volume- Profit (CVP) analysis.
Breakeven analysis shows the relationship between cost and revenue with output or sales that
is required to equate the cost. Moreover, break even analysis provides a clear idea about the
required volume of sales to earn a target profit. Thus break even analysis helps the decision
criteria. Break even analysis is done to check whether the project is capable to generate profit
using the attainable capacity.
c.
Sensitivity analysis:
Sensitivity analysis provides the picture of relative changes in overall profitability due to
change in any one variable. Usually changes in material and other variable cost or change in
selling price are being taken into consideration for making sensitivity analysis in BASIC
Bank ltd.
d. Ratio analysis:
The common ratios that are being practiced in BASIC Bank ltd is current ratio (not less than
1), Debt to Equity ratio (70:30), debt service coverage ratio (not less than 2), interest
coverage ratio (not less than 2), operating profit margin (not less than 5%).
5.1.5.5 Socio economic aspect
The observation of this aspect is to see whether the project is socially viable. As a part of
socio economic feasibility study BASIC Bank studies following parameters:
Employment generation
Foreign exchange earning
Environment impact
Economic linkage impact
Contribution to GDP
5.1.6 Procedure for valuation of land & building

In choosing the right location suitable site should be inspected from technical viewpoint like
availability of utilities, means of transport, availability of manpower, etc, Price of land should
be determined based on present forced sale value of the land. In case, if felt so, value of land
may be determined through spot survey of the land by a surveyor registered at Registrar of
Land during past 3 years. The covered area of the factory to be determined on the basis of
actual requirement for production process, storage facilities and other necessary structure.
Clearance from environment pollution control authority to be taken when necessary.
49
5.2 CREDIT PRICING OF SMES

BASIC Bank follows the instruction of Bangladesh Bank for pricing the SMEs. If the SMEs
are sound and creditworthy then bank gives rebate on interest rate by decreasing the rate. But
if the SMEs are not sound and credit worthy then bank added premium to the prevailing
interest rate in order to minimize the default risk. The interest rate for SMEs are given below:
Rate of Interest on Lending
Category
Interest Rate
Small Industry / Enterprise:
a. Small Industry / Enterprise: Service and Manufacturing
Term Lending
13.00%p.a
Working Capital
13.00%p.a
b. Small Enterprise: Business / Commercial / Trading
Term Lending
16.00% p.a
Working Capital
17.00% p.a
Medium Industry / Enterprise:
a. Medium Industry / Enterprise: Service and Manufacturing
Term Lending
15.00%p.a
Working Capital
16.00%p.a
b. Medium Enterprise: Business / Commercial / Trading
Term Lending
17.00%p.a
Working Capital
18.00%p.a
Table 5.1-Interest rate for SME Loan of BASIC Bank Ltd.
50
5.3 CREDIT OPERATION SYSTEM FOR SME

Borrower approaches the branch for credit
Interview with Branch-In-Charge, Credit-In-Charge and Relationship
Manager
Borrower submits loan application in prescribed format along with
relevant papers
Appraisal at Branch Level by Branch Credit Committee, same time CIB
Report from Bangladesh Bank, Legal Opinion & Valuation Report from
enlisted Surveyors are collected
Credit Line Proposal (CLP) is sent to Head Office
Appraisal at Head office by Head Office Credit Committee
Approval by Board of Directors (if necessary)
Sanction letter to the borrower mentioning the terms and conditions
Completion of Documentary requirements
Disbursement of Loan
Loan Supervision, Monitoring and control
5.4 CREDIT RISK GRADING FOR SMES

Well-managed credit risk grading system promotes bank safety and soundness by facilitating
informed decision-making. Grading system measure credit risk and differentiate individual
credits and groups of credits by the risk they pose. CRG is useful in analyzing credit
proposal, new or renewal for regular limits or specific transactions. BASIC Bank analyzes the
following risk factors for assessing the CRG of Small and Medium Enterprises. The risk
factors and weights assigned to each factors are given below:
51

Credit Risk Grading
Financial Risk
(50%)
Leverage
(15%)
Liquidity
(15%)
Profitability
(15%)
Business/ Industry
risk (18%)
Management
Risk (12%)
Security Risk
(10%)
Size of
Business (5%)
Experience
(5%)
Security
Coverage (4%)
Account
Conduct (5%)
Age of
Business (3%)
Succession
(4%)
Collateral
Coverage (4%)
Utilization of
Limit (2%)
Business
Outlook (3%)
Team Work
(2%)
Support (2%)
Compliance of
Covenants
(2%)
Industry
Growth (3%)
Coverage
ratio (5%)
Relationship
Risk (10%)
Personal
Deposit (1%)
Competition
(2%)
Barriers to
Business (2%)
The following is the Credit Risk Grade matrix based on the total score obtained,
Number
Risk Grading
Short Name
Score
Superior
SUP
Good
GD
100% cash covered

Government guarantee
International Bank guarantee
85+
Acceptable
ACCPT
75-84
Marginal/Watch list
MG/WL
65-74
Special Mention
SM
55-64
Sub-standard
SS
45-54
Doubtful
DF
35-44
Bad & Loss
BL
<35
Table 5.2-Credit Risk Grading Matrix.
52
5.5 CASE STUDY

M/s Tisha Jute Spinners Limited approached the bank to get loan from the bank in order to
purchase machinery and raw jute from Nadia Jute. The Credit Line Proposal (CLP) and the
Credit Risk Grading (CRG) of the client prepared by the official are given below:
5.5.1 Credit Line Proposal (CLP)

Basic Bank Limited
Main Branch
73, Motijheel C/A, Dhaka-1000.
Credit Line Proposal (CLP)
(Fresh)
Date:
01.
02.
03.
4.
05.
Borrower
Date of establishment
Constitution
Main Sponsor/Director
Capital structure
06. Particulars of Sponsors
:
:
:
:
:
M/S Tisha Jute Spinners Ltd.

01.01.2010.
Private Limited Company.
Mr. Habibur Rahman
Authorized capital Tk. 500.00 lac
Paid-up-Capital Tk.10.00 Lac.
Name
Position
Mst. Tamanna Begum

Chairman
Md. Habibur Rahman
Managing Director
Md. Riazul Bari
Director
** All the directors are members of same family.
07.
08.
Address
Factory address
Business /Correspondence
:
:
:
Account opening date
09. Type of business

:
10. Particulars of previous sanctions:
Particulars
Date of
Sanction/
renewal
25.05.2010
Ownership
proportion
30%
60%
10%
Muroil, Shantahar Road, Bogra.

Nafi Plaza, 3rd floor, Temple Road, Sathmatha,
Bogra.
A/C- 0210010005696
Opening date-22.04.2010
Jute Spinning and processing.
Sanctioned
facility
Sanctioned
amount
(Tk. in Lac)
NIL
Date of
expiry
Remarks
53

11. Particulars of proposed facilities:
A) Term Loan:
Nature of facility
Amount
Purposes
Validity/Expiry
Interest
Source
repayment
Term Loan
Tk. 500.00 (five hundred) lac.
To purchase machinery and other facilities of Nadia Jute at cost of Tk. 528.20 lac.
5(five) year
11.50% p.a. with quarterly rest subject to change from time to time at the discretion
of the bank.
of Out of sales proceeds or from own sources of the Directors.
B) Cash Credit (Hypothecation):

Nature of facility
Cash Credit (Hypothecation)
Amount
Tk.2, 500.00 (twenty five hundred ) lac.
Purposes
To purchase procure raw materials
Validity/Expiry
1(one) year.
Interest
12.00% p.a. with quarterly rest subject to change from time to time at the
discretion of the bank.
Source of repayment
Out of sales proceeds or from own sources of the Directors
Margin
30% on stock.
C) STL:
Nature of facility
Amount
Purposes
Validity/Expiry
Interest
Source of repayment
STL
Tk. 500.00 (five hundred) lac.
Purchase of raw material during harvesting season at competitive price.
1(one) year
12.00% p.a. with quarterly rest subject to change from time to time at the
discretion of the bank.
Out of sales proceeds or from own sources of the Directors.
12. Proposed Security:

i.
13.
Registered Mortgage of 970.75 decimal land of which 966.25 decimal is in

Mouza: Jatrashul, P.S: Kahalu, District: Bogra and 4.50 decimal is in Mouza:
Boro Mohor, P.S: Kahalu, District: Bogra in the name of Md. Habibur
Rahman, Managing Director of the Company.
ii.
I.G.P.A. in favor of the BASIC Bank Limited.
iii.
Hypothecation of Existing machinery.
Valuation appraisal of the property:
Particulars
970.75 Decimal Land

Different structure (Factory Building, godown etc)
Machineries
Total
Current Value
(Tk. In Lac)
1941.50
459.20
1680.03
4,080.73
Forced Sale Value

(Tk. In Lac)
1650.27
367.36
1260.02
3,277.66
54

14. Liabilities of allied concern:
Name
of
the Facility
Limit
Concern
M/S Nadia
LTR
Case to case
Enterprise
Outstanding as
25.05.2010
Tk. 142.16 lac
on Expiry
09.05.2010
15.
16.
Liabilities with other Banks/NBFIs: N/A

Stock position: The value of stock including raw materials, WIP and finished goods is
amounted around Tk. 900.00 lac.
17. Present production capacity of the project:
Product
Jute Yarn & Bag
Capacity (Per day)

30 MT
Capacity (Yearly)
9,000 MT
18. Sales:
Year
Item
Quantity
2010 (up to March)
Yarn
1728 MT
Rate (price per

MT )
Tk.90,000.00
Bag
576 MT
Tk. 78000.00
Tk.
15,55,20,000.00
Tk. 4,49,28,000.00
Item
Jute
Quantity
1814 MT
Rate (per MT)

Tk. 60,000.00
Sales
Tk. 10,88,40,000.00
Year
Item
Quantity
Sales
2010 (up to March)
Yarn
Bag
1728 MT
576 MT
Rate (price per

MT )
Tk.70,000.00
Tk. 71,250.00
Sales
19. Purchase:
2010
March)
Year
( Up
to
20. Production:
Tk.12,09,60,000.00
Tk.576,71,250.00
21. Business received: N/A

22. Other Information:
(i) CIB report: CIB report is under process with Head Office.
(ii) Management Information:
Name
Md. Habibur Rahman
Mst. Tamanna Begum
Md. Riazul Bari
Date of Birth
01.02.1974
30.01.1979
03.12.1977
Qualification
M.A
M.A
M.A
Position
Managing Director
Chairman
Director
55

(iii) Name of allied concern:
a) M/S Nadia Jute Mills
b) M/S Jalil Traders
c) M/S Kafi International
d) M/S Jalil Construction.
e) M/S Nadia Enterprise
23. Associated lending/ business risk (s): CRG score: 75, Acceptable.
The price and requirement of Jute Twine/Yarn is completely depends on its
international market demand and supply.
Export policy of the government has impact on jute industry as well as its business.
Production / supply of jute and its price depend on weather variability also.
Lack of production factors like skilled labor, power and energy supply, water supply
etc. may hamper its production capacity.
24. Observations:
Tisha Jute Spinners Ltd, represented by its Managing Director Mr. Md. Habibur Rahman, was
incorporated in 01.01.2010. The main sponsor of the project has been banking with BASIC
Bank Bogra Branch since 31.01.2002 with satisfactory performance. Now, he wants to
establish the project though acquisition of M/S. Nadia Jute Mills, which is under sole
ownership of Mr. Habibur Rahaman.
Now the Managing Director of Tisha Jute Spinners Ltd., has approached us for
sanctioning following facilities:
i
ii
iii
Term loan Tk. 500.00 (five hundred) lac.

Cash Credit (H) of. Tk. 2,500.00 (twenty five hundred) lac
STL of Tk. Tk.500.00 (five hundred) lac
Recommendation:
Considering the facts BCC has recommended sanction of the above facilities in the account
of Tisha Jute Spinners Ltd. under usual terms and conditions of the Bank.
Submitted to Head Office for approval.
Sincerely yours,
Md. Zainul Abedin Choudhury
General Manager & Branch-In-Charge
56

5.5.2 Credit Risk Grading
CREDIT RISK GRADING SCORE SHEET
Reference No.:
Borrower
Group Name (if any)
Branch:
Industry/Sector
Date of Financials
Completed by
Approved by
Number
1
2
3
4
5
6
7
8
Criteria
Weight
A. Financial Risk
50%
1. Leverage: (15%)
Debt Equity Ratio () - Times
Total Liabilities to Tangible Net worth
All calculations should be based on
annula financial statements of the
borrower (audited preferred)
2. Liquidity: (15%)
Current Ratio () -Times
Current Assets to Current Liabilities
3. Profitability: (15%)
Operating Profit Margin (%)
(Operating Profit/Sales) X 100
25-May-10
Date:
Tisha Jute Sppiners & Belting Ltd.
Aggregate Score:
75
Main
Jute
Risk
Gradin
Acceptable
31-Mar-10
g:
Shibli Sadek
Branch Credit Committee
Grading
Score
Short
Superior
Fully cash secured, secured by
government
guarantee/international bank
SUP
guarantee
Good
85+
GD
Acceptable
75-84
ACCPT
Marginal/Watchlist
65-74
MG/WL
Special Mention
55-64
SM
Substandard
45-54
SS
Doubtful
35-44
DF
Bad/Loss
<35
BL
Parameter
Score
Actual
Parameter
Score
Obtained
Less than 0.25

0.26 to 0.35 x
0.36 to 0.50 x
0.51 to 0.75 x
0.76 to 1.25 x
1.26 to 2.00 x
2.01 to 2.50 x
2.51 to 2.75 x
More than 2.75
15
14
13
12
11
10
8
7
0
0.00
15
Greater than 2.74

2.50 to 2.74 x
2.00 to 2.49 x
1.50 to 1.99 x
1.10 to 1.49 x
0.90 to 1.09 x
0.80 to 0.89 x
0.70 to 0.79 x
Less than 0.70
Greater than 25%
20% to 24%
15% to 19%
15
14
13
12
11
10
8
7
0
15
14
13
0.86
15.94%
13
57

10% to 14%
7% to 9%
4% to 6%
1% to 3%
Less than 1%
12
10
9
7
0
More than 2.00

More than 1.51 Less than
2.00
1.50
1.24
Less than 1.00
5
4
4. Coverage: (5%)
Interest Coverage Ratio () - Times
Earning before interest & tax (EBIT)
Interest on debt
Total Score- Financial Risk

B. Business/ Industry Risk 18%
1. Size of Business (in BDT crore)
3.99
3
2
0
50
41
> 60.00
30.00 59.99
10.00 29.99
5.00 - 9.99
2.50 - 4.99
< 2.50
5
4
3
2
1
0
60.00
3
2
1
0
The number of years the borrower

engaged in the primary line of business
> 10 Years
> 5 - 10 Years
2 - 5 Years
< 2 Years
3. Business Outlook
Critical assesment of medium term
prospects of industry, market share
and economic factors.
Favorable
Stable
Slightly Uncertain
Cause for Concern
3
2
1
0
Stable
4. Industry Growth
Strong (10%+)
Good (>5% 10%)
Good (>5% - 10%)

Moderate (1%-5%)
No Growth (<1%)
2
1
0
Dominant Player
Moderately
Competitive
Moderately Competitive
Highly Competitive
1
0
Difficult
Average
Easy
2
1
0
Difficult
The size of the borrower's business

measured by the most recent year's
total sales. Preferably audited numbers.
2. Age of Business
5. Market Competition
6. Entry/Exit Barriers
Total Score- Business/Industry Risk

C. Management Risk
1. Experience
18
12
12%
More than 10 years in the
related line of business
More than 10
years in the
related line of
business
58

Quality of management based on total
management in the Industry.
510 years in the related line

of business
15 years in the related line
of business
No experience
2. Second Line/ Succession
Ready Succession
Succession within 1-2 years

Succession within 2-3 years
Succession in question
3
2
0
Very Good
Moderate
Poor
Regular Conflict
3
2
1
0
# of years of experience of the senior
3. Team Work
Total Score- Management Risk

D. Security Risk
10%
1. Security Coverage (Primary)
2. Collateral Coverage (Property

Location)
3. Support (Guarantee)
Total Score- Security Risk

E. Relationship Risk
2
0
Succession in
question
Very Good
12
Fully Pledged
facilities/substantially cash
covered / Reg. Mortg. for
HBL
Registered Hypothecation
(1st Charge/1st Pari passu
Charge)
2nd charge/Inferior charge
Simple
hypothecation/Negative lien
on assets
No security
Registered Mortgage on
Municipal corporation/Prime
Area property
Registered Mortgage on
Pourashava/Semi-Urban
area property
Equitable Mortgage or No
property but Plant and
Machinery as collateral
Negative lien on collateral

No collateral
Personal Guarantee with
high net worth or Strong
Corporate Guarantee
1
0
2
Personal Guarantees or
Corporate Guarantee with
average financial strength
No support/guarantee
Registered
Hypothecation
(1st Charge/1st
Pari passu
Charge)
Registered
Mortgage on
Pourashava/Semi
-Urban area
property
Personal
Guarantee with
high net worth or
Strong Corporate
Guarantee
2
1
0
0
10
10%
59

1. Account Conduct
More than 3 years Accounts

with faultless record
Accounts having
satisfactory
dealings with
some late
payments.
Less than 3 years Accounts

with faultless record
Accounts having satisfactory
dealings with some late
payments.
Frequent Past dues &
Irregular dealings in account
2. Utilization of Limit
(actual/projection)
More than 60%

40% - 60%
Less than 40%
2
1
0
80.00%
3. Compliance of Covenants /
Full Compliance
Some NonCompliance
Conditions
Some Non-Compliance
No Compliance
1
0
4. Personal Deposits
Personal accounts of the key

business Sponsors/
Principals are maintained in
the bank, with significant
deposits
Personal
accounts of the
key business
Sponsors/
Principals are
maintained in the
bank, with
significant
deposits
No depository relationship
Total Score- Relationship Risk
0
10
Grand Total - All Risk
100
75
2
0
5.6 SME CREDIT MONITORING AND FOLLOW UP

60

The basic objective of monitoring and follow up is to ensure that the credit granted by the
bank to the SME are safe as the fund lent by the banks belong to the depositors and bank
management has tremendous responsibility in safeguarding the interest of depositors.
The monitoring of projects includes adequate control procedures in disbursement of loan and
the continuous monitoring of project operations during its period of construction and
implementation through report requirement as well as plant visits. A project under
implementation is visited every month and progress report is submitted to the management.
Bank official on project supervision keeps watch over the estimation made and notes the
deviation for taking quick remedial measures.
BASIC Bank tries to ensure that money lent is properly used for generation of income
through increased economic activities and money is repaid in time. All these are ensured
through as effective supervision and follow up system. The bank has been following a series
of measures, both in Head Office and branch level, to follow up and supervision of loan and
advances given to SMEs to avoid and minimize non performing loan of the bank.
Keeping watch over the accounts to ensure that operations are regular and as per
procedure. Particular care is taken when the balance in the account remains very near
or goes beyond the drawing limit or there is no good turnover.
Ensuring the inputs/ materials are purchased/ procured as per procedures/ terms of
sanction and are used properly and outputs are sold properly.
Keeping watch over the inflow and outflow of fund.
Collecting periodical reports, returns and information about the borrower and examine
the activities of the project/ enterprise financed.
Ensuring that security/ collaterals have been obtained as per terms of sanction and
valuation has been assessed correctly and security is maintained properly.
Ensuring that property has been properly insured where required as per policy,
procedures and practice.
Ensuring that the documents have been obtained as per terms of sanction and as per
procedure for such type of advance. If not get the documents regularized.
Keeping regular contact with the borrower both formally and informally and pay
regular visit to the projects/ enterprise financed.
Keep watch over the repayment trend and see that the advance does not turn up as
irregular or stuck up and becomes time barred.
Ensure that appropriate actions are taken in time to regularize the irregularities and
recover the loan as per schedule.
Obtaining periodical balance confirmation from the borrower and necessary fresh
document is obtained (in case of renewal/ enhancement of loan).
To check whether there is any adverse trends in market, economic and political
conditions which may endanger the reliability of the facility.
To check that borrowers business is being satisfactorily conducted as reflected
through a review and analysis of the financial and operating statement.
To make sure Compliance of term of approval.
To check satisfactory conduct (turnover, regularity of repayment etc.) of the
borrowing accounts.
To assess the adequacy of collateral value.
In order to ensure end use of term loan funds, it is practice to disburse the money directly to
the supplier who has supplied the fixed assets and not to the borrower directly. On the other
61

hand in case of working capital advance the objective to acquire current assets, supervision of
end use of fund is comparatively hard and possibility of diversion in case of cash credit
(hypothecation) is more. The working capital utilization is checked to great extent by
ensuring that the borrower computes his working capital requirements and furnishes a
statement regarding inventory and book debts as shown in monthly statements. Bankers
frequently visit the business house to verify the actual position of current assets. Moreover,
the borrower is required to maintain the proper current ratio.
5.7 RECOVERY OF NON-PERFORMING SME LOAN

BASIC Bank Limited has been following a series of measures to recover the default amount
of SME loan and advances both in Branch and Head Office level. Branches have been given
yearly target to recover dues from the existing default borrower to reduce the classified loans
and advances up to minimum level. BASIC bank takes the following steps to recover the
stuck up credit:
5.7.1 Exerting moral pressure

The bankers visit the borrowers place of business again and again and find out the cases of
nonpayment of the banks dues. The banker may also request some influential customers of
the area to exert pressure on the borrower to clear banks dues. If there is a guarantor, he is
also called upon to adjust the account or have it adjusted by the principal.
5.7.2 Legal procedure

In case the borrower does not adjust the default loan, the only course left open to the bank is
to send a legal notice stating the undesirable character of the credit and recall and ask the
party to liquidate it within a stipulated time falling which the securities will have to be
disposed off without further reference to him at the best possible market rate either in public
auction or by private negotiation according to the convenience of the bank. After the
securities have been sold and the bank will resort a legal auction to recover the dues. If no
favorable response is made by the borrower guarantor after sending notice, the bank disposes
of the securities and adjusts the account. Presently banks are empowered to dispose of the
securities without intervention of the court under the Artha Rin Adalat Act 2003. If the credit
is not fully secured and where there is a shortfall to adjust the advance after disposal of
securities, bank file a suit against the borrower and guarantor for recovery of banks dues.
62
Chapter-6
SME Financing of BASIC Bank
Limited
63
6.1 MAIN PRINCIPLES OF BASIC BANK LTD FOR SME

FINANCING
At the time of extending credit BASIC bank limited follows certain principles. Main
principles of lending operations in BASIC Bank are as follows:
50% of total credit will be invested to small and medium industry.

BASIC Bank gives importance to finance export oriented industry or import substitute
industry.
BASIC Bank always welcomes any new type of projects rather than conventional
industry.
Projects, fixed costs within 20 crore (excluding land& building) is defined as SMI. So
BASIC Bank expects the proposed projects are within 20 crore.
There should be debt to equity ratio as determined by the bank on individual case basis.
Common practice of debt ratio is 70:30.
All lending will adequately be secured with acceptable collateral security and margin
requirements.
End use of term loan and working capital facilities will be closely monitored to ensure
that the funds are used for the purpose of which those were advanced.
Bank maintains credit deposit ratio nearly 80% to maintain liquidity and not to be in
crisis of fund. Bank does not fall short of short term temporary funds o0r borrowings
from other banks or through short term money market operations.
Bank offers premium interest rate to high credit rating borrowers.
In BASIC bank, most of the deposit chunk is in fixed deposit. Thus the bank can easily
go for term lending.
6.2 MEDIUMS OF SME FINANCING

BASIC Bank provides SME loan by two mediums. They are:
1. Directly providing the loan to the SMEs through the 34 branches and SME centers of
the Bank.
2. By giving money to the NGOs in order to provide loan to the SMEs. BASIC Bank is
financing SMEs through 3 NGOs such as Asha, BRAC and TMSS under Bangladesh
Agri-business Development Project. BASIC Bank has given loan to 28,000
entrepreneurs and created 1, 00,000 beneficiary of the loan. The ratio of male and
female entrepreneur for the project is 70:30. In addition to it BASIC Bank is giving
SME loan by using more than 60 small ans large NGOs. The Bank has disbursed Tk.
29 crore loans to 80177 male and fremale entrepreneurs of SME.
64
6.3 SECTORS FOR SME FINANCING

The lending guidelines of BASIC clearly identify the industry and business segments that
should be provided loans. It also dictates the industry and business segments that should be
discouraged to provide loan.
6.3.1 Preferred Sectors

The management placed much emphasis for financing projects under the following subsectors:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Jute and jute-mixed commodities

Food processing
Goat rearing and breeding
Animal feed
Light engineering and automobiles
Assembling and reconditioning
Pharmaceutical products
Medical and health services
Leather and leather goods
Sericulture and silk industry
Tourism and amusement
Basic chemicals
Industrial raw materials
Besides, projects/ businesses will get particular preferences if,

(i)
(ii)
(iii)
(iv)
(v)
Fixed cost upto Tk. 50.00 lac,

Majority of female workers, managers and sponsors
Promote environment friendly activities
Use indigenous raw materials
Endorse health and population management activities
6.3.2 Reserved sectors / discouraged sectors

BASIC Bank Limited does not finance in any form to these sectors:
Arms and ammunition and machinery

Atomic energy
Security printing and
Forestry and mechanical extraction in reserve forest areas
BASIC Bank Limited at the present situation has reservation in financing following areas:
Highly Leveraged Transactions

Lending to companies having stuck up as per CIB/ other sources
Finance to speculative investors
65
Logging, Mineral Extraction/Mining, or other activity that is Ethically or

Environmentally Sensitive
Counterparties in countries subject to UN sanctions
Bridge loan and syndication relying on equity/debt issuance as a source of
repayment
Large scale commercial business/ Lending to Holding Companies
Taking an Equity Stake in Borrowers
6.4 LOAN PRODUCTS OF BASIC FOR SME FINANCING

BASIC Bank Ltd has been offering a wide range of credit facilities to meet the financial
needs of the Small and Medium Enterprises. But they havent launched any specific SME
products for financing the SMEs. Rather the Bank is using the traditional loan products for
financing the SMEs such as Term loan, Short Term Loan, SOD, Trade Finance, Letter of
Credit, Bank Guarantee etc. But recently it has launched a new product that will help the
women entrepreneur of Small & Medium Enterprises. The product name is BASIC Kalyani.
A brief description of the products terms and conditions are given below:
6.4.1 BASIC Kalyani

It is an easy way to get loan at flexible terms and conditions by the women SME
entrepreneurs. The terms and eligibility criteria of borrower are given below:
Terms & Conditions
Giving loan from the Banks own fund.
Any business can take maximum 5, 00,000 taka loan without any security and
maximum 25, 00,000 taka loan with security.
Annual interest rate is 10%.
3 months grace period.
Loan should be repaid within 3 years.
Eligibility Criteria of Applicant
Any women entrepreneur having age of 18 and up.

The business should have Trade License.
The CIB report of the borrower and the business should be clean
Borrower should be eligible for taking loan.
66
6.5 SME FINANCING

BASIC Bank is a specialized bank. It has been established to finance the SMEs in 1989 by
the Bangladesh Government. It has been financing SMEs for 22 years. It has to give at least
50% loan of its total loan to Small and Medium Enterprises as per Memorandums of
Association of the Bank. The SME loan disbursement and recovery is given below:
6.5.1 SME Loan Disbursement and Recovery
Figure 6.1-SME loan disbursement and recovery for 10 years

BASIC Bank has disbursed Tk. 26776.12 million in 2010 which has grown 60.73% than the
previous year. But it has recovered Tk. 23295.23 million of the loan in year 2010 which is
greater than that of previous year.
6.5.2 SME Loan to Total Loan
Figure 6.2-SME loan to total loan for 5 years
67

Interpretation
BASIC Bank Ltd is a specialized bank. This bank does both commercial lending and lending
to Small and Medium enterprises. Though it is engaged in commercial lending its maximum
amount of deposit collection goes to support the small industries. From SME loan to total
loan ratio we see that 57.78% loans goes to SME sectors.
6.5.3 Sector wise distribution of SME Loans

The SME loan is given to industry, trade and service industries. The sector wise SME loan
distribution for 2006-2010is given below:
Figure 6.3- Sector wise distribution of SME loans for 5 years

SME loan to industry sector is Tk. 15565.13 million in 2010 which is 49.62% higher than
that of previous year. SME loan to trade sector has grown 85% than that of 2009. The SME
loan to service sector has grown from Tk. 989.79 million in 2006 to Tk. 1978.63 million in
2010.
6.5.4 Industry wise distribution of SME Loans

The textile industry including garments being one of the major contributors to national
economy dominated the SME loan portfolio of the Bank. SME Financing in other sectors
include agro based industry like poultry, engineering; food and allied industries; chemicals,
pharmaceuticals and allied industries; paper, board, printing and packaging; and other nonmetallic goods, leather and jute products.
Industrial Sectors
2010
2009
Food & Allied Ind.
2526.733
1001.815
Textile
3942.539
1690.214
ERGM
1877.87
872.5452
Accessories
903.2007
408.7633
Jute Prod.& Allied Ind.
1970.193
966.5008
Forest Prod. & Allied Ind.
38.43018
30.07294
Paper, Board, Printing, Pub.& Packaging
577.8885
300.6745
68

Tannery Leather & Rubber Prod.
539.1619
Chem. Pharmaceuticals & Allied Ind.
859.3804
Glass, Ceramic. & Other Non-metal Prod.
93.43922
Engineering
749.589
Electrical & Electronics Industry
330.0368
Miscellaneous Industry
1156.347
Total
15565.13
Table 6.1-Industry wise distribution of SME Loans
292.3593
467.3769
67.47316
1042.994
25.56314
3236.809
10403.16
Figure 6.4-Industry wise distribution of SME Loans
6.5.5 Geographical location wise distribution of SME loans

Division
2010
2009
Dhaka
18653.99
11284.82
Chittagong
4285.693
2625.081
Khulna
1094.59
807.4778
Rajshahi
1418.158
1534.024
Sylhet
503.3389
343.9652
Barisal
76.73184
63.22074
Rangpur
743.6228
Total
26776.12
16658.59
Table 6.2-Geographical location wise distribution of SME Loans
69
Figure 6.5-Geographical location wise distribution of SME loans

Here we can see that the 70% amount of SME Loan is disbursed to the Dhaka division and
0.29% is disbursed to the Barisal division. The SME loan is more concentrated in the urban
area of Dhaka.
6.5.6 Percentage of Non-Performing SME Loan
Figure 6.6-Percentage of Non-performing SME loans

The non-performing SME loan percentage of total loan is randomly increasing and
decreasing without any trend. But the year NPL is 49% higher than the previous year.
6.6 SME PERFORMANCE ANALYSIS

In order to measure the SME performance of the client of Bank I have taken five clients and
shown the change in their asset, net worth, gross sales and profit before and after taking the
loan from the Bank. The short description of the clients is given below:
70

Sl.
Name of the Enterprise
No
1 Sakura Food Industries
2 Suktara Handmade paper
3
4
5
Years of
establishment
2005
2006
Ownership
pattern
Private
Private
Name of the Products
Biscuit, Cake, Loaf

Writing pad, greeting card,
showpiece & others
Karonik Industries Pvt. Ltd.
2004
Private
Ball point pen
Shamsuddin Towels Ltd.
2006
Private
Towels
Modern Cold Storage Ltd.
2005
Private
Potato preferring
Table 6.3-Basic information of 5 clients taking SME Loan
Date of
Sanction
01.01.2008
15.02.2008
03.02.2008
25.03.2008
10.04.2008
Total Asset and Net Worth of the clients before and after the loan is given below:
Sl.
No
1
2
3
4
5

Before taking SME loan
After taking SME loan
Total Asset
Net Worth
Total Asset
Net Worth
2007
2007
2008
2008
Sakura Food Industries
17.5
14.89
25.5
19.75
Suktara Handmade paper
9
6.33
13
10
20.1
14.21
24.3
19.35
13
9.64
18
14.52
45
35.26
49.4
40.03
Table 6.4- Total Asset and Net worth of 5 clients taking SME Loan
The total asset has increased on an average 31.86% from the previous year and net worth has
increased 38.19% on an average.
Amount of Gross Sale and Profit of the clients are given below:
Sl.
Before taking SME loan
After taking SME loan
No
Gross Sale
Net Profit
Gross Sale Net Profit
2007
2007
2008
2008
1 Sakura Food Industries
9
1.5
15.22
7.75
2 Suktara Handmade paper
7.8
3.8
13
9.86
3 Karonik Industries Pvt. Ltd.
14
8.69
22.44
17.35
4 Shamsuddin Towels Ltd.
17
12.64
20.36
14.52
5 Modern Cold Storage Ltd.
52.9
32.26
59.4
41.03
Table 6.5- Gross Sale and Profit of 5 clients taking SME Loan
The gross sale has increased on an average 45.62% from the previous year and net profit has
increased 143.57% on an average. From this we can say that the five firms has grown well by
taking SME loan from BASIC Bank.
71
Chapter-7
Tobit Regression Analysis, Multiple
Regression Analysis
&
Comparative Analysis of BASIC
Banks SME Financing
72
7.1 TOBIT REGRESSION ANALYSIS

Tobit model was used in analyzing the data. This framework considers the demand for and
supply of funds as separate issues. The demand and supply equations are represented as:
DL = a1X1 + a2X2 + + anXn +
ui
(1)
SL = 1X1 + 2X2 + + mXm +
ei
(2)
Where DL is demand for credit, SL is the supply of credit, X is a vector of explanatory

variables, ui and ei are random disturbances assumed to be independent of the X.
The banks select enterprise/entrepreneur to be granted loans according to the decisions rule:
LG =
SL; If Supply of Loan > Demand for Loan

0; If Supply of Loan < Demand for Loan
LG is the observed loan granted. The credit worthy borrowers fall into the class SL > DL
while the rejected applicants are in the SL < DL group. A dummy dependent variable is
required to capture such dichotomy in the decision-making behavior of the bank.
Loan granted is the supply for loan. It is the dependent variable. The independent variables
are security value, net worth, CRG score and maturity of loan. Tobit model was run to
identify what amount of loan should be granted. Before that the data are transferred into log
form. Data after log transformation are given in appendix.
7.1.1 Tobit regression equation of SME Loan Granted, Security Value, Net
Worth, CRG Score and Maturity of Loan
tobit loangranted securityvalue networth crgscore maturityofloan, ll
Tobit regression
Number of obs =
40
LR chi2(4)
= 156.96
Prob > chi2 = 0.0000
Log likelihood = 26.974918
Pseudo R2
= 1.5237
-----------------------------------------------------------------------------loangranted |
Coef. Std. Err.
t
P>|t| [95% Conf. Interval]
-------------+---------------------------------------------------------------securityva~e |
.8897281 .037953 23.44 0.000 .8127557 .9667004
networth |
.0737358 .0488212 4.51 0.004 -.0252781 .1727498
crgscore |
.3064718 .3500787 0.88 0.387 -1.016464 .4035207
maturityof~n |
-.0522321 .0490277 -1.07 0.294 -.1516648 .0472007
_cons |
1.330031 1.560973 0.85 0.400 -1.835768 4.49583
-------------+-------------------------------------------------------------------------------------/sigma |
.1173874 .0133804
.0902506 .1445241
Obs. summary:
1 left-censored observation at loangranted<=1.6094379
39 uncensored observations
0 right-censored observations
73

The regression equation is,
Amount of SME Loan Granted = 1.33 + 0.89 Security Value + 0.07 Net worth + 0.31 CRG
Score 0.05 Maturity of Loan
R-Sq =1.52
Interpretation of R-square
In the above Tobit model log likely hood and
are significant at 95% confidence interval. R
square is 1.52 which indicates that the independent variables are very strong to explain the
dependent variable. The independent variables, security value, net worth, CRG score and
maturity of loan are very strong in explaining the dependent variable loan amount.
Interpretation of Regression Equation
The constant value of 1.33 represents that if the value of the independent variables is
zero, then the SME loan amount granted will be Tk. 1.33 lac.
Amount of SME Loan Granted = 1.33 + 0.89(0) Security Value + 0.07(0) Net worth +
0.31(0) CRG Score 0.05(0) Maturity of Loan=1.33 lac
The coefficient of security value is 0.89 which indicates that if security value increases
by TK. 1 lac, SME loan amount granted will increase by TK. 0.89 lac and will be Tk.
2.22 lac in total. The equation will be:
The coefficient of net worth is 0.07 which indicates that if net worth increased by Tk. 1
lac (holding other variables constant), then SME loan amount granted will be increased
by TK. 0.07 lac. Then the amount of SME loan granted will be 1.40 lac.
Coefficient of CRG score is 0.31 indicating that if CRG score is increased by 1 point
(holding other variables constant), SME loan amount granted will be increased by TK.
0.31 lac. Then the amount of SME loan granted will be 1.64 lac.
Coefficient of maturity of loan is 0.05 indicating that if the maturity of loan is increased
by 1 year (holding other variables constant), SME loan amount granted will be
decreased by TK. 0.05 lac. The maturity of loan is negatively related to the SME loan
amount granted. Then the amount of SME loan granted will be 1.28 lac.
74
Significance of the coefficient

To analyze whether the coefficients of security value, net worth, CRG score and matirity of
loan are significant I have made two hypotheses. One is null hypothesis (H 0) and another one
is alternative hypothesis (H1) for the coefficients.
H0: B1 = 0, B2 = 0, B3 = 0, B4 = 0.
H1: B1 0, B2 0, B3 0, B4 0.
Predictor
Security value
Net worth
CRG score
Maturity of loan
Coefficient
0.89
0.07
0.31
-0.05
T
23.44
4.51
0.88
-1.07
P
0.000
0.004
0.387
0.294
Only two independent variables in the above model are significant at 5% significance level. If
the P- value of any variable is less than significant level we call that the variable is
significant. In the above model p- value of security value and net worth are respectively
0.000 and 0.004 which are less than .05 which is the significance level. The other two
variables CRG score and maturity of loan are not significant because their p-value are greater
than the significant level.
7.2 MULTIPLE REGRESSION ANALYSIS

How much change is occurred in dependent variable in response to the change of independent
variable is shown by regression analysis. There are two types of regression analysis. One is
linear regression and another is multiple regressions. In this report multiple regressions is
used to demonstrate the following relationships:
7.2.1 Multiple regression equation of Interest Income on SME credit and Credit
other than SME
For this analysis I have taken interest income as dependent variable and SME credit & credit
other than SME as independent variables. Interest income is the main source of banks
profitability. BASIC Bank Ltd gives priority to the SME financing and this has brought the
line share of interest income. The regression equation is:
Interest Income = 131 + 0.137 SME Credit + 0.0730 Loans other than SME
R-Sq = 95.6%
Interpretation of R-Sq
75

For analyzing I have used interest income as response variable, SME Credit and Loan
other than SME as predictor variables. Here the R square denotes what percentage of
change in response variable due to the change of predictor variables. The value Rsquare of 95.6% is representing that 95.6% change in Interest income occurs for the
change in SME credit and Loans other than SME. Rest of the change may be due to the
change of other independent variables.
Interpretation of the Equation
The constant value of 131 represents that if there is no SME credit and other loans, the
interest income is 131 million. This interest comes from interest on depositing balance
with other banks and Bangladesh Bank. the equation looks like the following:
Interest Income = 131 + 0.137(0) SME Credit + 0.0730(0) Loans other than SME =131
The coefficient of SME credit and Loans other than SME are 0.137 and 0.0730. If the
value of SME credit changes by taka 1 million (holding loans other than SME constant)
then the interest income will increase by taka 0.137 million for SME credit variation
and will be 131.137 million in total. The equation will be:
Interest Income = 131 + 0.137(1) SME Credit + 0.0730(0) Loans other than SME
=131.137
The coefficient of loans other than SME is 0.0730 implicating that change in loan other
than SME of taka 1 million, will increase the Interest income by 0.0730 million holding
the SME credit constant. Then interest income will be 131.073 million.
Interest Income = 131 + 0.137(0) SME Credit + 0.0730(1) Loans other than SME
=131.073
Significance of the coefficient
To analyze whether the coefficients of SME credit and loan other than SME are significant I
have made two hypotheses. One is null hypothesis (H 0) and another one is alternative
hypothesis (H1) for the coefficients.
H0: B1 (Coefficient of SME) = 0, B2 (Coefficient of loans other than SME) = 0
H1: B1 (Coefficient of SME) 0, B2 (Coefficient of loans other than SME) 0
Predictor
SME Credit
Loans other than SME
Coefficient
0.13684
0.07299
T
2.95
3.75
P
0.006
0.004
76

The t- statistic of 2.95 for SME credit variable and its small p value of 0.006 (less than table
value of 0.05) indicate that the coefficient of SME credit is significantly different from zero.
Thats why we can reject the H0.
Similarly the t- statistic of 3.75 for loans other than SME variable and its small p value of
0.004 indicate the coefficient of loans other than SME variable is significantly different from
zero. So, the H0 can also be rejected.
In summary the coefficient of both predictor variables are significantly different from zero.
This tells us that the equation is representative to predict the interest income.
Analysis of variance for regression significance
The analysis of variance (ANOVA) examines the significance of all the coefficients
collectively. ANOVA table based on the decomposition of the total variation in dependent
variable (SST) into its explained (SSR) and unexplained (SSE) parts.
H0: B1 = 0, B2 = 0
This hypothesis means that response variable interest income is not related to any of the
predictor variables, SME credit and loans other than SME.
H1: B1 0, B2 0
If the regression model assumptions are appropriate and H0 is true, the ratio is
MSR (Mean square of regression)
F=
MSE (Mean square of error)
Source
DF
SS
MS
Regression
2
37786952
18893476
Residual Error
19
1740763
91619
206.22 0.000
Total
21
39527716
The computed F value 206.22 is used to test the significance of the regression as a whole
considering both of the coefficients collectively. The table value of F ratio at 5% significance
level with 2 and 19 degrees of freedom is F 0.05 =3.52 The large F ratio and its small p value
show the regression is significant. So, H0 is rejected. The regression function explains a
significant amount of variability in interest income. The SME credit and loans other than
SME credit has significant control over interest income.
Rejection Region
Acceptation Region
3.52
206.22
77

Figure 7.1- Acceptation and Rejection Region
7.3 COMPARATIVE ANALYSIS

BRAC Bank Ltd, AB Bank Ltd., Prime Bank Ltd., City Bank Ltd., Dhaka Bank Ltd. and
Mercantile Bank Ltd are leading banks in our country. These banks are also contributing in
our small and medium enterprise sector development. So to compare the performance of
BASIC Bank Ltd with the six private sector banks as BASIC Bank Ltd is specialized for
SME sector financing. Here based on the following points comparison among these seven
banks will be made:
7.3.1 SME Loan to Total Loan
Figure 7.2- SME loan to Total loan of 7 Banks

Interpretation
From the analysis it is stated that BASIC Bank is the most dominant player in the SME
market. It gives 57.78% of SME loan to the Small and Medium Enterprises which is greater
than the other banks. BRAC Bank gives 48.51% SME loan to different SME sectors. City
Bank gives the lowest amount of SME loan which is 1.49% of total loan.
7.3.2 Percentage of Classified SME Loan
78

Figure 7.3- Percentage of Classified SME loan of 7 Banks
Interpretation:
According to BRPD Circular by Bangladesh Bank loan and advances are divided in two
forms- classified loans and unclassified loans. Classified loans consist of substandard,
doubtful and bad & loss. The higher the percentage of classified loan the worst the
performance of the bank. Here the BASIC Banks classified loans amount is low at 4.83%.
But the percentage is high for BRAC
Bank Ltd.
7.3.3 Provision against Classified SME Loan
Interpretation:
Figure 7.4- Provision against Classified SME loan of 7 Banks
From the above analysis we came to know AB Bank keeps the highest amount of provision
for the classified loan which is taka 2995.83 million. Dhaka Bank keeps 17% provision which
is taka 1481 million. BASIC Bank has 14% provision against classified loan which is
1228.73 million.
7.3.4 Rate of Recovery of SME loan
79

Figure 7.5- Rate of Recovery of SME loan of 7 Banks
Interpretation:
From the above analysis we came to know that BASIC Bank is the most dominant player in
the market. Its recovery rate is quite satisfactory. Actually the employees who are dealing
with customer are vigilant to recover the outstanding loan. The recovery percentage of
BASIC Bank is 87%. But the recovery of BRAC Bank Ltd is 82%. Prime Bank has the
lowest recovery rate of 72%.
7.3.5 Modes of SME Loan Disbursement

Bank name
BASIC Bank LTD.
Prime Bank Ltd
Dhaka Bank Ltd
Mercantile Bank Ltd
BRAC Bank Ltd
AB Bank Ltd.
City Bank Ltd.
Type
Term loan and working capital loan and BASIC Kalayani
Term loan and working capital loan
Only term loan
Only term loan
Table 7.1- Modes of SME Loan of 7 banks
Prime Bank, Dhaka Bank, AB Bank & City Bank have offered both term loan and working
capital loan to the SMEs but Mercantile Bank and BRAC Bank offered only term loan to the
SMEs. BASIC Bank offered term loan, working capital loan and BASIC Kalyani for the
women entrepreneurs.
7.3.6 Interest rate of SME Loan

Bank name
BASIC Bank LTD.
Prime Bank Ltd
Dhaka Bank Ltd
Mercantile Bank Ltd
BRAC Bank Ltd
AB Bank Ltd.
City Bank Ltd.
Amount
10% to 15% p.a.
13% to 15% p.a.
12% to 13% p.a.
15% p.a.
18% to 24% p.a.
14% to 15.50%
13% to 18%
Table 7.2- Interest rate of SME Loan of 7 banks
BASIC Bank provides the minimum interest rate to the SMEs which is 10% and BRAC Bank
charges the maximum interest rate of 24% to the SMEs.
80
Chapter-8
Findings
81
8.1 FINDINGS
After analyzing all the parts of the report, some important points are determined. Pointing out
momentous finding about the SME financing prospects of BASIC Bank Ltd in comparing to
other six private commercial banks is required. The significant findings found out while
making the report are:
Head Office of the bank is monitoring all kind of SME loans and advances
The Head office of the bank perfectly monitors the banking operation and execution of the
credit policy. When I have examined the credit extension procedure of the bank I have found
that, every proposal are forwarded to the Head office for granting the loan and Head office
has the full authority to reject any kind of proposal. Thus any kind of ill practices at the
branch level are restricted. Along with that, some power has also been forwarded to the
branch manager most of whom also are well conversant about the credit policy of the bank.
Approximately 60% loans and advances have been given to small and cottage industries
In the credit policy it has been specified that, approximately 50% of the loans and advances
will be given to small-scale industries. By examining the figures we have found that, BASIC
Bank Ltd employed 60% of its loan able funds to small-scale industries.
Higher recovery percentage of disbursed loan
As a specialized bank BASIC Banks main focus on small and medium enterprises. With
proper credit policy and recovery management BASIC Bank Ltd maintains high recovery rate
at 87% that creates competitive advantage than other commercial banks.
Competitive benefits of SME loans for BASIC Bank Ltd
SME loan is most suitable in Bangladesh to create employment opportunity boosting
rural economy and to increase income level of the people. Through financing SME
BASIC Bank ltd is ultimately contribution to the economic development and
employment generation of Bangladesh.
In SME loan, default rate is low representing around 87% recovery. This is because of
the fact that, in SME risk is distributed among a big number of customers with small
amount of loan.
Strong dependency of interest income on SME credit and loans other than SME credit
When analyzing the regression of interest income on SME credit & loans other than SME
credit, I have found out that income comes from SME has great influence on total interest
income. If the SME credit can be enlarged it will generate huge interest income for the bank.
Risk measuring model
In BASIC Bank measuring credit risk is in practice. There is a risk measuring model and
software used in the bank for credit risk measuring of Small and Medium Enterprises. Thus
the bank assesses the risk of SMEs properly. For loan pricing BASIC Bank generally follows
82

the rate provided by Bangladesh Bank but the bank increase or decrease the rate as per the
credit risk of the borrower.
Lack of specific products for SME financing
BASIC Bank does not have specified products for financing SMEs like other banks. It uses
the typical loan products to finance the SME. But they have launched BASIC kalayani for the
women entrepreneurs of the SMEs. But the bank has taken initiative for launching specific
SME products for the SMEs.
Inadequate promotional activities
BASIC Bank does not use any promotional activities for its products promotion. So the
SMEs become unknown about the products and services provided by the bank. So the huge
credit demand of SME sector is not met up due to the lack of promotional activities of the
bank.
Lack of Non-performing loan recovery management
Loan default problem in Bangladesh is like a chronic disease. Despite various measures
including the constitution of Artha Rin Adalat there has not been any remarkable
improvement in the recovery of the classified loans. BASIC Bank has NPL of 4.83% to total
loan. But it does not have any special NPL loan recovery management. The bank has dragged
many clients to the Artha Rin Adalat but the process of getting verdicts is cumbersome and
lengthy. So there are a lot of default loan in the bank. The Bank has to form a NPL loan
recovery cell to collect the default loan.
Lack of advisory and consultancy cell for SMEs
BASIC Bank does not have any advisory and consultancy cell for SMEs like other banks. So
the SMEs are not able to make right decision about the financing method and products of
financing.
Lengthy credit sanctioning process
The process for credit sanctioning is time consuming and lengthy. As a result SMEs do not
get the financing in time. The average credit sanctioning time is 30 days. Due to the time
required for the credit approval SMEs switch to other PCBs to get credit facilities faster.
Project based vis a vis collateral based financing
BASIC Bank use the combination of both collateral based financing and project based
financing. Merely collateral based financing is not safe proposition for lending. Because it
has been observed that only collateral could not safeguard a loan from falling in default loan.
However the combination of both project based finance backed by collateral is used by the
BASIC Bank.
Borrowing from different financial organization
BASIC Bank collets its funds from Bangladesh Bank, Government of Bangladesh, Ministry
of Finance, Asian Development Bank and KFW Bank of German at lower interest rate and
use the funds to finance small and medium industries.
83
Chapter-9
Conclusion, Bibliography &
Appendix
84
9.1 CONCLUSION
SME worldwide are recognized as engines of economic growth. The commonly perceived
merits often emphasized for their promotion especially in the developing countries like
Bangladesh include their relatively high labor intensity, dependence on indigenous skills and
technology, contributions to entrepreneurship development and innovativeness and growth of
industrial linkages. The case for fostering SME growth in Bangladesh is irrefutable as these
industries offer bright prospects for creating large-scale employment and income earning
opportunities at relatively low cost for the unemployed especially in the rural area
strengthening the efforts towards achieving high and sustained economic growth which are
critically important prerequisites for triggering an exit from endemic poverty and socioeconomic deprivation.
The BASIC Bank Limited has been trying to operate its business successfully in Bangladesh
since 1994. Basic Bank has already developed goodwill among its clientele by offering its
excellent services through General banking, Credit division and Foreign Exchange divisions.
This success has resulted from the dedication, commitment and dynamic leadership among its
management over the periods. The working atmosphere of the BASIC Bank Limited is very
simulating. During the short span of time of its operation, the bank has been successfully to
the position itself as a progressive and dynamic financial institution in the country. As the
bank is concentrated in one of the thrust sectors of Bangladesh- SME Financing- the bank
must emphasize on the domestic scenario more closely and analyze any certain trends and
strategies of their competitors. The bank must accept any failures and think of them as an
objective to pursue future goals instead of blaming such failures on other factors and in this
way the Bank will be able to keep on playing its important roles in our economy.
Nevertheless, the success of SME banking depends on the expertise and dedication of the
field level officers. That is why continuous training and motivation is very much relevant to
run the SME banking successfully.
9.2 BIBLIOGRAPHY
Books:
Kothari,C.R. 2012-2013: Research Methodology Methods & Techniques, New Age

International Publisher, New Dilhi, ISBN: 978-81-224-1522-3 Page # 1-400.
Hanke , E. Jhon & Reitsch, G. Arthur,2005: Business Forecasting Dorling
Kindersley(India) Pvt. Ltd, Pearson Education. ISBN 81-7758-006-X. Page # 241267.
85
Articles & Journals:

Performance Evaluation of SMEs of Bangladesh by Kashfia Ahmed, Department
of Business Administration, East West University & Tanbir Ahmed Chowdhury,
Department of Business Administration, East West University, July, 2009.
Proposed Loan Peoples Republic of Bangladesh: Small and Medium-Sized
Enterprise Development Project by Asian Development Bank, August, 2009.
Role of SMEs Export Growth in Bangladesh by Md Shafiqur Rahman, Senior
Research Officer, Federation of Bangladesh Chambers of Commerce and Industry
SMEs in Bangladesh by Abdul Awal Mintoo, 2006.
Credit Policy of BASIC Bank Limited.
Websites:
www.basicbankltd.com
www.bangladeshbank.com
www.thesmallindustriesbankingnetwork.bd.com
www.ifc.bd.com
www.cia.com
www.abbankltd.com
www.bracbankltd.com
www.dhakabankltd.com
www.citybankltd.com
www.mercantilebankltd.com
www.primebankltd.com
Annual Report:
Annual report of BASIC Bank Ltd From 2009 to 2010

Annual report of BRAC Bank Ltd from 2009 to 2010
Annual report of Mercantile Bank Ltd. from 2009 to 2010
Annual report of AB Bank Ltd From 2009 to 2010
Annual report of Dhaka Bank Ltd from 2009 to 2010
Annual report of City Bank Ltd. from 2009 to 2010
Annual report of Prime Bank Ltd From 2009 to 2010
86
9.3 APPENDIX
Table-1
Sectors
Agriculture
Fishing
Manufacturing
Construction
Wholesale and Retail trade and Repairs
Hotels and Restaurants
Transport, Communication and Storage
Real Estate, Renting and Business activities
Education
Health and Social Work
Other Service Activities
Total
Source: ICG/MIDAS Survey, 2004
Total Contribution to GDP

177,729,637,637
32,872,674,674
282,344,700,575
7,196,460,200
171,335,861,390
28,599,263,975
8,950,171,356
13,771,436,794
151,808,506
2,743,049,785
15,632,094,785
741,327,159,677
% of Total Contribution
24
4
38
1
23
3
1
2
1
1
2
100
Table-2
Clients
No.
1
Zahanara Begum
Loan
Granted
1.609438
Security
Value
1.94591
Net
CRG
Maturity
worth
Score
of Loan
2.302585 4.430817 1.791759
Harun-ur-Rashid
1.791759
2.10657
2.302585 4.465908 2.302585
Zainul Abedin
2.014903 2.140066 2.251292 4.442651 2.302585
TMSS
2.079442 2.202765 2.302585 4.394449 2.302585
Zinnatul Hoque
2.079442 2.302585 2.014903 4.248495 2.302585
Nil Sagor Agro Industries Ltd.
2.397895 2.514465 2.890372 4.442651 1.609438
Arif Iqbal
Client Name
2.484907
2.70805
1.84055
4.465908 1.791759
A.H. Jute Spinners & Belting Ltd. 2.484907 2.566487 1.877937 4.317488 1.609438
Afrin Jute Mills Ltd
2.564949 2.811208 2.353278 4.382027 1.609438
10
Crystal Future Venture Ltd
2.639057 3.027715 2.155245 4.317488 2.302585
11
Fist Lease Finance & Investment
2.674149 3.238678 2.983153 4.406719 1.609438
12
Peoples Leasing & Finance
2.70805
3.004692 2.484907 4.382027 1.609438
87

13
Rupayan Housing Estate Ltd
2.70805
2.977059
14
Bashundhara Paper Mills Ltd
2.70805
2.890372 2.675527 4.394449 1.791759
15
Dysin International
2.70805
2.995732 2.772589 4.477337 1.098612
16
Home Textiles Ltd
2.70805
2.884242 2.995732 4.394449 1.609438
17
Alpha Ball Pen Ltd.
2.70805
2.851862 3.135494 4.406719 0.693147
18
Anchor Toothbrush
2.995732 3.573469 2.351375 4.382027 1.609438
19
Anwar Jute Spinning Mills Ltd.
3.218876 3.419692 3.026746 4.406719 1.791759
20
I.I.D.F.C.
3.218876 3.583519 2.302585 4.430817 1.609438
21
Tisha Enterprise
3.332205 3.422633 2.977059 4.442651 1.098612
22
2.36462
4.442651 1.098612
Tisha Jute Spinners & Belting ltd. 3.465736 3.655581 2.956472 4.330733 1.098612
23
Body Fashion Ltd
24
BD. Kawa Ind. Ltd.
25
Chittagong Feed
26
Ratna Auto Rice & Poultry
3.688879 3.806662 3.258097 4.317488 0.693147
27
Bashar & Sons
3.688879 3.857567 4.025352 4.317488 1.098612
28
Sakura Food Industries
29
Suktara Handmade paper
3.912023 4.246923 3.589059 4.343805 1.609438
30
4.007333 4.198104 3.280159 4.477337 1.609438
31
4.025352 4.144721 3.806662 4.317488 1.609438
32
4.094345 4.326646 3.500741 4.382027 1.609438
33
Kwality Jute Yearn Mills Ltd.
4.094345 4.345363 3.213662 4.430817 1.791759
34
Feni Dawakhana
4.174387 4.365643 3.817712 4.356709 1.098612
35
Jalalabad Soap & Chemicals
4.317488 4.465103 4.114637 4.465908 1.098612
36
Hira Biscuit Pvt. Ltd.
4.317488 4.672829 3.912023 4.382027 0.693147
37
3.555348 3.819469 1.981001 4.442651
1.94591
3.555348 3.835574 2.962692 4.382027 1.791759

3.583519
3.73767
3.89995
3.689629 4.406719 1.609438
4.007333 3.569533 4.343805 1.609438
Bangladesh DevelopMent Co. ltd. 4.382027 4.659185 4.255613 4.382027 1.098612
38
Rifat Enterprise
39
Sun Gravures ltd.
40
Aparupa Garments Ltd.
4.44676
5.131968 3.820565 4.418841 1.609438
4.787492 5.128715 4.307168 4.454347 1.098612

5.010635 5.395263 4.389871 4.442651
88
Table-3
Year
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Interest Income
4337.04
3877.17
3829.43
2866.57
2278.55
1701.39
1350.64
1190.04
985.51
795.46
670.02
606.72
451.76
336.46
229.40
222.67
177.81
150.93
96.74
75.44
46.66
21.70

SME Loan
Other Loan
26776.12
19565.39
16658.59
12602.94
16176.05
11093.08
12630.00
9633.35
10151.70
8848.30
7770.91
7568.44
7465.29
4534.86
5491.35
3790.85
5012.94
2944.10
3141.66
3119.12
2168.96
2449.77
1587.61
2372.50
1358.70
1860.20
942.65
1688.25
707.00
1017.81
678.22
883.07
514.41
597.83
218.63
767.98
110.08
605.67
67.34
365.46
47.68
152.32
18.69
47.76
89

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SME financing of BASIC Bank Limited

SME financing of BASIC Bank Limited

SME financing of BASIC Bank Limited

SME financing of BASIC Bank Limited

1.1 ORIGIN OF THE STUDY

1.2 OBJECTIVES OF THE STUDY

1.2.2 Specific Objectives

SME financing of BASIC Bank Limited

1.3 SCOPE OF THE STUDY

1.4 METHODOLOGY OF THE STUDY

1.4.1 Sources of data

SME financing of BASIC Bank Limited

1.5 LIMITATIONS OF THE STUDY

SME financing of BASIC Bank Limited

SME financing of BASIC Bank Limited

2.1 DEFINITION OF SME

2.1.1 Definition by Ministry of Industries (MOI)

Cost of Asset excluding land

2.1.2 Definition by Bangladesh Bank

SME financing of BASIC Bank Limited

2.2 SME SECTORS IN BANGLADESH

SME financing of BASIC Bank Limited

2.3 NUMBER OF SMES

Figure 2.1-Composition of SMEs

SME financing of BASIC Bank Limited

2.4 GROWTH OF SMES

Figure 2.2- Growth Percentage of SMEs

SME financing of BASIC Bank Limited

Source: Bangladesh Census of Economic Activities 1986 to 2003

Figure 2.3- Growth Percentage of Manufacturing SMEs

2.5 DEMAND AND SUPPLY GAP OF SME FINANCING

SME financing of BASIC Bank Limited

2.5.2 Overall SME Credit Supply Analysis

SME financing of BASIC Bank Limited

2.6 REFINANCING OF SMES BY BANGLADESH BANK

Amount Refinanced (In crore Taka)

No. of Beneficiary Small & Medium

2.7 ROLES OF SME

SME financing of BASIC Bank Limited

2.7.1 Creating Employment Opportunity

Average Annual Growth Rate

Figure 2.4-Percentage of Location wise & Sector wise employment by SMEs

SME financing of BASIC Bank Limited

2.7.2 SMEs contribution in GDP

Source: Economic Review, Ministry of Finance, GOB, 2008

SME financing of BASIC Bank Limited

Figure 2.6- Sector Wise GDP Contribution of SMEs

2.7.3 Women Employment

Unpaid family worker

Irregular paid worker

Domestic worker/maid servant

(Amount in Million Taka)

SME financing of BASIC Bank Limited

2.7.4 Contribution of Small Manufacturing Industries

Yearly Compound Rate of Growth

Source: Ahmed, M.U

SME financing of BASIC Bank Limited

2.7.5 Income Generation

Source: ICG/MIDAS, 2003

2.7.6 Solving Unemployment Problem

SME financing of BASIC Bank Limited

2.7.7 Contribution in export sector

2.7.8 Raw materials and machinery for large industry

2.7.9 Proper Use of Local Resources