BRAC Bank plans to become a complete financial partner for cottage, micro, small and medium enterprises (CMSMEs) with technology-driven innovative products to make them more vibrant amid the persisting economic slowdown.
As part of the strategy, the country's most SME-focused commercial bank recently launched a unique campaign titled "SME Means BRAC Bank" that offers the lowest-ever lending rate in Bangladesh's CMSME financing sector.
Syed Abdul Momen, additional managing director and head of SME banking at BRAC Bank, shared the lender's current and future financing plan for CMSMEs in an exclusive interview with The Financial Express recently.
He said the economic activities had slowed down significantly in recent months because of plummeting credit demand, and CMSMEs had also been suffering under such sluggishness.
Syed Abdul Momen
"We launched the SME Means BRAC Bank campaign with the prime objective of making CMSMEs vibrant. With this campaign, we will claim the bank's leadership in CMSME financing," he said.
The seasoned banker said the bank would not just make the claim through publicity in dailies and social media platforms but would establish it by financing the segment at the industry's lowest rate of 13.75 per cent.
To meet the evolving needs of entrepreneurs, the bank has also launched two dedicated solutions under the umbrella - Prabartan and BizPay.
Mr Momen said Prabartan was designed to address the funding requirements of online vendors, while BizPay was a new transaction banking platform.
Sharing the bank's CMSME experience over the years, the experienced banker said the entrepreneurs normally received the loans shortly after disbursement and transferred those to other banks, which were convenient for them, before maintaining regular transactions there.
Under BizPay, he said, the bank would provide all sorts of banking services so that entrepreneurs would not need to go to other places for their banking needs.
"In fact, we want to become a complete financial partner for CMSMEs," he said.
Talking about the unique achievements over the years in the CMSME field, Mr Momen said the bank had proved that a financial institution could make profits by investing in the highly supervised segment.
Many banks started shifting their focus to this segment by applying the successful model that BRAC Bank had initiated, he said.
"And this is our achievement. We appreciate them [other banks] because the gap between credit demand and supply is too big for our bank to address alone," he also said.
He said it was a time-consuming journey for entrepreneurs to secure financing - from handling extensive paperwork to facing multiple visits from loan officers.
Besides, he said, as part of continuing investments in cutting-edge technology to offer faster and secure banking solutions to clients, the bank had introduced a high-yielding digital intervention tool known as Electronic Loan Application Proposal (eLAP) more than a year ago.
"It saves loan processing time and cost significantly," he said.
Mr Momen said eLAP was an automated system that preserved all data of borrowers.
He also said they had planned to create an artificial intelligence-driven credit scorecard by using clients' information stored in eLAP in the coming years.
"The system will be able to approve loans without any visit to applicants," he said.
Talking about the falling loan ratio in the most vibrant segment of the economy against the banking sector's total lending, he said banks always consider CMSMEs a highly supervisory credit avenue that comes with costs.
"So, the margin of profit is comparatively low, which is probably a reason behind the banks' least focus on this area," he said.
Sharing another regulatory hurdle that banks now face in CMSME financing, he said commercial banks used to keep 0.25 per cent general provision against lending to CMSMEs and 1.0 per cent for other areas.
But the provisioning policy benefit is gone, and banks are now required to keep 1.0 per cent as general provisioning against each CMSME-segment loan.
"This will certainly discourage lenders. If we really want to ensure CMSMEs' easy access to funds, we need to give some sort of additional benefits to banks," he said.
Responding to another question, he said the late Sir Fazle Hasan Abed had established BRAC
Bank 24 years ago with an objective to give collateral-free credit to small enterprises.
"Since then, the bank has kept following his philosophy. Now, CMSMEs account for nearly half
of the bank's portfolio."
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