Financial Services to

Enable SME Growth

Syed Mahbubur Rahman

Managing Director & CEO

perspective

BRAC Bank – Beginning of the Journey

Small and Medium size Enterprises (SMEs) in Bangladesh did not have access to banks and financial institutions like the big multinational & local corporates. But SMEs have a significant role in employment generation, poverty alleviation and overall economic growth, especially for a developing economy like that of Bangladesh’s.

Not Served by Banks & beyond Limit of MFIs

Multinational & Local Corporates

MicroBusiness

Small & MediumEnterprises

Served by all Public & Private Commercial Banks

Served by MFIs

Missing Middle

To serve the “Missing Middle” and to work as a catalyst for the vibrant yet unbanked SME sector of Bangladesh, our Chairperson, Sir Fazle Hasn Abed founded BRAC Bank in 2001 with institutional shareholding of BRAC, ShoreBank & IFC.

BRAC Bank – Philosophy in SME BankingDifferentiating factors –Triple Bottom Line – People, Planet & ProfitFund Flow Strategy - Raise deposits through Corporate & Consumer Banking business in urban area and lend the fund to SMEs across the country Focus on Financial Inclusiveness – Bring more population under formal financial umbrella by expanding the reach of formal financial services in semi-urban & rural areaEmpower Women Entrepreneurs - Special assistance/training & preferential rates are provided for women entrepreneurs. Dedicated Women Entrepreneur Cell to serve the women entrepreneurs. Focus on serving SMEs - Maintain 50% of

total Bank’s portfolio in SME Banking to ensure the focus & commitment towards SMEs

Serve SMEs -The SMEs do not maintain financial record properly. Our loan officers helps them to prepare their financials and also train them on proper financial record keeping.

Country’s Largest Collateral free Small Business Portfolio

Source:Bangladesh Bank and Regulatory Reporting, BRAC Bank

Without Collateral SME Loan Portfolio as of March ‘15

Financial Sector   USD 1,131m

Banking Industry   USD 981m

BRAC Bank   USD 385m

BRAC Bank Share

Financial Sector

34.04%

Banking Industry

39.24%

BRAC Bank’s unique Small Business Model

• The Loan Officer is responsible for collections up to 180DPD

• Special Asset Management (SAM) team takes over from 180DPD

• Checks all documents

• Informs doc deficiencies (if any) to SME Business.

• Disburse the loan if found OK.

• Area Credit Managers visit the customer & do a full analysis of all credit credentials & Gives credit decision based on the same day.

• SME Business completes loan file preparation & all documentations

• Customers selected by Loan Officer/CRO’s

• Gathers business data with the help of the customer.

• Provides basic due diligence data to Area Credit Manager

• Area Credit Manager does an initial review based on due diligence data & plans visit if positive.

• Area Managers visit the new customers.

SME BusinessSME Business ACMACMOPSOPS

Loan Officer/CROLoan Officer/CRO

• Decentralized Credit Approval Model enables to provide faster credit decisions & Reduce TAT (Turn Around Time) maintaining proper segregation of duties.

• Approver physically visits each and every proposal which ensures quality selection.

• Equal priority is given on Business Growth & Collection

AM & ACMAM & ACM

SME BusinessSME Business

Special Asset Mgmt

Special Asset MgmtSME BusinessSME Business

Poverty Reduction through “Creation of Jobs”

• Till date BRAC Bank as created around 1.5 million new employments through it’s Small Business lending in various sectors (Trading, Manufacturing, Agriculture, Service, etc.)

• BRAC bank commenced 1st Impact Measurement Study with an objective to validate indicators and track performance of their SME loan where Employment Creation of both Male & Female employees were measured. The result is –

Economic Sub-indicator

Specific measurement

indicators

First Study

Treated(N=286)

Control(N=134)

t-test

% of change

over control

Employment creation

Number of full time male employees

2.26 1.62 3.27 71.68

Number of full time female employees

0.31 0.29 0.23 93.55

Male employment increased by 72%

Female employment increased by 93%

• It was also found that - Manufacturing sector employs three times more employees than

trading & agricultural sector. Highest number of women are employed by manufacturing sector &

trading sector employs the least number of women

BRAC Bank - 14 years of unshakable trust on potential SMEs…

• Evolved as Country’s largest SME Bank (for unsecured SME loans)

• We lead the way – First SME Bank of the Country who took formal financial services to

the doorstep of SMEs First commercial bank to provide collateral free loans to SMEs Proven the financial industry that lending in the SME Segment can

be profitable

• 472 SME Unit Offices• 165 Branches & SME

Service Centers• 422 ATMs

Customer Touch Points

• Total SME Staff2,500

• CRO/Loan Officers1,500

• SME portfolio: US$ 600m

• Customers: 124,000

• Disbursed : US$ 4,100m• Customer served :

501,000• Unsecured:91%

Since

Inception

Number of Staff

Portfolio

Realizing Dreams of Small Business Entrepreneurs…

ONE TRUSTED PARTNERONE TRUSTED PARTNER

Key Priorities – Small Business

Thank You