A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
Introduction
Micro-Credit, Micro-Enterprise and Small and medium enterprises (henceforth,
SMEs) play a key role in economic growth and industrial development of a country.
They make vital contributions in improving economic and social sectors of a country
through stimulating large scale employment, investment, development of indigenous
skill and technology, promotion of entrepreneurship and innovativeness, enhancing
exports, and also building an industrial base at different scales. Growth of these is
constrained by many factors. Many SMEs occasionally go on growing into large
firms. This paper looks for this role in the society’s development and identifying such
constraints of manufacture based Micro-Credit, Micro-Enterprise and SME
Development in Bangladesh. From the study, it has been identified that the amount
of investment in these sector like Non-Formal and Voluntary Banking Services of
SIBL is not sufficient but this Bank is trying to accelerate the amount as well as
initiatives for bringing development of these sector. Non-Formal and Voluntary
Banking sectors of SIBL are- Family Empowerment Micro-Credit program, Family
Empowerment Micro-Enterprise, Small and Medium Enterprise (SME) and Cash
Waqf Certificate Account and Corporate Social Responsibility (CSR). SIBL started its
journey through threes sector banking like Formal (Deposit collection, investment),
Non-Formal (Micro-Credit, Micro-Enterprise and SMEs) and Voluntary Banking
Services. Although the amount of investment in Non-Formal sector is decreasing but
this Bank kept its contribution from the starting its operation. SIBL, which started its
journey with the inauguration of Micro-Credit program in 1995 with three sector
banking. From the above table it is seen that the amount of investment in Micro-
credit program has been reduced gradually. In the year 2006 the amount of
investment was 22.80 crore taka but in the year 2010 the amount came at 17.78
crore taka. This means that the investment amount in Micro-credit program reduced
over the year significantly due to the Bank’s investment diversification to the formal
banking sector like corporate banking. The outstanding amount in Micro-credit
program is very much lower over the years. In 2006 it was 4.66 crore and in 2010 it
is 0.6883 crore taka and this indicate the intention of very good repayment tendency.
The investment in Micro-enterprise over the years. In 2006 it was 25.244 crore taka
but in the year 2010 it is 11.13 crore taka only. In Micro-enterprise investment the
outstanding amount is very much lower, in 2006 the outstanding amount was only
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
3.46 crore and in 2010 it was only 0.502 crpre taka. And this indicates that the poor
class clients are very much concerned for their repayment. The rate of recovery in
Micro-Credit and Micro-Enterprise is very high and above all satisfactory means
nearly 95%. SIBL has diversified SMEs Products such as Bai-Muajjal Commercial,
Small Enterprise (SE), HPSM Commercial, Small Enterprise (SE), HPSM Transport,
Small Enterprise (SE), Bai-muajjal Commercial, installment, Small Enterprise (SE),
Murabaha Commercial, Small Enterprise (SME), Bai-muajjal Commercial (Micro-
Enterprise). In 2010 the amount of investment in SMEs was 1.96% of total
investment and the income was 0.92% of total investment income, in 2010 SME
disbursement amount was 69.12 Million taka and SME investment income was 3.69
million taka. In 2010 SMEs outstanding amount was 170.35 Lac taka. Above all the
recovery rate of SME investment is very high and satisfactory.
SIBL collects deposit from the wealthy person through Cash Waqf Account and
invest those amounts in different profitable sectors. The Profit coming from
investment of cash Waqf account is disbursed to the poor people and in different
charity, Mosque etc. in 2010 the amount of deposit in cash waqf account is 4.41
crore taka. And the cash waqf fund is used in Family Rehabilitation, Education,
Health & Sanitation, Social Utility and others. The welfare activities of the Social
Islami Bank Limited (SIBL) as part of corporate social responsibility are maintained
from profit made in the Cash Waqf and Social Welfare Fund. SIBL has assisted poor
patients suffering from Cataract & Low Vision. In 2006 eight mobile camps were held
in different parts of Bangladesh including Faullah, Mirpur, Manikgonj, Bancharampur,
Fatichari, Sylhet and Noakhali. These camps provided 185 cleft lip and palate
operations and medical care for 2622 patients including medicine/ medicine,
spectacles and cataract surgery free of costs. In 2010 SIBL spent 204.38 Lac Taka
in Corporate Social Responsibility (CSR).
Table of Contents
Sl. Particulars Page
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
Executive Summary i-ii
Chapter-One: Background of the Study
1.0 Introduction 1-2
1.1 Origin of the Study 2
1.2 Objectives of the Study 3
1.3 Rationale of the Study 3
1.4 Scope of the Study 4
1.5 Methodology of the Study 4
1.6 Limitation of the Study 5
Chapter-Two: Literature Review 6-12
Chapter-Three: Organizational Profile
3.0 An Overview of the Bank 13
3.1 Brief History of SIBL 14
3.2 Mission of the Bank 15
3.3 Vision of the Bank 15
3.4 Position of the Bank 15-16
3.5 Position of the Principal Branch till 31st July 2011 17
3.6 Organizational Structure (Organogram) 18
3.7 Services Provided by SIBL 19
Chapter-Four (Main Study): Non-Formal Banking Services
4.0 Setting of the Problems and Objectives 20-21
4.1 Frontiers of Family Empowerment Micro-Credit Programs 21-23
4.2 Family Empowerment Social Financing Programs of SIBL 23-25
4.3 Family Empowerment Social Credit: A Comparative Review 25-27
4.4 Micro-credit line of SIBL: Selected issues and Problems 28
4.5 Family Empowerment Micro Enterprise Program of SIBL 29-
4.5.0 Objectives 29
4.5.1 Target Group 29
4.5.2 Modes of Investment 29
4.5.3 Ceiling of Investment 29
4.5.4 Procedure of Investment 30
4.5.5 Profit and other Charges 30
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
4.5.6 Security 30
4.5.7 Purpose of Investment 31
4.5.8 Recovery of Investment 31
Chapter-Five: Small and Medium Enterprise (SME)
5.0 New Definition of Small & Medium Enterprise (SMEs) 36
5.1 Prudential Regulations on SME Financing of Bangladesh Bank 36-40
5.2 ANALYSIS OF SME INVESTMENTS IN SIBL: PRESENT SCENARIO 41-55
5.2.1 Why do you take the SME Investment Opportunity of SIBL? 41
5.2.2 Major Types of Small and Medium Enterprise 41
5.2.3 SIBL products for Small and Medium Enterprise (SMEs) 41-51
5.2.4 Small and Medium Enterprises products offered by SIBL (Table) 52-55
5.3 SME Loan Documentation & Loan Processing Procedure 56
5.4 Risk Factors for SME Loan 56
5.5 Investment Risk Grading used by SIBL 57
5.6 Selection of Borrower: Is the Borrower Creditworthy 57
CHAPTER-SIX:SME PERFORMENANCE & TRENDS CALCUALTION OF SIBL
6.0 Ratio Analysis of SME Investment from the year 2005 to 2010 58
6.1 SME Investment to Total Investment 59
6.2 SME Disbursement for past 5 glorious years 61
6.3 Investment income earned by overall SME Investment 62
6.4 Investment Outstanding from year 2006 to 2010 62
Chapter-SEVEN: Key Aspects Related to the Marketing of SME Products in SIBL
7.0 Demand Creation 64
7.1 Market Segmentation 65
7.2 Target Customers 65-66
7.3 MARKET Positioning 66
7.4 Developing the Marketing Mix for SME investments 67-69
CHAPTER-EIGHT: Constraints of Manufacture based Small and Medium 70-75
Enterprise (SME) Development in Bangladesh
CHAPTER-NINE: VOLUNTARY SECTORS
9.0 Cash Waqf Certificate Accounts 81-82
9.0.1 Empowering Multi-Generational Family Heritage Implication of 76-77
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
Cash Waqf Certificate
9.0.2 Implication of Cash Waqf Certificate 78-79
9.0.3 Objectives of Cash Waqf 80
9.0.4 Cash-Waqf services as Social and Private Good and Criteria of 80-81
Allocative efficiency
9.0.5 Guidelines/ Rules Governing the Operations of Cash Waqf 81-82
Certificate Account in SIBL
9.1 Corporate Social Responsibility (CSR) in banks and financial institutions in
Bangladesh
9.1.1 Priority Areas of Corporate Social Responsibility (CSR) 85-86
9.1.2 Initiating CSR programs in banks/financial institutions 86-87
9.1.3 What is CSR-Clearing the Confusion 87
9.1.4 So what is Corporate Social Responsibility (CSR)? 87-88
9.1.5 Corporate Social Responsibility (CSR) Social Islami Bank Ltd. 89-90
9.1.6 CSR Expenditure Trends & Sectors of SIBL 91
Chapter–TEN: Major Findings & Recommendations 92-94
10.0 Major Findings 92
10.1 Recommendations 93-94
Chapter-Eleven: Conclusion 95-96
References 97
Appendices: 98-132
1 Internship Dairy 98-104
2 Bangladesh Financial System Reformation Since Liberation War 104-127
3 Required Papers for Investment 128
4 Investment Mix of Principal Branch, SIBL 129-130
5 Cash Waqf Certificate Model 131
6 32 purposes of Utilization Cash Waqf Certificate Account at SIBL 131-132
Contents of Table
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
Sl No. Table No. Table Name Page No.
1 3.0 Position of the Principal Branch since its opening 17
2 4.0 Comparison between SIBL approach and NBFIs 26
approach
3 4.1 Family Empowerment Micro-Enterprise Statistics 31
4 5.1 Bai-Muajjal (com) SME 52
5 5.2 Higher Purchase Shirkatul Melk (HPSM) com. SME 53
6 5.3 Higher Purchase Shirkatul Melk (Transport) SME 54
7 5.4 Bai-Muajjal Commercial (Baim) SME 55
8 5.5 Investment Risk Grading (IRG 57
9 6.1 Ratio Analysis of SME 58
10 6.2 SME disbursement amount over the years 61
11 6.3 Investment Income from SME 62
12 6.4 SME outstanding from 2006 to 2010 (Amount in Lac 62
Taka)
13 9.1 Growth Trends of Cash Waqf A/Cs Number & 83
Deposited Amount
14 9.2 Cash Waqf A/Cs at Principal Branch of SIBL 84
15 9.1.1 Sector wise CSR expenditure 92
Contents of Figure
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
Sl No Figure No Figure Name Page No
1 4.0 Family Empowerment Micro-Credit Program (amount 32
of investment in crore)
2 4.1 Family Empowerment Micro-Credit Program (amount 33
of outstanding in crore)
3 4.2 Family Empowerment Micro-Credit Program (rate of 33
recovered)
4 4.3 Investment amount in family empowerment micro- 34
enterprise program
5 4.4 Outstanding amount in Family Empowerment Micro- 34
Enterprise Program
6 4.5 Rate of Recovery of Family Empowerment Micro 35
Enterprise Program Investment
7 6.1 SME Investment to Total Deposits 58
8 6.2 SME Investment to Total Investment 59
9 6.3 Investment Income from SME to total Investment 59
Income
10 6.4 Investment Income from Commercial Banking to Total 60
Investment Income
11 6.5 Investment Income from Installment Investment 60
Scheme to Total Investment Income
12 6.6 SME Financing in million Tk. 61
13 6.7 Investment Income from SME 62
14 6.8 SME Outstanding from the year 2006 to 2010 63
15 9.1 Number of Cash Waqf Certificate Account from the 83
year 2006 to 2010
16 9.2 Deposited Amount Trends in Cash Waqf A/Cs over the 83
year(2006-2010)
17 9.1.1 Total Corporate Social Responsibility expenditure 91
Acronyms
SIBL Social Islami Bank Limited
A Study into the “Non-Formal & Voluntary Banking Services” of SIBL
BB Bangladesh Bank
SME Small and Medium Enterprise
FEMC Family Empowerment Micro-Credit
FEME Family Empowerment Micro-Enterprise
CWAs Cash Waqf Accounts
CSR Corporate Social Responsibility
GB Green Banking
IRG Investment Risk Grading
IRM Investment Risk Management
GB General Banking
ETP Effluent Treatment Plant
ERM Environmental Risk Management
HHK Hybrid Hoffman Kiln
RO Relationship Officer
RM Relationship Management/Marketing
SMEO Small & Medium Enterprise Officer
EO Executive Officer
FAVP First Assistant Vice President
AVP Assistant Vice President
SAVP Senior Assistant Vice President
LC Letter of Credit
BBLC Back to Back Letter of Credit
TR Trust Receipt
HPSM Higher Purchase Sherkatul Melk
MTDR Mudaraba Term Deposit Receipt
TIN Tax Identification Number
IRC Import Registration Certificate
ERC Export Registration Certificate
SMA Special Mentioned Account
DF Doubtful
BL Bad Loan
RR Recovery Rate
SS Sub Standard
NBFIs Non Bank Financial Institutions
DSE Dhaka Stock Exchange
CSE Chittagong Stock Exchange
CIB Credit Information Bureau
A/Cs Accounts
CRAB Credit Rating Agency of Bangladesh
MPI Murabaha Post Import
SMEF Small & Medium Enterprise Foundation