1.

INTRODUCTION

Zarai Taraqiati Bank Limited (ZTBL) erstwhile Agricultural Development Bank of Pakistan (ADBP) is the premier financial institution geared towards the development of agriculture sector through provision of financial services and technical know how. The restructuring of former ADBP is being carried out with the aim to uplift the agriculture and rural sector by raising farm productivity, streamlining the institutional credit and increasing income generating capacity of the farming community. ZTBL was incorporated as a Public Limited Company on 14th December, 2002 through repeal of ADB Ordinance of 1961 and registered under Companies Ordinance, 1984 with an independent Board of Directors (See Fig.-1).

ZTBL is the largest and specialized bank facilitating the agriculture sector in the country. It has 342 branches all over the country. The ZTBL has multi services and investment plans for development of agriculture in country.

The Head Office of the ZTBL is in Islamabad with a total network of 342 branches (including 26 Zonal Offices) which exists in all four provinces of the country with the following break up: 1. 2. 3. 4. Punjab Province Sindh Province Balochistan Province N.W.F.P. Province Total 159 89 32 62 -------------342 ========

1.1

Capital Structure of Zarai Taraqiati Bank Limited

ZTBL is a key Rural Financial Institution (R.F.I) of Pakistan providing affordable, rural and agriculture financial/non-financial services to the rural Pakistan (comprising 68% of the total population of Pakistan). The ZTBL through a country-wide network of 342 branches is serving around half a million clients

annually and over one million accumulated account holders with the average loan size of around Rs.89,000/- serving 65%, 31% & 4% of subsistence, economic and large growers respectively.

The total assets of the ZTBL stand at Rs.84 billion with a nation-wide working strength comprising 5500 employees. The share of ZTBL in total national institutional agricultural credit remains around 35%.

Authorized capital of ZTBL is Rs.25/- billion, comprising 2,500 million ordinary shares of Rs.10/- each. As on December 31, 2005 the paid up capital was Rs.11.870 billion, almost all of which is owned by the Federal Government, leaving token ownership to all the Provincial Governments.

In its report of June 22, 2005 JCR-VIS has re-affirmed the medium to long term entity rating of "AAA" (Triple A) with a "Stable" outlook and short term rating of "A-1+" (A-One Plus) assigned to ZTBL. It has also re-affirmed the rating assigned to it on a stand-alone basis i.e. the medium to long term rating of "BB+" (Double B Plus) with a "Stable" outlook and the short term rating at "A-3" (AThree).

(Fig 1) BOARD OF DIRECTORS OF ZTBL

ZTBL alone serves around 0.5 million farmers annually and reportedly shares over 50% of the institutional credit. The ZTBL provides loans, for a wide range of investment activities encompassing tractors, implements, irrigation, horticulture, livestock, and fisheries and for production category (seed, fertilizers, pesticides). The ZTBL is trying to recover its stuck up loans so that these can be recycled to the agriculture sector.

2.

COMPANY BACKGROUND

Pakistan is basically an agricultural country, and finance has been needed for its rapid development. With a view to meet this basic need the Agricultural Development Finance Corporation was set-up in 1951, and was entrusted with the task of providing financial facilities for the development and modernization of agriculture, including:

Forestry Fisheries Animal Husbandry Poultry Dairy Farming.

Later on the Agricultural Bank of Pakistan was also established in September 1957, under the Agricultural Bank Act. The ZTBL is to provide credit in cash or in kind, warehousing and storage facilities to agriculturists, cooperative societies and other bodies, of which the majority of members are agriculturists. As the functions of the Agricultural Development Finance Corporation and, Agricultural Bank of Pakistan were similar and since both were working with capital provided by the Government, they were merged into one organization known as Agricultural Development Bank of Pakistan on February 18. 1961. The Agricultural Development Bank of Pakistan is a banking company for the purpose of the Banking Companies Ordinance and the State Bank of Pakistan Act.

Zarai Taraqiati Bank Limited erstwhile Agricultural Development Bank of Pakistan (ADBP) is the premier financial institution geared towards the development of agriculture sector through provision of financial services and technical know how. The restructuring of former ADBP is being carried out with the aim:

y y y

To uplift the agriculture and rural sector by raising farm productivity. Streamlining the institutional credit. Increasing income generating capacity of the farming community.

ZTBL was incorporated as a Public Limited Company on 14th December, 2002 through repeal of. ADB Ordinance of 1961.

The new corporate structure redefines the ZTBL's status as a Public Limited Company registered under Companies Ordinance'1984 with an independent Board of Directors which aims at ensuring good Governance, Autonomy, Delivering high quality.

2.1

Current Scenario:

The ZTBL restructuring plan covers the following; y y y y y y Governance: establish an environment that facilitates good governance and accountability. Systems: modernize operations through use of technology, networking, and communication tools. Business processes: streamline products and delivery systems so as to reduce transaction costs, simplify operations, and increase outreach. Products and services: introduce products and services that are financially economically viable. Human resource development: improve standards and skills of management and staff and strengthen training capacity. IT: establish new hardware and software platform to support MIS, accounting system including forensic accounting, and risk management functions.

3.

CURRENT MARKET SHARE AND THE COMPITITORS

The all commercial banks fall in the list of competitors. These commercial banks extend loan to the Agriculture Sectors for uplifting of the agriculture market, but the ZTBL enjoy the major share of the market. The overall market share of the ZTBL in the Agriculture loaning and RFIs is 37% whereas the cumulative percentage of other commercial banks is around 45. The rest of the 18% is being covered by the cooperative societies and other domestic banks. The following pie chart shows the percentage-wise position of the shares of different quarters.

Market Share in Agriculture Development Sector

ZTBL 37% Commercial Banks 45% Other Domestic Banks and Cooperative Societies 18%

4.

MISSION/VISION STATEMENTS AND CORPORATED OBJECTIVES

As part of the Business Plan, the Board of Directors also reconsidered the Mission and Vision Statements of the ZTBL. The Board therefore finally approved the amended Mission and Vision statements on 16th February 2008.

4.1

Mission Statement

To play effective role in the promotion of economic growth, by enhancing the availability of credit to the agriculture sector, through reliable access to sustainable financing, special lending programs, technical assistance, and other products & services, and to promote career development opportunities for increasing professionalism and technical proficiencies of employees. 4.2 Vision Statement

Dedicated to serve the needs of the farming community, by delivering financial products and technical services on a competitive and sustainable basis, in a convenient , efficient and professional manner, leading to success of the ZTBL and the farmers. 4.3 Corporate Objectives y Develop and operate as a financially and operationally sustainable R.F.I of the country. Assist rural community, particularly the small farmers, in raising their productivity and income levels through timely delivery of credit, advisory and ancillary services. Build ZTBL's image as a proactive, client friendly, financially & operationally sustainable with indigenous product deployment. Establish and provide backward and forward linkages to strengthen agri. value added commodity chains. Engage in public - private and wholesale - retail partnership to deepen outreach and reduce operating cost. To function as a rural commercial bank to mobilize rural capital formation and to commercialize the agri. sector by delivering the true value of credit to the client. Provide a wide range of risk insurance products to its clients. Open up it venues of operation to Domestic & International Banking Industry to avail comparative advantages.

5.

PRODUCTS AND SERVICES

5.1

Products/Schemes

ZTBL with the aim to uplift the agriculture and rural sector by raising farm productivity introduced multiple schemes with very much success. Some of the schemes are :

5.1.1 Supervised Credit Scheme Under this scheme agriculture loans are given for short, medium and long term loans upto Rs. 1.00 million per borrower/per case. The loans are sanctioned for In Fats, livestock, orchard, tractor, agricultural machinery, tube well and irrigation facilities etc. under the scheme besides provision of credit, information are to the farmers for planning the farm, production, guidance for implementation of the scheme, marketing and repayment of loans.

5.1.2 Zarkhaiz (one window operation) For timely and conveniently provision of credit to purchase inputs, loans are provided to the borrowers under One Window Operation being conducted twice a week during Rabi and Kharif seasons. Applications processed on the same day whereas sanction payments are made within three days at Branch. For Rabi Crops one window operation from October to January and for Kharif Crops from April to September each year which is extendable as per requirement of particular area.

5.1.3 White Revolution Scheme In order to modernize the dairy farming for increasing milk supply and mitigate poverty in the country and improving the living standards of the

rural inhabitants, a strategic partnership between ZTBL and MIs. Pakistan Dairy Development Company has been agreed upon and an agreement in this regard has been signed on 6th June, 2007. The salient features of this strategic partnership is given here as under:

i.

The company shall recommend good dairy farmer to ZTBL and send the loan request to the ZTBL along with necessary documents. The concerned branch of the ZTBL will process the case as per prescribed procedure of the ZTBL. The modernization of dairy farm will be carried out through financing milk cooling tank, generator, voltage stabilizer, hot water gezer, water pump, cooling pad and other dairy equipment. The loan will be considered against securities acceptable to the ZTBL excluding surety, hypothecation of animal and assets created out of ZTBLs loan. There would be maximum limit of loan of Rs. 1 million per borrower/party: Initially the scheme will be for modernization of 5,000 farm during 5 years period which involved Rs.700 million, 1000 farm would be covered under the scheme on yearly basis. The project shall be started on pilot basis in potential area namely Lahore, Hyderabad, Quetta and Peshawar zones and its expansion would be made gradually. PDDC would bear the entire amount of mark-up charged in the loan cases. Provided the 50% of principal part of loan is repaid in time by the borrower. The remaining 50% amount of principal along with the amount of mark-up would be paid by PDDC.

ii.

iii.

iv.

5.1.4 Sairab Pakistan Scheme Despite technological advancements and rapid growth of industrial sector, agriculture is still the back bone of Pakistans economy. It contributes

towards GDP and employs nearly 45% of countrys labor force. It provides raw material for industrial products. So it has both pull & push effect economy. Water plays vital role to improve per acre yield. Out of total million hectors area of Pakistan, 22 million hectors is cultivated while million hectors is cultivable waste mainly due to non-availability of water. More over increase in water supply being a key input is required to raise cropping intensity and hence the income of the farmer. Since inception ZTBL financed over 143000 Tube wells amounting to Rs. 15 billion. For raising irrigated area to accelerate the economic growth and to facilitate. Farmers ZTBL has signed collaboration agreement with M/s KSB Pumps Company Limited (Company) on 28 May, 2007. ZTBL will disburse Rs.6 billion to the farmers for installation of 30,000 Tubewells/Turbines during the next five years. KSB Pumps Company will provide quality machinery/equipment for efficient pumping of water. The company shall also provide after sale service including replacement of parts/availability of spares etc. through its network of dealers. The company agreed to allow warranty period of one year.

5.1.5 Sada Bahar Scheme For providing timely input loans for crops and working capital for poultry and fishery etc, the ZTBL has launched a Sada Bahar Scheme. Assessment for inputs requirements for the whole year is made at the time of first application. The amount so assessed is treated as Revolving Limit provided it is within the security limit. The Managers are authorized to sanction such loan limits upto Rs.O.500 million. Schemes main features are as under:

Revolving Credit Limit is fixed to cater production credit and ancillary requirements of the farmers during one year period. The

10

documentation once completed remains applicable for three years with yearly cleanup/renewal without any further documents. The borrowers can draw the credit in lump sum or in installments according to his requirement. Like-wise he can repay in lump sum or in installments during the year when his cash position allows him. Pass Book containing transactions in his SBS Account is supplied to every borrower free of cost.

5.1.6 Tea Financing Scheme In order to increase the tea cultivation in District Mansehra, Swat, Mutta, Shangla par and Dir in Malakand Division, tea financing scheme has been introduced which would not only save the hard earned foreign exchange but would also help improve the socioeconomic condition of the inhabitants of the area. The salient futures of the scheme are given as under: Maximum Credit Ceiling of Rs.60, 000/- per acre has been fixed. Farmers owing land upto five acres are eligible to avail loans. Credit will be given in 3 installments: first year Rs.30, 000/-, 2nd year Rs.15,000/- 3rd year Rs.15,000/- provided the disbursed loan is used properly. The credit would be repayable within 1 year with 6 years grace period with prescribed markup of 9% per annum. Rebate of 1 % will be allowed in mark-up on timely repayment and proper utilization of the loan.

5.1.7 Crop Maximization Project Ministry of Food, Agriculture and Livestock (MINF AL), Government of Pakistan has launched Crop Maximization Project in 109 villages in various districts through out the country to increase the productivity/yield of crops. Under the project MINFAL has to provide funds of Rs, 299.893 million to ZTBL for disbursing loans to the project farmers for purchase of

11

inputs. Till the time funds of Rs.468 Million have since been received by the ZTBL for the purpose. These funds are to be revolved for meeting input credit needs in the project villages till 30th June, 2014 after which the ZTBL will return the principal amount to MINFAL. Accordingly Credit needs of the project farmers are being met by respective ZTBL branches through Village Organizations formed for the purpose. Duly the currency of the project the ZTBL is authorized to charge 4% per annum mark-up on loans to project growers to meet its operational cost, however in case of default Banks normal rate of return i.e. 9% will be applicable.

5.2

Eligibility/Recovery Procedure

In line with the introduction of different kinds of schemes and loans the criteria of eligibility was also set and the recovery procedure was also chalked out for better management of the schemes and loans. The same is: Development Loans a) Installation of tube wells (including cost of power lines upto 8 poles and transformer/Ancillary structure. Pumping sets/lift irrigation pumps (including peter engines) Open Wells Purchase of improved farm machinery (including tractors,, power tillers, implements, cutter binders (reaper wind rover), threshers, trolley, spraying equipment, cane crusher and miscellaneous agricultural equipment, tractor pulled harvesters, self propelled combines. b) Those types of loans which are advanced for the purchase of items like farm machinery/tractors, irrigation, land development, orchard/green houses, on-farm godowns/storages, dairy, poultry, fishery, livestock farming and are recoverable period exceeding 18 months. Production Loan Those types of loans which are advanced for seed, fertilizer, pesticides, labour charges and POL etc. to grow crops and vegetables including working capital for poultry, dairy, orchard, fishery and are recoverable within 18 months.

12

Production/Seasonal Loans Items y y y y Seeds Fertilizers Pesticides/Insecticides, Herbicides (Feticides) Manual Sprayers Sairab Scheme:

5.2.1 Eligibility Farmers of at least 3 acres land holding will be eligible to avail financing under the scheme provided loan proposal is feasible Terms & condition for loan under under different schemes. Type of Security Equity Contribution Cost of Credit: LA Form Postal RS. Charges Appraisal Fee 1% Mark-up Recovery Period Maximum Loan Agri. Land/ Other Tangible Security 25% --Rs. 20/50/- P.A. --9% PA with 1% rebate on timely Repayment 5 years in half yearly installments with one year grace period Rs. 1 Million per case Limit

5.2.2 Recovery Schedule Recovery schedule in each loan case as per terms of sanction of loan is fixed and communicated to the borrowers after disbursement of loan.

In case of default or failure in repayment of any installment on due date the markup shall continue to be charged and last installment due to this may differ from the amount of installments fixed at the time of disbursement.

13

5.2.3 Recovery Procedure in case of Default Issuance of Notices: Demand notice is issued before the due date of every installment. A Legal Notice is issued one month after the due date informing the borrower that if the amount is not repaid within next one month, further legal action will be taken to recover the dues.

Legal action: Legal action can be initiated against the defaulter if loan is not repaid even after expiry of legal Notice period.

Where the court in bank favor has decreed a case, account is to be settled by recovery of amount from the auction of the mortgaged property. The ZTBL may purchase the mortgaged property if considered feasible to dispose it off later on through auction or in any manner deemed fit for getting the best price.

The ZTBL may dispose of the mortgaged properties of defaulters for satisfaction of its dues without intervention of courts under Financial Institutions (Recovery of Finances) Ordinance 2001.

5.2.4. Rescheduling of Loan Repayment Facility ZTBL allows rescheduling of repayment of installments to its borrowers in order to maintain credit discipline and to mitigate their genuine problems in real hardship cases and in areas declared as calamity hit by the respective Provincial Governments

The Rescheduling facility is to be considered by the ZTBL on case basis and is to be allowed on borrowers request only. The relaxation in recovery period shall not be allowed beyond one year in any case. The borrowers

14

shall have to execute a supplementary loan agreement on Non Judicial Stamp Paper of appropriate value to give legal cover to extended period. The borrowers shall have to pay the return for the extended period.

Down Payment for Rescheduling of Loans Rescheduling Rate of down payment as against due Number installments to be rescheduled 1st 10% 2nd 20% 3rd 30% Types of Security: 1. Immovable Property 2. Movable Property 3. Personal Sureties 5.3 Services 5.3.1 Locker Facilities Apart from its core functional activity marked with country based agribusiness, ZTBL has started to serve its valued customers by offering lockers facility. Initially, this facility is being offered at about 11 main branches of big cities. However this facility is not yet extended in Quetta.

5.3.2 Collection of Utilities Bills ZTBL has recently entered into the customer services section and started collection of utilities bills. This facility has been started towards its expansion of commercial banking so that the facilities could be provided to all its customers/account holders and to the general public. This will enhance the image and awareness of the ZTBL in the general public. 5.3.3 Hajj Operations facilities ZTBL has recently stepped forwarded in collection and processing of Hajj Applications. The forum has been provided to the people to give them

15

better facility as compared to their competitors. This sector needs a lot of improvement and policy making for which the ZTBL is in the process to build an easy approaching and facilitating policy which should be in the best interest of the people/general public as well as in the interest of ZTBL.

6.

ORGANIZATIONAL STRUCTURE 6.1 Objective

To transform ZTBL into a progressive, financially viable and self sustained commercial organization, the Bank was incorporated as a Public Ltd. Company in the year 2002, with all powers to conduct the business of the company vested in its Board of Directors. As a step further towards achieving the goals of restructuring new Organizational Structure of the Bank was approved by BOD in its 16th meeting held on March 8, 2005 to bring it in line with other Commercial Banks and to promote quick decision making. 6.2 Scope

Scope to achieve objectives spread over the following areas: Head Office, 6 Audit Zones, 25 Zonal Offices and 342 Branch offices. 6.3 Key parameters of the Organizational Structure (i) Elimination of overlapping and duplicity of functions between different divisions/Departments/Units. Remain Flexible to relocate Units/Departments for optimum utilization of Human Resource. Three tier Management system aimed at quick decision making. Reduction in turn around time of services. Career progression of employees has been linked with merit.

(ii)

(iii) (iv) (v)

16

(vi)

Functions of Divisions/Departments have been re-defined and aligned with the new objectives of the organization. 25 Zonal Offices have replaced 49 Regional Offices with wider jurisdiction and improved supervisory control to cope with the expanded/enlarged operational requirements. Zonal offices have been established keeping in view the volume of business, distance of branches from Zonal offices, availability of ZTBL owned buildings at various stations, geographical proximity of regions, work load/future potential and average number of branches per zone. Supervisory and establishment costs are to be curtailed. Branches have been categorized as large, medium and small depending upon the volume of business.

(vii)

(viii)

(ix) (x)

6.4

Management Tiers

6.5

Parameters of Organization Structure Policy

After conversion of ADBP into Zarai Taraqiati Bank Limited as public limited company, the process of re-structuring of bank had already begun. The end

17

objective of this process is to make this bank a progressive, financially viable and sustainable commercial bank having focus on rural finance with the objective of expanding its out reach through innovative package of customer friendly products and services. This objective cannot be achieved unless Bank recapture lost market share, improve the infrastructure, create an environment of trust and respect.

In order to run this institution on self sustained basis and to bring about efficiency in its day to day business, the existing bureaucratic structure has been replaced besides changing the existing organizations structure and tiers of management. The detail is given in the following paras.

Existing designations are abolished. New structure is based on a three tier management system already mentioned above.
6.6 Span of Control of Different Executives i) Members of SMT will continue to perform their role and responsibilities as presently defined under the terms of their contract. SEVP as and when appointed will primarily be responsible for strategic planning, policy making, guidance and critical operational issues. EVP will be the Operational Incharge of a Division. However, in case of a department of greater importance and wider area of responsibility, an EVP may also head a department in which case EVP will report directly to the functional head, SEVP or the President. In case an EVP with required qualification is not available, a functional head may temporarily be given the additional charge of an EVP and Divisional Head. SVP may head a department or a designated large zone. Accordingly all existing senior director and directors will become part of senior vice President (SVP) cadre. A Vice President (VP) may head a cluster of units within a given department, designated small zone or designated large branch. Accordingly, the existing joint director will form VP cadre. VP wherever posted as Manager of branch will be called Chief Manager.

ii)

iii)

iv)

v)

vi)

18

vii) An Asstt. Vice President (AVP) may head a unit within a given department or designated medium branch. viii) Senior Officer (SO) will head a unit or designated small branch or as unit support. ix) The Officer will perform as a unit support.

6.7

Management Hierarchy/Organizational Chart

The general direction and superintendence of the affairs of the ZTBL are entrusted to a 09 members Board of Directors consisting of a chairman appointed by the Federal Government, the Federal Government officers from the Ministries of Finance and Food and Agriculture. Four officers of the four Provincial Governments and one non-official nominated by each province. One member on this board represents the State Bank of Pakistan also.

In ZTBL, the president supervises and directs the senior executive who supervises and directs the senior voice president, and senior voice president control voice president, who control Assistant voice president, who finally supervise officers. The management hierarchy of the ZTBL is as follows;

19

Earlier the ZTBL was functioning like a pure government institution and permission has to be sought on every step for moving forward.

Now the ZTBL Management Board is fully empowered to run the affairs of the ZTBL. More than 2,000 employees of the ZTBL have opted for Voluntary Golden Hand Shake Scheme, offered by it to its employees.

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7.

FUNCTIONAL SETUP

There are different divisions working in ZTBL. They are: (1) Human Resource Division; (2) Credit Division; (3) Recovery Division; (4) Finance and Accounts Division; (5) Service Division; (6) Information System Division; and (7) Internal Audit Division.

7.1

Human Resources Division

This division comprises of four departments i.e. (1) HR Policy Department; (2) HR Operation Department; (3) HR Staff Relation and Welfare Department; and (4) Training & Development Department. The primary objective of this division is to attract the potential and excellent work force for ZTBL. Its expertise in attracting, acquiring, retaining the talent required for the ZTBL is main function of this division. It continuously make deliberations on the HR policies for improvement purpose. This division also ensure the timely delivery of the services of HR section. This division improves the profession competence and management capabilities of the ZTBLs management and staff. It also conduct the training courses of new comers and audit personnel. Personnel of the ZTBL are also provided training on the relevant services which the ZTBL provide to different quarters. In the recent past, the HR Division has initiated the process of induction of Management Trainee Officers with the aim to post them in the areas of skill deficiency. 7.2 Credit Division

Credit Division of the ZTBL coordinates the operations of the ZTBL in connection with agricultural credit and its relations with the Customers/Clients and also to the level of provincial co-operative banks and any other organizations engaged in the business of agricultural credit.

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7.3

Recovery Division

This Division of the ZTBL chalk out the plans and implement the specific methods for recovery of the different types of loans and credits. It also actively contribute in designing and planning in the procedure and if suggest changes/revision in the plans according to the prevailing situations. All these plans and procedures are being regulated and approved by the BOD before its implementation. However, to develop effective plans, the input from the other Divisions is also taken care of.

To make more funds available for farm credit, the Recovery Division has to make hectic efforts for which this division mobilizes MCOs and daily/weekly monitoring of recovery by the Branch Managers, zonal Chiefs and by the Head Office. However, the work of this division adversely affected by the outside factors.

7.4

Finance & Accounts Division

This division provides information for planning effective and efficient accounting system, control and perform decision-making regarding annual budget and balance sheet of the Bank. Over all financial system of ZTBL is being regulated and implement through this division. The Finance & Accounts Division is therefore responsible for the implementation of systems and procedures that assure the sound and efficient functioning of the Banks financial activities. The flow of financial activities begins with a plan (budget). Further this Division keeps an accurate record of all financial transactions, generates interim financial reports, and produces audited financial statements at the end of financial year.

7.5

Services Division

The functions of Services Division are to implement the ZTBLs procurement and services procedure in letter and spirit. All the purchases/procurement of different

22

nature like vehicles, equipment, furniture, renovation of office buildings are carried through this Division of the ZTBL. It also lookafter the services to be provided by different contractors.

The ZTBL internal activities relating to administration are being regulated through this Division. However, the day to day activities at Branch Level or Zone Level are taken care of relevant Branch Managers or Zone Incharge of Vice President Level.

7.6

Information System Division

The ZTBL is in the process of streamlining the IT and Management Information System (MIS) under the project loan sanctioned by ADB. For that purpose, a comprehensive five year strategy to acquire, implement and train the relevant HR has been developed. Medium to long term goals are established and duly approved by the BoD. Its functions / first step is to upgrade the use of communication network for efficient email and circular management system and streamlining all zonal offices including the head office in the Management Information System. Most of the work has been completed in Punjab and Sindh Provinces whereas work in Balochistan and NWFP is in progress.

7.7

Internal Audit Division

The Internal Audit Division functioning in ZTBL in accordance with provisions of Code of Corporate Governance which reports to the Audit Committee of Board of Directors. This division is comprises of three departments at Head Office and six Audit Zones in the field. The Audit Zones are divided into different teams which conduct 100% audit of activities at branches level whereas the Incharge of Audit Zone conducts the audit of Zonal Offices of the ZTBL. This division is working with the objectives to safeguard the interest of the ZTBL.

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8.

HRM UNIONS

There are two categories of unions in the ZTBL. One is Peoples Employees Union and the other is Officers Association.

8.1

Peoples Employees Union

This union has been formed in 1973. Later on, the union gained the status of Collective Bargaining Agent (CBA) in the year 1976. The union is functioning in the ZTBL and take care of the employees interest in the ZTBL. The union is registered with National Industrial Relations Commission of Pakistan and has its own Charter. The CBA bargain with the ZTBL of different arising issues and act according to the set procedures in the law. However any dispute which could not be settled amicably, then the same dispute is taken to the NIRC Court by the CBA for its verdict on the dispute. Then further the chain of Appellate Courts is followed if required.

8.2

Officers Association

The Officers Association was formed in 1982 with the aim to protect the interests of different level officers of the ZTBL. But contrary to the Employees Union, the Officers Association have no such forum of jurisdiction. It follows the normal procedure of negotiation with the ZTBL on any kind of disputes. If not satisfied with the decision of the ZTBL Management on any issue, then they may follow the normal courts procedure for remedial purpose. But there is no such agitation process, as is allowed in the case of Employees Union. 9. COMPENSATION METHODS

The ZTBL has introduced different kinds of compensation methods to attract its employees for effective and efficient performance. This is in addition to the direct wages paid to the employees in the shape of salary etc. The detail is as under:

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9.1

Pension Scheme

There is a defined funded pension scheme, approved by the Income Tax Authorities, is operative in the ZTBL for the employees who had opted for the employees benefits scheme, introduced in 1975 for the clerical/non-clerical staff and in 1977 for the executives/officers. The pension method is calculated on the basis of Projected Unit Credit Method. Any surplus/deficit arising on actuarial valuation in excess or lower of 10% of the fair value of plan assets, is recognized as income or expense over the estimated working lives of the employees.

9.2

Gratuity Scheme

The ZTBL also operates defined benefits funded gratuity scheme which is also approved by the Income Tax Authorities for those eligible employees who did not opted for the pension scheme. The annual contribution is 10% of the actual basic pay. One eligible employee can be given one benefit at a time whether that is pension scheme or gratuity scheme.

9.3

Provident Fund Scheme

The ZTBL also operates a defined contribution funded provident scheme for those employees who did not opt for the pension scheme of 1975 and 1977. In this scheme, equal contribution is made by the employee and the ZTBL at defined rates.

For those employees who opted for the pension scheme of 1975 and 1977, ZTBL operates a non-contributory provident fund scheme in which contribution come only from the employee side without any contribution from the ZTBL.

Both of these provident fund scheme of contributor and non-contributory are approved schemes from the Income Tax Authorities.

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9.4

Benevolent Fund Scheme

Parallel with the above schemes, the ZTBL has Benevolent Fund Scheme in two categories that is one for the clerical/non-clerical staff and the other is for officers. Contribution to this scheme is made equally by the employees and by the ZTBL. The ZTBL is also liable to make good any shortfall in the fund.

9.5

Post Retirement Medical Benefits

The ZTBL operates post retirement medical benefits scheme for all of its employees for which the ZTBL keep provision in the consolidated financial statement for the benefits based on actual basis.

9.6

Employees Compensated Absences

The leave of the employees are accumulated to a certain period which is encashable only at the time of retirement to the specified limit which is provided in the terms of employment. Provision for this compensated absences are also made in the consolidated financial statements for the benefit based on entitled unavailed leave balance carried forwarded to the next year.

10.

FACTORS AFFECTING PRODUCTIVITY/PERFORMANCE

There are different factors which affect the productivity and performance of the ZTBL. As the above report reveals that the ZTBL reinvest the recovery gains to enhance its productivity, the factors which hinders the recovery directly affects the productivity of the ZTBL. These factors may include:

(1) (2) (3) (4)

Cyclone in the Coastal areas Heavy rains Droughts Relief Package for ZTBLs borrowers

26

Even during the year 2007, when the Ex-Prime Minister of Pakistan was assassinated on 27th December 2007, this resulted in law and order situation in the whole country, and the ZTBL was closed down in these days which were the peak recovery days. This directly affected the ZTBL recovery efforts/outcome resulting in adverse affect on the reinvestment in the lending.

11.

SWOT ANALYSIS

After study of the working of the ZTBL the SWOT analysis conducted by the Group presenting this report. This analysis is based on the perception and assessment of the group and has no obligation at any level on anyone whosoever.

The ZTBL has been calculated on the Zone Level. All the zones heads are being given the targets for achievement which contributes towards overall performance and productivity of the ZTBL. This give strength to the employees to the Zone Level to compete with employee with other Zones, resulting in better productivity. However, there are certain outer factors which affect this performance for competing with competitors which may be natural calamities in the shape of draughts, floods etc. which results in less recovery from the borrowers or the relaxation to the borrowers for payment of less percentage of interest also decrease the outcome.

Another weakness had arisen in the shape of lay off of the experienced employees, when about 2,000 employees of different cadres have been separated through Golden Handshake Scheme. The ZTBL suffered a lot because immediately a big percentage of the employees relieved from service and the burden of their work was shouldered to the remaining staff who were hardly able to manage the work in that pace which was going on before the introduction of Golden Handshake Scheme. Definitely the efficiency of the employees decreased having overburdened. However, to overcome this problem the Human Resource Department of the ZTBL has taken practical steps like training the existing staff in the expertise which the ZTBL lost during the separation of

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the employee. Also to motivate the existing employees, certain level of promotion being carried out which put some extra energy in the employees to cope with the hard situation as they were seeing reward ahead. Appointment on the most required positions were also made to fill the lacuna created because of the Golden Handshake Scheme.

There are lots of opportunities in the field of Agriculture Credit Portfolio as our country is basically an agriculturist country having 60% of the population working in the agriculture sector. This sector has a lot of potential to increase. However, to get benefit out of this sector, the ZTBL should penetrate to the deepest level. Presently, the ZTBL is having maximum growth share of this market, it would be an opportunity to make the credit loaning on more easy terms so that the maximum potential of Agriculture Sector should attract towards the ZTBL. This will require policy making on the highest level. This will also compensate against the threats faced by the ZTBL from environmental factors, as if from one area the ZTBL suffers losses due to natural disasters, will be able to get recovery from the other areas where the agriculture grows.

The ZTBL is owned by the Government, and because of the present political system, there is political interference exists in the working of the ZTBL. Although, because of its formation in 2002 on corporate style, the interference on political basis has lessened but still there are situations where the borrowers has government favour. This threat to the ZTBL badly effect resulting losses. To overcome this level of interference, an independent regulatory authority would best serve the purpose. The Regulator Authority may be so independent, not to influence by any quarter, if the borrowers are not meeting the criteria. If all the loaning/crediting is being done on merit, there is 100% chances for the increase in the productivity / performance.

12.

BCG / GE MATRIX

In this report there are three different separate working areas which are considered a Strategic Business Units of the ZTBL. These are:

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y y y

Deposit Schemes Loaning Schemes Project Loans

The following chart shows the position of these units.

12.1

Deposit Schemes As we are entering into new era of commercial banking and offered

different deposit schemes like current account, PLS account, Rozana Bachat account, Business Deposit account and Zarai Term Deposit certificates, so the same is in question mark because it has low market share in a high growth market. There is a lot of potential in this area for capturing the market share. The cash cow of the ZTBL has the potential to feed this area for getting the question mark into star. Once this area has been captured as star then these schemes can be degenerated in the cash cow with implementation of further suitable market strategies. Here the strategy is required to be adapted is between growth and stability.

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12.2

Loaning Schemes

Loaning schemes of the ZTBL having largest network of branches and enjoy the maximum market share over all other competitors has been placed as Cash Cow. This area has a low growth market where loaning schemes have already posses major market share i.e. 37% . Now the only growth and stability strategy is implemented to see if how much further market share can be captured and the ZTBL has the potential to keep consistent grip over this area. Still these loaning schemes generate the maximum output for the ZTBL and from this area, investment in the question mark is being made for capturing the market share.

11.3

Project Loans

All the project loans have either been converted as sick units or written off on political grounds for which the ZTBL sustained lost of billions of rupees. These loans are in the process of final retrenchment strategy. These loans have very low market share in a low growth market for the ZTBL therefore placed in the dog. The first chance to see the market, and if there is any potential in the market for new viable projects, this area would be considered for the turnaround strategy to convert dog into question mark, otherwise there is no other way but to finally close down through the process of other retrenchment strategies.

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