The Standard Measurement Of The Non Conventional Financial Services Of Southeast Bank Ltd., From The Customer’s Point Of View.
CHAPTER ONE: Orientation To The Report Objective: The objective of this research paper has been divided into two sections. In the first section, the objective is to analyze the whole organization and the industry itself the strengths, weaknesses and opportunities and threats will be analyzed. It has provided an in depth analysis about the whole organization including its various departments and identified the existing problems. The second section of this paper is the main part or the project part, in which the report has been done. As we have chosen the topic, in the second part we will try to measure the financial services provided by Southeast Bank Ltd. Then the objectives of the study in this project will he as follow: Identifying each of the non-conventional services available at SBL in its all three departments, (1) The general banking division (2) The credit department and (3) The foreign exchange or the export import department. Explaining the overall function of all the three departments first. Describing the procedures and provisions of each of the services available At SBL. After analyzing each of those services a number of criteria’s will be procured from each of them, which will virtually express the pros & cones of each of the services as well as quality. Each of the criteria of the service will be graded in a 4 point scale and after that, the average of all the criteria’s grade point will be taken. The average grade point will be considered as the grade point of that particular financial service. In order to grade the criteria’s of each of the services, sample survey will be done by inviting the clients to fill up the sample survey forms of the particular services. Five sample clients will be taken to grade the criteria’s of each of the services. The 4.00 point scale will be divided into three categorical ranges, “standard”, “average standard” and “below standard”. After grading all of the non-conventional services, it will be found that, which service falls under which category, means “standard”, “average standard” or “below standard”. The findings of the report will be evaluated through two methods; one is observing the percentage of the “standard” or non “standard” and the other is the “t”—test method.
Formulating recommendations for the both, for the non “standard” to make them “standard” and for the “standard” to make them more “standard”. Finally giving the conclusion of the report. Scope This report has been provided a brief orientation about the organization SBL and then the project part of this report has analyzed all of the services provided by the SBL and the quality of those services has been also measured through grading by the sample clients in a 4.00 point scale. Methodology: As we tried to measure the quality of the services at SBL, then very first we required the data about the procedures and provisions of various non-conventional services of SBL. In order to get those we had to mostly rely on the secondary source of information. The secondary source was also useful for getting many of the organizational data of SBL. Among the secondary source, the annual report book, the credit operational manual, the banking manual, some report profile and instruments at the branch and I-I/O was very useful. But not all the data about the organization SBL and it’s services were found from the secondary source, then we had to rely on the primary source of information. Not only that, the main function of this report was taking the sample survey of the clients of the Bank, which was the part of the primary source of information. Through the sample survey, the clients were asked to grade the non-conventional services of SBL as well as giving their comments regarding the criteria’s of the services. The other way of primary source would be the perception and brainstorming of the writer (me) of this report, because he had to evaluate the report findings, formulate recommendations and finally had to give the conclusion of the report. CHAPTER TWO: The orientation to the organization Southeast Bank Ltd.(SBL). 2.1
The Emergence of SBL:
-A Global Context As already mentioned earlier, SBL emerged at a crucial juncture when Bangladesh was undergoing through economic reforms and trade liberalization according to the Uruguay Round Agreement. The experience of the East Asian Economies, especially South Asia has been the driving force that led to the establishment of Southeast Bank Ltd. (SBL). The company’s philosophy ‘ A Bank with Vision” has been prescribed with the essence of the legend of the Asian success.
2.1. a Economic Background: In 1995, the world economic growth rate stood at around 3%. Trade liberalization, economic reforms and prudent management of macro economic fundamentals led to the highest growth rate of around 7.5% in Asia in 1995. The free movement of capital provided the Asian economies an opportunity to accelerate growth by attracting Foreign Direct Investment (FDI). Unfortunately, the Least Developing Countries (LDC)’s of Asia like Bangladesh failed to attract the foreign investors. In 1995 there was a mixed trend in the economy due to the combined effect of Financial Sector Reform Program (FSRP), tax reforms and trade liberalization. At the same time there was a great deal of political instability and deep apprehension among the, hat jeopardized the growth rate, and investment in the country. Moreover, trade liberalization exposed the country to fierce competition and lead to closure of several local enterprises. Despite these limitations, the country achieved a GDP growth rate of 4.4% in 1995. Though inflation was low, but it had a moderate increase due to the credit expansion in the domestic economy. Under the FSRP, the financial sector has been streamlined with introduction of more reform, new regulatory measures, relaxation and other measures. These are flexible deposit and lending rate policy with in a prescribed band, replacing capital to liabilities approach in assessment of capital adequacy by linking to asset and establishment of Credit Information Bureau (CIB) for customer information. Exchange control restrictions were relaxed and Taka was made fully convertible on the current account. Therefore, considering the world economic trends and the performance of the Bangladesh economy, SBL has emerged at a crucial time when the domestic economy was being exposed to competition and liberalization. As a result, since its inception SBL has been competing against the rising foreign and local competition to establish a firm footing in the banking industry of Bangladesh 2.2
SBL At A Glance:
As already mentioned earlier, SBL was incorporated as a public limited company on March 12, 1995 and commenced banking operations on May 25, 1995. It has been incorporated with an authorized capital of Tk. 500 million and a subscribed capital of Taka 10 million. The bank has been sponsored by a group of eminent business personalities headed by Mr. M.A. Kashem as the chairman of the Board of Directors. The bank management team is lead by Mr. Sayed Anisul Haque as the CEO of the organization. He is supported by Mr. Shah M. Nurul Alam as the Deputy Managing Director (DMD) of the bank. Currently the bank has ten branches in operation located in strategic areas of the country. A list of ten branches accompanied by their addresses is listed below: 2.2.a Corporate Headquarter 1, Dilkusha C/A, Purbani Annex Building, 3rd floor, Dhaka. Branches: • Principal Branch: 1, Dilkusha C/A, Dhaka. • Imamganj’Branch: 163/2 Mitford Road, Dhaka. • Bangshal Branch: 14/3, North South Road, Dhaka.
•
Gulshan Branch: Gulshan Avenue, Dhaka. • Agrabad Branch: 59, Agrahad C/A, Chittagong. • Khatunganj’ Branch: 410-41 1, Khatunganj, Chittagong. • Jubilee Road Branch: 96, Jubilee Road, Chittagong. • Laldighirpar Branch: New Market, Laldighirpar, Sylhet. • Mouivi Bazar Branch: 124/I, Central Road, Moulvi Bazar. • Khulna Branch: Khulna. • Dhanmondi Branch Dhanmondi • Kawran Bazar Branch • Uttara Branch • Mirpur Branch 2.2.1, Notes To The Accounts: Legal Name: Southeast Bank Ltd. Address: Corporate Headquarter 1, Dilkusha C/A, Dhaka-1000. Phone : PABX 95500S1-5 Fax~ 880-2- 9550093 Email: seastbk@citecho.net Type of Business: Commercial Banking Date of incorporation: March 12, 1995 Date of commencement: May 25, 1995 List of all Facilities: Refer list of branches Status of company: Public limited company. (IPO to be issued) Authorized capital: Tk. 500 million Paid up capital: Tk. 200 million Subscribed capital: Tk. 1 00 million. Financial Adviser: A. K. M. Gaffar Auditor: M. J. Abedin & Co. Chartered Accountants Karim Chamber, 99, Motijheel C/A, Dhaka Company Secretary: A.K. Qureshi
2.3 List Of Executives And Officers With Hierarchy At SBL: SBL has a total number of 358 employees which includes both officers and staffs in its headquarters and ten-branch countrywide. The lists of officers with their designations are given below: Name Of The Designation In Number • President & Managing Director 1 • Deputy Managing Director1 • Senior Executive Vice President1 • Executive Vice PresidentCurrently Vacant • Senior Vice President4 • Vice President 7 • First Vice President 1 • Asst. Vice President11 • First Asst. Vice President- 6 • Staff Officer17 • Senior Executive Officer- 24 • Executive officer- 6 • In Probation 20 • Officer15 • Junior Officer 8 • Asst. Officer 35 • Trainee Asst. Officer20 Support Management Staffs • • • • • • • •
Assistant Apprentice Assistant System Operator Computer Operator Telex Operator Receptionist Organizational Support Staff (Messenger) Security guard
Cash Department : • Head teller • Teller. Grade 1,2, 3 • Teller Apprentice 2.3.a Organizational Layout of SBL: The Corporate Headquarter of Southeast Bank has nine major divisions and each comprising of various departments. The major divisions in the headquarter are as follows: • • • • •
Credit Services Division Credit Administration Financial Control & Electronic Data Processing Marketing General Services
• • • • •
Human Resource Development Research & Development Branches Control Division International Division Company Secretary’s wing
2.3.b Branch level organizational layout: The ten branches of SBL have the type of organizational structure. Each branch has three departments namely: • General Banking • Credit Department • Trade Finance (Foreign Exchange) Functions of branch level departments: As already mentioned earlier, the branches of SBL have three departments. The functions and activities of these branch level departments are discussed below: •
General Banking:
This department is the retail department of the bank that provides personal services to the retail customers. Major services provided in this department are deposits and withdrawals, remittance of foreign and local currencies, new account openings, purchase of foreign currencies, and purchase of various types of savings scheme such as Pension Savings Scheme, Paribarik Shanchay Patra (Family Savings Scheme) and selling of other Government savings bonds or certificates. The head of the General banking division is the Operations Manager who looks after the whole department as well as the bank. The cash wing, which is headed by a head teller, is also under the Jurisdiction of the General Banking Department. • Credit Department This is yet another key department in the branches particularly in the major or active branches. This department provides all sorts of credit facilities to the customers of the bank. As already mentioned earlier, services are only provided to the account holdets of SBL. The major services of the Credit Department includes providing Overdraft Facilities, Work order contract loans, time loan, term loan, project finance, Syndicated loan, Consumer Credit Scheme, Bank Guarantee and other services. The head of this wing is the Credit In-charge, who is responsible for the functioning of this department. He is in turn assisted by staff officers, Senior Executive Officers (SEO)’s and Probationary Officers. • Foreign Exchange: Though the name sounds buying and selling of foreign currencies, but actually it is the trade finance department of the branch. This department provides services regarding financing of international trade to its customers. Financing can be in terms of both funded or nun funded facilities. Major types of services include financing of Letter of Credit, (non funded), Bills against Letter of Credit (BLC), Loan against Trust Receipt (LTR), Loan against imported Good (LJM) and other services. This is another major department that earns a lot of revenue for a bank. The trade finance department is headed by the Foreign Exchange In-charge who is responsible for the proper functioning of the bank. He is in turn assisted by other officials of the department.
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Office of the Head of the Branch:
This is not a department but this is the office of the top executive of a branch. The HOB is the chief officer of the branch and is responsible for the whole activities of the branch. 2.3. c Information on key Employees: The top management of SBL is comprised of group of eminent bankers with strong skills and proven track record of professional management. The top management who are associated with founding of the bank and involved during the inception process played a crucial role toward the establishment of the bank. Under their dynamic leadership and efficient management SBL has already established a firm footing in the financial sector of Bangladesh particularly among the new comer banks of 1995. The president and Managing Director of the bank, Mr. Sayed Anisul Haque, is a career banker and have an excellent reputation in the banking sector of Bangladesh. He was previously associated with AB Bank where he served as the Executive Vice President (EVP). He joined SBL since its inception and has been leading the organization with great competence. Under his dynamic and able leadership, SBL has achieved remarkable success and he is directing the path of SBL as it embarks in to the new millenium. Another top executive of the organization is Mr. Shah M. Nurul Alam, Deputy Managing Director of SBL. He has also earned excellent reputation in the banking field of Bangladesh and enjoys a proven track record of excellent managerial skill. He was previously associated with AD bank and joined SBL since its inception as Senior Executive Vice President (SEVP) and very recently he has been promoted to the office of the DMD. The other key executives like SEVP, SVP’S, and VP’s come from different banks with a pool of various managerial and banking skills each contributing toward the growth and development of the organization. The top executives come from various banks such as AB Bank, BCCI, Uttara, Al- Baraka, Mahreq Bank, NCCBL and other leading banks of the country. 2.3. d Human Resources Policies and Practices: • Recruitment and Employee Benefits: The service rule of SBL states the recruitment policy of the bank. In general, the Board of Directors determines the recruitment policy of the bank from time to time. The minimum entry-level qualification for any official position other than supportive management is a Bachelors degree. However, informally the management prefers a minimum of master’s degree for the appointment of probationary officers in the Executive Officer position. Employees who are appointed in the entry level positions and having no prior banking experience and selected through direct recruitment are put under a two years probationary period. However, there has been some recent changes In the policy regarding the recruitment of probationary officers. According to the revised policy, the probationary period for MBA’s would be six months, BBA’s would be one year and all other discipline holders would have a probation period of two years. I revised recruitment policy is a part of the organization’s plan to recruit more MBA giving preference to MBA in order to build up a management team comprising competent MBA’s to lead the organization in future. After a successful completion of the probationary period, a probationary officer is eligible for job absorption
and is confirmed to the designation for which he or she applied. During the time of confirmation, the employees records are scrutinized and the direct supervising officer prepares a report of performance appraisal and it is sent to the competent authority for decision and approval. • Recruitment Process: The recruitment for entry level positions begin with a formal written test which is conducted and supervised by the Institute of Business Administration (IBA), University of Dhaka. The written test is very close to the Graduate Management Admission test (GMAT) and in addition to this, it also comprises of analytical and descriptive type questions. After successful completion of the written test, a personal interview is conducted for the successful candidates by a panel of experts comprising of renowned bureaucrats and prominent bankers of the country. 2.3.e Employee benefits and Facilities: • Provident fund: According to the service rule of the hank, all permanent and confirmed employees of the bank automatically become contributors of the company’s provident fund. Each employee contributes a fund that is equal to 10% of the basic salary. The bank shall contribute to the fund monthly an amount equal to the contribution of each member. •
Superannuating Fund: Death/Survival Benefit:
The death cum survival benefit will be allowed to the employees of the bank on their nominees or legal heirs under the following hierarchical positions of the employees. •
Festival Bonus:
All regular employees of the bank including the probationary officers and temporary officers are entitled to festival bonus for Eid ul Fitr and Eld ul Azha. •
Incentive Bonus:
The Board of Directors of SBL at its discretion may decide to provide incentive bonus to the employees depending upon the profitability of the bank. All regular officers including the probationary officers and temporary officers will be entitled to the incentive bonus on daily bonus proportionately. Bonuses will not be entitled for the employees who have resigned or placed upon suspension or on disciplinary action. •
Honorarium:
An employee will be paid honorarium @ Tk. 5000 and Tk. 7500 for passing the Banking Diploma Part One and Part Two examinations respectively. •
Staff Loan:
For enhancing the quality of life for the SBL executives, the management provides a staff loan to its executives ranking from FAVP. Under the staff loan scheme, car loans are
provided to bank executive at a favorable rate, A staff house-building loan is also under the scheme but not implemented yet as stated in the service rule. •
Risk Allowance:
Employee’s working in the bank’s cash department as Head Teller, Teller and Teller trainee shall be allowed a risk allowance @ Tk. 1000 for Plead Teller, Tk. 750 for the senior Teller and Tk. 500 for Teller and Teller and Teller Trainees only per month in consideration of the risk factor involved in handling cash. •
Gash Incentive:
As a part of being company’s program in being a part of employee’s personal life and making a positive contribution, the management has decided to provide a cash bonus of Tk. 15000 to the employees who are expecting a child. The cash bonuses will he provided only for two children. • Employee Vacations/ Paid Holidays: There are several types of paid vacations that are offered by the management for the employees: • Casual Leave: A casual leave is a leave of absence for a very short period of time that may be unable to attend office during such period due to urgent private matters or sudden illness. An employee will be entitled to enjoy a casual leave often days in a given year. •
Privilege Leave:
Every employee shall earn a privilege leave on full pay after completion of one year service ~ 1/13 Th period spent on duty i.e. I day for every 13 days of duty. A maximum of 180 days privilege leave can be accumulated. • Sick Leave: An employee shall be entitled to enjoy the sick leave up to a maximum of 14 days in a given year. The leave can be availed only on submission of required medical documents. • Quarantine Leave: Quarantine leave may be granted by the competent authority for not attending office for a period of 10- 15 days on recommendation of a qualified practitioner. •
Maternity Leave:
The female employees of the bank are entitled to a maternity leave for period of six weeks at a time including pre-natal and post-natal with full salary & other benefits.
• Extra Ordinary Leave: Extra Ordinary leave can only be granted to an employee when no other leave is admissible. The duration of extra ordinary leave shall be regulated so that the period of total leave does not exceed 360 days. •
Gratuity:
The Board of Directors shall grant gratuity to an employee of the bank and in the event of his/ her death while in service of the bank to his/her nominee or legal heirs. The eligibility for gratuity to an employee will depend on the service records and if the management considers his/her service to be good, efficient, sincere and faithful.’ All employees who have completed a minimum service of five years with the bank will be entitled to one month’s basic salary for each completed year of service to be calculated upon last pay drawn immediately proceeding the date of his/her ceasing to be in the service of the bank. • Social Functions & Recreations: The management of SBL arranges various types of social functions for recreation purposes of the employees and their family members. Major social functions include Annual Picnic, river Cruise, Cricket match with major corporate clients and other events. These programs are chalked out to create a healthy relationship among the employees as well as with the top management. It also adds a new flavor and dynamism to the existing day to day banking life of an employee. •
Buildings:
The corporate headquarter and the Principal Branch are located at 1, Dilkusha C/A, Purbani Annex Building, Dhaka. The Principal Branch which has a floor area of approximately 5000 square feet and has two floors. The rent for the principal branch is Tk. 1,16,010 per month. The first floor of the branch houses the Retail banking facilities of the bank. Over here, the cash counters, account-opening booth, foreign and local remittance section, savings scheme section and the computer division are located. It also houses the Office of the Operations Manager who heads the General Banking Department. In the retail section, there are four counters and one exclusively for Grameen Phone Bill collection. The re is also a strong room where the volt is located. At the same time, there is also a storeroom used for the storage of important documents. The second floor of the branch accommodates the Credit Department Foreign Exchange Department, Accounts, Clearing and Guarantee sections. The second floor also accommodates the Office of the Plead of the Branch (HOB). As already mentioned earlier, SBLts Principal Branch is the main branch of the organization and considered to be the busiest branch of SBL. As it is located in the downtown of the city, the Principal Branch of the bank has now become the huh of all sorts of commercial activities. In this branch, during the peak hours, the retail counters can usually accommodate approximately fifty customers at a comfortable pace. However, during the extreme rush hours, particularly when the time for Grameen Phone bill collection arrives, the whole retail area gets crowded and the queue of customers even gets out of the of lice and extends as Fir as the main gate of Purbani Hotel. However, there are several drawbacks involved in the facilities and layout of the Principal Branch of SBL. First of all, it was not a wise decision to
choose the present site as the location for Principal Branch. It is wide]y known that the Principal Branch is the main branch of a bank and therefore it is always the busiest branch of any bank. Therefore, the Principal Branch should always be spacious and have adequate space for expansion. At the present site of SBL’s Principal branch, the office is heavily crowded. There is no space for seating arrangements. Most important is that there is a severe shortage of storage facilities as the existing storeroom is not sufficient for storage of bank goods and documents. As a result, things are piled up in trunks and put in front at the second floor. This tarnishes the outlook and view of the branch. It is expected that the branch will become busier in the coming days and in the next five years if things does not change Principal Branch of SBL would look no better than the traditional banks of the country. Therefore the management choice in establishing the Principal branch here was not correct and very soon the branch has to move from its present site, as it will not be able to take the load. The situation is also similar at the Head Office. It also lacks adequate space and storage facilities. The head office is over crowded and very small space for making seating arrangements. As the bank is expanding, the current floor space at the head office is getting extremely inadequate and immediately requires expansion. 2.4
Products Of SBL:
Being a new bank, SBL provides a variety of services to its customers. Throughout its three major departments in the branches, there are several services that are offered to the customers. The major services of the bank are listed below: 2.4.a Funded services: • • • • • • • • • •
Cash Credit Over Draft Time Loan Term Loan Export Cash Credit Real Estate Loans Syndicated Loans! Project Loans Consumer Credit Scheme Bills under Letter of Credit Loan against Trust Receipt
2.4. Non funded services: • •
Guarantee Acceptances
2.4.c Fund Generating Services. • • • • •
Current Deposits Savings Deposits Fixed Deposits Short Term Deposits Dearer Certificate Deposits
2.4. d Commission based services: • • • • • •
Domestic Bill collection Foreign Bills Purchase Remittances Pay order Foreign Exchange transaction Demand draft Seasonality:
Like all other industries, the banking sector of Bangladesh is also under the grip of seasonally factors. Similarly, SBL also have some Seasonality trends that affect the banking operations. According to competent sources of the bank, the seasonal characteristics of the banking services depend upon several festivals of the country. There is a tremendous withdrawal spree by the depositors during the Eid ul Fitre and the Eld ul Azha since during this time general people need cash in hand to purchase various commodities, payment of Zakat and buying of sacrificial animals. Therefore both small and medium depositors withdraw certain amount of money during the two religious festivals. Banks are also under tremendous pressure during the pre-Eid days and many banks borrow money from other banks or other branches as cal] money loan to finance any short fall in the cash reserves in order to honor the depositors claim. Another major seasonal characteristics is the annual closing of 3 I’ December. Each year during the annual closing there are some withdrawal sprees as many depositories withdraw cash to meet personal or financial requirements. During this time banks have to deal with the withdrawal spree and many banks practice “Window Dressing” by showing fictions deposits. On the other hand, there are some inflows of deposits during the annual closings. Bank officials’ frantically try to attract deposits in order to meet the stipulated targets. Therefore bank officials try to attract various depositors with lucrative offers and services. 2.5
External Factors That Affect SBL:
There are several factors that affect the product pricing strategy of any bank. These factors are mainly external factors, which has to be taken in to consideration while designing the pricing strategy. Some of the external factors that affect the pricing strategy of SBL are discussed below: 2. 5.a Bangladesh Rank policies and circulars: Like all other countries, the banking services are guided and regulated by the Central bank. Similarly, the guidelines and instructions of Bangladesh Bank heavily influence SBL’s pricing strategies. Bangladesh Bank determines the band for interest rate variation for both lending and deposits. The commercial banks operate with in the stipulated hand of interest rate as prescribed by Bangladesh bank. Therefore, SBL can not charge any absorbitant interest for its depositors and borrowers. 2. 5. h Credibility and Customer—Bank Relationship: This is another important pricing factor in designing the pricing strategies of the bank. Although, there are some prescribed policies on interest rates set by the Bangladesh Bank and as well as by the SBL management, but in practice the bank can charge various interest rates to its different types of clients. This depends upon the credibility of the client and the bank-
customer relationship. If the customer has a good credit report and maintains a good banking transaction with the bank, then that customer would get a favorable interest rate from the bank. This particularly happens with the corporate clients of SBL. The different types of corporate clients are getting different types of interest rate depending upon there past performance and credibility. This is practiced in order to survive in this tremendous era of competition and so it is very important to attract and retain the corporate clients. Many corporate clients of the top 20 customers of SBL are provided this preferential rate. 2.5.c Macro Economic Conditions: The financial institutions are always heavily influenced by the macro economic conditions both globally, regionally or locally. The key macro economic indicators like GDP growth rate, inflation, industrial growth rate, expansion of trade and commerce and other factors affect the operations and the pricing strategy of the bank. SBL, since its inception has achieved a steady growth rate. However the present economic downturn or recession is affecting SBL’s operations. The country is now under a deep recession having a major decline in industrial growth rate, galloping inflationary pressure, decline in international trade with export targets for the fiscal year yet to be achieved and other factors will eventually affect SBL and other banks pricing strategies. Many banks will have to revise the interest rate structure for its various services in order to cope with economic slowdown. However, first quarter results for SBL’s Principal Branch is quite satisfactory as they have surpassed their stipulated targets despite the economic sluggishness going on in the country. 2.6
The Product wise Breakdown Of SBL:
The consolidated statement of affairs or the Balance Sheet of SBL reveals important information regarding the breakdown or product wise classification in the sales of composition. The most recent available data as on 3 1 st December provides the following breakdowns: •
Deposit composition:
Demand Deposits: Tk. 591, 814, 954.03 Savings Deposits: Tk. 275,739,578.65 Time Deposits: Tk. 2,493,721,004.86 •
Loans & Advances:
Time Loan: Tk. 354,198,962 Term Loan: Tk.408, 594,395 Consumer Credit Scheme: Tk. 59,539,390 Over Draft: Tk. 1,041,346,046 BLC: Tk. 342, 460, 699 LJM: Tk. 2,988,891 LTR: Tk. 384,606,162 Staff Loan: Tk. 4,160,700.99
•
Non - Funded Facilities:
Guarantee:
Tk. 319,325,552
L/C Import: Tk. 847,449,011 L/C Export: Tk. 32,963,412,34 2.6. a Product Coverage Areas: The various type of SBL products include providing General Banking services to various types of customers, credit facilities such as Term! Time loan, Working capital financing, Industrial financing, Trade finance, Consumer Credit scheme and other services. It should be mentioned that SBL does not provide ant services in the financing of agri products. 2.6.b Sales Method: It has been mentioned earlier that SBL pursues a selective banking strategy in its process of carrying out banking operations. An individual without having an account in the SBL is not provided any banking services. At the same time there must be an introducer from the bank before opening an account. Deposits are attracted to the bank through a process called “Deposit Hunting”. The officers of the bank are sent to different clients as well as individual clients through their own network or channels. As far as the loans and advances are concerned, SBL also pursues a selective banking strategy. They are not offering their services to a wide ran2e of C½Storn.ers In fact. unofficially every one not able to SBL’s loans and advances. A majority of the loans and advances have accessible to SBL’s loan and advances. A majority of loans and advances have been provided with in a group of customers who are sonic how related or known to the sponsors or the top executives and senior bank officials. In this way they try to make their portfolio secure and make it easier for them to recover the loan from the client as he or she is known well to the management. Therefore, SBL’s selling strategy is quite conservative and in ward looking and services are only provided to the clients chosen on a selective basis. In fact most of the top-notch corporate clients of SBL has been brought to this organization trough the network of the sponsors and the top management. However, the problem is that as they bank is expanding, this type of conservative selling strategy might not work in attracting the required number of clients to the bank. 2.6. c Sales Incentive Program : Since SBL does not have a separate wing of sales department, the officers of the bank have to directly sell their services to the customers. There is no prescribed set of policy about the sales incentive at SBL. However, officers are motivated to attract depositors and borrowers to the bank and this is recorded in the appraisal or personal record of the employee, which in turn adds a positive attribute of the employee to the management. In the future, it is expected that the concerned officer may have a better chance of career progression and development in the organization. 2.6. d Advertising & Sales Promotion: This is one of the weakest areas at SBL where the management does not put much emphasis on it. SBL does not pursue an aggressive marketing
and advertising campaign, which would bring the organization to the limelight. Rather, the management maintains a low profile about the organization and preferring to consolidate position. Therefore, other than opening new branches, SBL does not run any commercials in any of the media] of Bangladesh. Currently, SBL has only one attractive billboard in the city at the Farm Gate over bridge. This neon sign has greatly exposed the bank to the general public and many people are now aware about this organization. However, this is not enough. Another indirect method of public relations or promotion is the branch manager’s conference of SBL. Though officially it is a program where the top management get in touch with the branch managers located through out the country. This acts as a major forum for interaction between the top management and the branch managers. However, the outcome of the branch managers conference is published in various newspapers and this a!so acts a as a promotional tool for the bank. SBL does not have any frequent publicity releases and they don’t promote their image with the advertising platform ‘ A Bank with Vision”. 2.6. e Legal aspects affecting Southeast Bank: As already mentioned earlier, SBL commenced its operations on May 25, 1995 as a scheduled bank as licensed by the Bangladesh bank. The bank was incorporated with an authorized capital of Tk. 500 million, paid d up capital of Tk. 200 million and an issued capital of Tk. 100 million. A breakdown of the shareholders indicate that there are 32 shareholders or subscribers holding ten Lac shares worth Tk. 100 each amounting to a subscribed capital of Tk. 1 00 million. The main sponsors of the bank are: (Sponsors and their family members own fifty percent of the stock) • Mr. M . A. Kashem • Mr. Azimuddin Ahmed • Mr. Yusuf Abdullah Haroon • Mr. Md. Abu Tayub • Mr. Mashiur Rahman Salient Features Of The Memorandum Of Articles: 2.7
Minimum Period Of Holding Shares:
According to the articles of association of SBL, the members of the sponsor group are not entitled to transfer share held by them in the company for a period of not less than three years from the date of commencement of business. 2. 7.a Voting Rights: The voting rights of the shareholders are strictly proportional to the number of shares held by them respectively subject to the provision of section 144 of the Banking Companies Act or any amendment as may be made from time to time.
2. 7.h Qualifications for the position of CEO: The President and Managing Director of the organization as the CEO of the bank who shall be appointed by the board of Directors with the prior approval of Bangladesh bank. The CEO shall be in office for a term not more than five years and may be extended from time to time. During this period the Board of Directors can replace or remove the CEO. 2. 7.c State Law Affecting Banking Operation: It has been mentioned earlier that the banking industry is one of the most highly regulated industries particularly in Bangladesh. Some of the major legal considerations affecting the banking operations in Bangladesh are discussed below. 2.8
The Bank Companies Act. 1991
This act which has been revised up to May 1997 covers the major areas of establishing, operating, directing and winding up a bank. The major features of the Bank Companies Act are: > A banking company shall have a paid up capital nit less than Taka Twenty Crores or six percent of the total demand and time liabilities of the bank. > No Banking company incorporated in Bangladesh will be allowed to. commence business unless it satisfies that the subscribed capital of the company is not less than one half of the authorized capital and that the paid up capital is not less than one half of the subscribed capital. > The capital of the company should consist of ordinary shares only. > The voting rights of the shareholders are strictly proportionate to the contribution made by the individual. > Other than new banks or specialized banks, every banking comp-any must take the prior approval of Bangladesh Bank before appointing the CEO and the Adviser and shall not be dismissed or released before the prior approval of Bangladesh bank. > The position of the CEO can not be left vacant for more than three months. If the company falls to appoint a CEO with in three months, Bangladesh Bank may appoint an administrator for discharging the duties of the bank. > Every banking companies incorporated in Bangladesh shall create a reserve fund. > A banking company shall not form any subsidiary company except for the purposes mentioned in the act. > No banking company will be allowed to make loans and advances against the security of its own shares or grant unsecured loans or advances on the guarantee of the directors or family members of the directors. > Bangladesh Bank may give directions to banking companies in matters of credit ceilings, minimum ratio of small loans, purpose and limit of advances and the rate of interest. > No banking company will be allowed to operate unless it obtains a license from Bangladesh bank > Bangladesh hank has the power to remove the Chairman, directors and the CEO of a bank. > Bangladesh bank has the power to supersede the decisions and activities of the Board of Directors of the bank
> In case of winding up of Business, the High Court Division of the Supreme Court may apply to Bangladesh Bank for the imposing moratorium on business. 2.8.a The Negotiable Instruments Act 1881 (as ,modified up to June 1994) The Negotiable Instruments Act or the NI Act governs various aspects and exchange of negotiable instrument in Bangladesh. This law sets different provisions and regulates transactions of instruments, promissory notes, bill of exchange and others. The act sets rules regarding writing down and presentation of checks, delivery and negotiation by endorsement. It also sets guidelines of presenting negotiable instrument, payment and interest, discharging liability on notes, bills and checks through cancellation, release and payment. Another key feature is how to dishonor by non-acceptance and non-payment and who and how the notice should be given. How the acceptance and payment for honor is made and rules for compensation is also mentioned in the act. Special provisions of check regarding crossing, account payee, special crossing and other relevant issues are discussed. 2.8. h Uniform Customs and Practice for Documentary Credit (UCPDC 500) The UCPDC 500, which has been prescribed by the International Chambers of Commerce (ICC), will apply to all documentary credits and will be binding on all the parties. This law deals with the whole gamut of International Trade Finance. It states the different types of credit, which can be classified in to revocable and irrevocable. It also states the liability of the issuing, advising and the confirming bank as well as revocation of a credit. The law also sets a standard for examination of documents in international trade and how to examine them and how to detect discrepancy. It states the bank to bank reimbursement arrangements. The transport documents in different types of mode of transport are also stated in the law. The law specifies required documents for sea, land and air transport. The provisions of clean transport documents are also mentioned in the regulations. 2. S.c Foreign Exchange_ Regulations Act 1994 This act regulates the exchange of foreign currencies, remittances and opening of foreign currency account under various classifications. According to this law, FC Accounts can be opened without initial deposits and bears no interest and both the account holder or the nominee can operate the account. The entire remittance from abroad is free from income tax. It also states the documents required for the opening of such accounts. Other guidelines enumerated are regulations regarding Residence Foreign Currency Deposit Account, Exporters Foreign Currency Deposit accounts, Non resident foreign currency account and others. It also sets out regulations regarding inward remittance, telegraphic transfer, foreign demand draft, and issue of cash or traveler’s checks. Finally, recent incentives provided are also mentioned in the act.
2.8. d Artha Rin Adalat Act 1990 One important legal framework in order to create a positive impact on loan portfolio management is the Artha Rin Adalat Act. This law has made banks viable and balance the rights of banks to foreclose on collateral with the rights of individuals and firms so that debts can be recovered in a timely manner. Prior to this law, banks had to file cases in sub judge courts, commercial courts and others which was found to be quite inadequate in the rapidly changing environment of the financial world. With the establishment of Artha Rin Adalat (Financial Debt Court), it is expected that there will he speedy disposal of money suits. 2.8.e Bankruptcy Act 1997 The banks and other financial institutions of this country have for a long time been urging for passing of a Bankruptcy Act to deal with their claims expeditiously. This act has already been passed by the parliament and will introduce procedure for corporate restructuring that go beyond liquidation like the bankruptcy act of industrially developed countries. 2.9
Macro Environment Scanning(MES):
It is very important to carry out a macro environment scanning for the banking industry in order to identify and analyze the external factor that affect the growth and development of the banking sector in Bangladesh. A through analysis of the macro environment in which the banks operate will allow the banks to develop pro-active strategies and navigate the organization in the turbulent ocean of competition 29. a Political & legal: •
Trade liberalization:
After the political changeover in 1975, Bangladesh have been going through successive trade liberalization and economic deregulation. In the mid eighties Bangladesh launched the Structural Adjustment program (SAP) under the prescriptions of World Bank and the IMP to cut down the twin deficits i.e. trade and budget deficits. From the early nineties the national financial sector has been going through a reform process under the Financial Sector Reform Program (FSRP) that focused on streamlining the NCB’S, DFI’s and the local PCB’S. Under the FSRP, new policies, regulations and relaxation have been introduced for healthy operations of the financial sector. FSRP has introduced Lending Risk Analysis (LRA) that analyzes the credit risk of the borrower. Under FSRP, Credit Information Bureau (CIB) has been established at the Bangladesh Bank where financial information of all the borrowers above Tk I million is recorded. Moreover, credit exposure matrix has been created where banks send reports to CIB of credit facilities to clients above Tk. l million. Thus CIB has become a major source of database. Apart from FSRP, the financial sector is still going through reforms. Under the latest World Bank recommendation the banking Division of the Ministry of Finance is being abolished a step further in providing autonomy to Bangladesh Bank. The emergence of SBL and other contemporary banks and the arrival of the foreign banks are all due to the on going reforms in the financial sector of Bangladesh.
•
Changes in the legal system:
For smoother operation of the financial institutions, the country’s legal system is also being modified in order to cope with the need of the rapidly changing environment of the banking sector. New laws are being established such as the Bank Companies Act which has been made exclusively for the operation and establishment of bank companies. The introductions of the Artha Rin Adalat Act and the bankruptcy Act are also recent changes that are have been made in the legal system that affects the operation of the banks. It is expected that these changes would expedite the process of loan recovery and at the same time lead to a speedy disposal of money suits filed by various banks. •
International Trade:
As Bangladesh is experiencing both unilateral and multilat3crlal trade liberalization under the Uruguay Round, the country’s trade barriers are gradually being eliminated. According the trade deal of WTO, trade harriers will have to be eliminated by the year 2005. As the economy is opening up, the volume of international trade has greatly increased the influx of foreign commodities and the export of Bangladeshi goods have greatly expanded the volume of international trade. The banking sector is being heavily influenced by the growth of foreign trade. New private banks are emerging and are actively involved in trade finance and earning a lot of revenue through Letter of Credit. •
Energy sector:
With the advent of the present government, the energy sector of Bangladesh is booming and expanding rapidly. The oil, gas and mineral resources of the country has attracted worldwide corporate giants like Mobil, Shell, Cairn and others to invest in Bangladesh. Energy sector has now become a thrust sector for attracting FDI. The present situation in the energy sector has attracted several multinational banks to start operations in Bangladesh in order to grab the lucrative market. The foreign banks are providing assistance to these corporate giants as they gain the contracts of exploration of gas and mineral resources. It is expected that foreign banks will arrive in future due to the growth of the energy sector. •
Unionization:
This problem has two-sided impact in Bangladesh. The political parties under the severe grip of illegal trade unionism back the NCB’s. As result, the productivity or output is declining rapidly in the NCB’S. The’ country’s Central Bank is also under the grip of trade unions. However, the PCB’s and the FCB’s are free from trade unions, as they are not allowed to operate. As a result, level of service and productivity is much higher in the PCB’s and the FCB’S. Therefore the private sectors as well as foreign banks are free from the threat of trade unions. 2.9.h Economic Forces: This is another major external factor that affects the growth and development of the banking sector. Some of the major issues are discussed below.
•
GDP Growth Rate:
This is the major indicator of the country’s economic performance and has a direct impact on the financial institutions. Currently according to ADB, GDP growth rate is around 5.7%. A steady growth rate with continues market oriented reforms will contribute positively by expanding the volume of business and profitability of the bank. In an economy, a steady growth means there will be more investment, savings and consumption in the economy. As result banks also get more deposits and more projects for credit disbursement. •
Inflation:
This is yet another important economic force that can influence the banking sector. Currently, in Bangladesh Inflation is in an increasing trend and if is this trend continues then it may cause problems for the financial institutions in future. •
Fiscal and Monetary Policy:
These are the two major important policies of the government that have a direct impact on the financial institutions of a country. Depending upon various uses the GOB designs its fiscal and monetary policies. If inflation is in an increasing trend, GOB may squeeze the money supply in the market through a contractionary monetary policy. Credit crunching is a process by which the GOB restricts credit expansion by the bank. GOB may also borrow from the banks selling treasury bills to finance fiscal deficit. Therefore, the banking sector is heavily influenced by the country’s fiscal and monetary policies. 2.9.c Social Forces: •
Customer Attitude:
As banks are service-oriented organizations, they always have to consider the attitude of the customer. The people particularly in the urban areas no longer like traditional banking. The urban customers want innovative and quality service from the bank where the “speed7’ of the service is the primary concern. Customers now want a speedy service accompanied by attractive and well decorated impressive branches with customer friendly officers providing tailor made services to the customers. The up coming private branches like SBL, Dhaka Bank Ltd. and Dutch Bangla Bank have now established impressive branches which are compatible to FCB’s in order to attract customers. SBL’s impressive Gulshan branch has already earned a reputation for the hank and has attracted lots of potential customers in the posh Gulshan area. > Customer taste and Psychology : Previously banks were only considered when people wanted to make deposits or go for commercial loans. But now the scenario is gradually changing. People are now asking for credit facilities for the purchase of consumer durable. In order to match with the customer needs, banks are also increasing their retail products such as ANZ’s SYFANZ, PLANZ and other services.
>
Technological Forces:
There have been tremendous changes that affect the financial institutions of the country. As a part of providing quality and speedy service to customers, banks need to be equipped with the state of the art technology in order to compete in this dynamic and competitive industry. Some of the recent technological advancements are: >
On line banking operations:
The multinational banks in Bangladesh have already installed on line banking operations system. Under this system, a customer doesn’t need to go to a particular branch for carrying out his or her transactions but rather can go to any branches of the bank and carry out transactions. Some private banks such as Prime Bank has installed on line banking operations with in the city. >
VSAT:
Use of satellite technology is commonly used for speedy service and instant fund transfer locally and globally. Multinational banks such as Standard Chartered, ANZ have established their own VSAT through which they can go for both global and local fund transfers instantly. This greatly enhances the quality of the service of the bank. > Tele Banking and ATM. These are the most widely used technological advancements used in the western countries as well as in the multinational banks in Bangladesh. Through a Tele banking, a customer can check balances and transact through the telephone. ATM is yet another major breakthrough where a customer doesn’t need to go to a bank for withdrawal or deposits. Non bank ATMs have been launched by Standard Chartered in Bangladesh and ANZ is soon about to launch ATM. This will enable the customers to avoid the hassle of going to a bank. 2.10
Industry Analysis:
2.10. a Threat of new Entrant. In every industry, there is a threat of new entry, which varies according to industry. Similarly, the banking sector of Bangladesh also faces the threat of new entrants. However, the threat comes from two directions. The first threat comes with the arrival of the multinational banks and their branch expansion particularly due to the booming energy sector. Another threat comes from the emergence of new private commercial banks. For example, the emergence of SBL, Dhaka Bank & others, the country’s traditional banks are facing the threat of further competition and better quality service. Similarly, the potential banks that may emerge in the next few years will further enhance the intensity of competition and may pose further threat to the existing banks. At the same time, arrival of the foreign banks is posing threat and pressure on the existing banks. Moreover, new deposit creation is very low due to the current slowdown in the economy. As a result further emergence of local and foreign banks will lead to a massive ‘deposit hunting” competition.
2.10. High Growth in the industry: The rivalry among the competitors and the growth in the industry depends upon the intensity of competition. If the industry has a high intensity of competition then the industry will have a high growth rate, as all the firms will try to beat the others in ord4er to grab the market share. Similarly, the banking sector of Bangladesh is growing considerably and at the same time competition is increasing. For example, Standard Chartered first launches the ATM in Bangladesh. Now after some time, ANZ is also about to launch their ATM service. At the same time credit other banks will also launch cards after the success of ANZ cards. 2.10. c High Strategic stakes: High strategic stakes is an important factor that determines the rivalry of competition. If a company introduces a new product line, then it has to reorganize the whole organizational structure, policies and procedures. For example, ANZ was the first one to launch credit cards in Bangladesh. They had to open a separate division for it. After their success, now other banks are also in the process of introducing credit cards. It is expected that Standard Chartered will soon launch credit cards and Prime Bank is also considering introducing credit cards. Therefore, there are strategic risks for the innovative company in the banking industry. 2.10. d Bargaining power of the customers: In the banking sector of Bangladesh, customers have a strong bargaining power. Since there are a large number of commercial banks providing similar services, customers have a wide range of options in deciding where to bank. They can either go for the FCB’s or turn to new PCB’s for getting quality service. Others may also consider the NCB’s for large credit facilities. Therefore banks have to pursue the customers with attractive interest rates and provide them with tailor made customized services in order to attract the customers or hunt depositors. 210.e Bangladesh Banking Sector at a Glance: Number of banks 41 1. NCBs 4 2. PCBs 19 3. FCBs 12 4. Specialized Banks 4 5.Cooperative 1 6. Grameen 1 • Number of Branches5897 1. Urban 2. Rural 3612(61%) • NCB Branches 3620 • PCB Branches 1081 • FCB Branches 26 • Specialized Bank Branches Total Bank Deposits Tk. Number of Accounts Average Deposits Per A/C Total Advances Tk.
2285
(39%)
1170 Tk.
420,102,000,000 21,645553 19,408 377,959,300,000
Number of Accounts Average Advances Per A/C Tk. 77,170 Average Weighted Rate of Interest on Deposits Average Weighted Rate of Interest on Advances 2.11
48,97,728 6.34% 13.5%
SWOT Analysis:
SWOT Analysis is an important tool for evaluating the company’s Strengths, Weaknesses, Opportunities and Threats. It helps the organization to identify how to evaluate its performance and scan the macro environment, which in turn would help the organization to navigate in the turbulent ocean of competition. 2. 11.a STRENGTHS: •
Company Reputation:
SBL has already established a favorable reputation in the banking industry of the country particularly among the new comers. With in a period of three years, SBL has already established a firm footing in the banking sector having tremendous growth in the profits and deposits. All these have lead them to earn a reputation in the banking field. •
Sponsors:
SBL has been founded by a group of eminent entrepreneurs of the country having adequate financial strength. The sponsor directors belong to large industrial conglomerates of the country. The Board of Directors headed by its Chairman Mr. M.A. Kashem is a former president of EBCCI and has years of experience and has earned the reputation of being a successful businessman. Other directors include Mr. Yusuf Ahdullah Flaroon, who is also the current president of FBCCI and Mr. Ragib All as the Vice-Chairman of the Bank who is also the owner of the country’s largest tea plantation. Therefore, SBL has a strong financial strength and is built upon a strong foundation. •
Leadership:
At SBL, eminent banker Mr. Sayed Anisul Haque as the CEO of the bank heads the management team. His years of banking experience at AB Bank and others have enabled him to navigate the organization in the turbulent ocean of fierce competition and taking SBL to a new millenium. Mr. Shah M. Nurul Alam, currently the DMD of the bank, supports the CEO. He was also at AB bank and an associate of the CEO and has years of banking experience. The bold leadership of the CEO and the DMD are the foundations of the management team of SBL. • Top Management. Like the CEO and the DNM, the top management of the bank is also a major strength for the SBL and has contributed heavily towards the growth and development of the bank. The top management officials have all worked in reputed banks and their years of banking experience, skill, and expertise will continue to contribute towards further expansion of the bank. At SBL, the top management is the driving force and the think tank of the organization where policies are crafted and often cascaded down.
• Market share and profitability: As already mentioned earlier, SBL has established a fin-n footing among the new corners in the banking industry of Bangladesh. They have already achieved a high growth rate accompanied by an impressive profit growth rate in 1997. The number of deposits and the loans and advances are also increasing rapidly. •
Facilities and Equipment.
SBL has adequate physical facilities and equipment’s to provide better service to the customers. The bank has computerized banking operations under the software called PC bank. Counting machines in the teller counters have been installed for speedy service at the cash counters. Computerized statements for the customers as well as for the internal use of the banks are also available. All the branches of SBL are equipped with telex or fax facilities. The head office and the Principal Branch also have Internet facilities. SBL has earned a reputation in the banking sector for establishing impressive branches. The Gulshan Branch and the Agrabad Branch are the most lavish and impressive branches of SBL. This creates a positive image in the minds of the potential customers and many people get attracted to the bank. This is also an indirect marketing campaign for the bank for attracting customers. The other branches of the bank are also impressive and are compatible to foreign banks. •
Interactive Corporate Culture.
SBL has an interactive corporate culture. Unlike other local organization, SBL’s work environment is very friendly, interactive and informal. There are no hidden barriers or boundaries while interacting among the superior or the subordinate. The environment is also lively and since the nature of the banking job itself is monotonous and routine, SBL’S lively work environment boosts up the spirit and motivation of the employees. At the same time, music system in the office also plays a key role in making the environment lively. •
Team work at mid level and lower level:
At SBLs mid level and lower level management, there are often team works. Many jobs are performed in-groups of two or three in order to reduce the burden of the workload and enhance the process of completion of the job. People are eager to help each other and people in general are devoted to work. •
Relatively less intervention from the Board of Directors compared to other banks:
At SBL, the scenario is relatively better in terms of intervention of the board in management practices compared to other banks. Though, in a private bank there are often undue interventions from the board regarding the processing of credit facilities. However, at SBL the scenario is, somewhat better and has fewer interventions from the board in the management practices. However, certain interventions from the board are inevitable in a Bangladeshi bank.
2.11. h Weaknesses: • No VISION The greatest irony is that despite claiming to be “ A Bank with Vision” which is used as its advertising platform and mission statement, the bank as of today has failed to develop a prescribed set of vision as it embarks in to the cyber age of twenty first century. The bank still could not identify the core area of business and where it should concentrate in its business, as the new millenium is about to start. The bank does not have any long term strategies of whether it wants to focus on retail banking or become a corporate bank. Till now, the hank is in a nowhere situation. Unofficially, retail banking is discouraged but at the same time the bank is not being able to pull itself away from retail banking. At the same time SBL has failed to be a full-fledged corporate bank. The path for the future should he determined right now. •
Advertising and Promotion:
This is a major set back for SBL and one of its weakest areas. SBL does not pursue an aggressive marketing campaign. It does not expose itself to the general public and are not in the lime light unlike other banks. Other than the neon sign at Farm Gate Over Bridge, SBL does not have neon sign or any advertisement in the city. As a result people are not aware of the existence of this bank. •
Poor Recruitment
During its inception, SBL has not recruited competent people in filling up its lower and some mid level positions. Other than the recruitment of the Probationary Officers, people who were recruited from other banks for the lower management are not competent enough to provide the best Output. As a result the services of the bank are being jeopardized. The external search of the bank in attracting people from other banks had flaws in it and the right people were not taken from the right bank. •
Reference Appointment
This is one of the set backs of SBL and will have a long-term repercussion on the quality of Human resource. N4any people have been recruited under the reference or the recommendation of the Board of Directors, which has become a chronic disease in the PCB’S. As a result, people having inadequate qualifications and experience have been recruited only because of their ties with the sponsors. The practice must be stopped considering the future of the bank and it is very important to have a competent workforce. •
Disguised Employment:
This has also become growing problem at SBL. Currently there are “Too many heads but few hands”. Again this is related to the problem of reference appointment. There are people who are only drawing salaries at the end of the month but making a minimum or no contribution towards the organization. On the other hand there are officers who work hard but are not apprised accordingly.
•
No Smile:
This is related to the customer services at the General Banking division. This division is considered to be the threat of a bank because this is the first point of interaction between a customer and a bank. Unfortunately, service quality is extremely low at GB. The officials of GB don’t even know how to welcome a new customer or a valued customer and entertain them. The Assistant officers or the junior officers behave very rudely with the customers. Officers at the account-opening booth are also very rude while behaving with the customers. •
Low Remuneration Package:
The remuneration package for the entry and the- mid level management is considerably low. The compensation package for SBL entry-level positions is even lower than the contemporary banks. Under the existing low pay structure, it will be very difficult to attract and retain MBA’s at SBL. Since foreign banks pay double that of SBL, it will be very difficult to attract competent MBA’s in future for SBL. Therefore SBL will fall to attract competent NOA’s and retain them if they do not revise their pay structure. •
Human Resource Department
The HR department is another weak area of SBL. The HR department is very small relative to the size of the bank and other than the Head of the HR wing, the staffs in this wing are incompetent to be an official in the HR department. Most of the HR practices and policies are not being followed or implemented here. The annual performance appraisal report of the employees has not been scrutinized yet and employees are not getting the required feedback. There is also no prescribed set of promotion policies. The bank is still practicing the traditional method where solely the experience or length of service is considered as the criteria for promotion. On the other hand, criteria for work output or productivity is not considered, Moreover, the HR department is only confined in the Head office and does not have any role in the branch level activities. •
Centralized Decision Making:
At SBL, corporate decisions, the CEO, DMD and other top management officials craft policies and strategies and then they are cascaded down. At times the Board of Directors are also engaged in making corporate decisions. As a result of this practice there is only a top down flow of communication at SBL. The scope for bottom up communication is very limited and many bright ideas or opinions are not being able to climb up the ladder to the top management. Ideas remain there forever. •
Noise Pollution:
This has become another major problem at SBL. Since there are no cubical shaped offices, there is a tremendous noise in the Credit and the Foreign Exchange department of the Principal Branch. The noise greatly hampers the work activity and the level of concentration.
This is the problem of having an open space office where everyone is communicating with each other and creates noise. •
Inadequate Storage Facilities:
There is a severe shortage of storage facility at SBLs Principal branch. This is because of the scarcity of space and the present location of Principal Branch can not tale this load of business. Due to lack of storage facilities, things have to be piled up in big sacks and trunks, which look very odd in the office. •
Lack of qualified system operators and comp titer operators :
Currently at SBLs Principal branch, there are system operators who do not have any background academic knowledge on computer applications. As a result they frequently make mistakes in the preparation of various computerized statements. At the same time, computer operators do not have the skill to carry out their activities. •
Few Staff Meetings:
It has been observed that there are very few staff meetings and departmental meetings at the branch level. During the last four months there was only one staff meeting and one departmental meeting. This is not a good management practice. •
Limitations of the PC Bank.
PC bank is not a modem and comprehensive banking software has been currently used by Southeast Bank. It does not provide adequate support in providing the services. It is not user friendly and management should consider replacing the PC bank system by a more comprehensive banking system. 2.11. c Opportunities: •
Diversification:
SBL can pursue a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify in to leasing and insurance. By expanding their business portfolio, SBL can reduce their business risk. •
Product line proliferation:
There are several opportunities for SBL to expand its product line. In this competitive environment SBL must expand its product line to enhance its Sustainable Competitive Advantage (SCA). As a part of its product line proliferation, SBL can introduce the following products.
•
ATM Service:
This is the fastest growing modem banking concept. SBL should grab this opportunity and take preparations for launching ATM. Since SBL is a local bank, they can form an alliance with other contemporary banks in launching the ATM. Standard Chartered has already successfully launched the ATM and ANZ is about to launch soon. •
Credit Cards and Tele Banking:
These are the new retail banking services provided by the foreign banks. SBL can evaluate the option of launching credit cards and Tele banking system. These are the recent developments in the banking sector and SBL should also evaluate the option of doing it. •
On-line banking:
SBL should move towards the on line banking operations. It is high time that they should go for this because the foreign banks as well as some local banks are already in to the on line banking operations. •
Introduction of SBL‘s own savings scheme:
This can be another new retail product for SBL. They can start introducing their own savings scheme or pension scheme for different professions. Foe example, ANZ has SYFANZ and PLANZ and Standard Chartered also has similar offers. Therefore for attracting more depositors, the management should consider the option of its own savings scheme. •
Introduction of corporate scheme:
This is an innovative way of attracting corporate clients to the bank. In stead of providing CCS to executives of various companies, SBL can introduce a special scheme for corporate officers for the purchase of consumer durable at an attractive interest rate. In this way, the bank will be able to attract a lot of corporate clients and in the. long run the bank would be benefited by getting business for the bank from the corporate clients in terms of L/C, Loans and advances etc. For example, officers of BATC, Lever Brothers, Square, Beximco can be entered in to the corporate scheme. • Separate schemes for service holders: The bank as a part of expanding its loan portfolio can provide assistance in terms of giving loans to service holders under various professions under a separate scheme. The bank can provide assistance to Engineers, Doctors, Lawyers and other professions tinder a separate scheme. ANZ has already introduces such a scheme for different professions.
2. 11.d Threats: •
Multinational Banks:
The emergence of the multinational banks and their rapid expansion poses a potential threat to the new PCBs. Due to the booming energy sector; more foreign banks are expected to arrive in Bangladesh. Moreover, the already existing foreign banks such as ANZ and Standard Chartered are now pursuing an aggressive branch expansion strategy. These banks are establishing more branches countrywide and are expected to get into for operation soon. Since the foreign banks have tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of grabbing the lucrative clients. •
Upcoming Banks:
The upcoming private local banks can also pose a threat to the existing PCB’S. It Is expected that in the next few years more local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against an on slaughter of foreign banks. •
Contemporary Banks:
The contemporary banks of SBL such as Dhaka Bank, Prime Bank and Dutch Bangla are its major rivals. Prime Bank and others arc carrying out aggressive campaign to attract lucrative corporate clients as well as big time depositors. SBL should remain vigilant about the steps taken by these banks as these will in turn affect SBL’s strategies. •
No new deposit creation:
This is a problem and a threat faced by the whole banking sector of Bangladesh. Due to the current economic slowdown, there is hardly any new deposit creation as there few investments and savings accompanied by a galloping inflation. As a result the new banks are not being able to attract absolutely new depositors but rather they have to hunt or snatch away depositors from other banks. Moreover, due to the financial turmoil in Southeast Asia, foreign remittance of Bangladeshis is also decreasing due to the massive retrenchment. Therefore all these adversaries are blocking the creation of new deposits and banks are operating by snatching away depositors from one to another. •
Default culture:
This is a major problem in Bangladesh. As SBL is a very new organization the problem of non-performing loans or default loans is very minimum or insignificant. However, as the bank becomes older this problem arises and the whole community suffers from this chronic disease. SBL has to remain vigilant about this problem so that proactive strategies arc taken to minimize this problem if not elimination.
2. 11. e Industry attractiveness criteria: •
The annual industry growth rate:
The annual growth rate in the industry is moderate because it is very difficult to avail permission from the Ministry of Finance of GOB to establish a bank. It is also very difficult to obtain clearance from Bangladesh Bank for launching new banks. Therefore the growth rate in the industry is minimum considering the number of banks opened as the criteria for evaluating this option. •
Historical profitability of the industry:
This is also moderate in the industry and varies according to NCB’S, PCB’s and FCB’S . The NCB’s are incurring major loses while the private and the foreign banks are making profits. •
Macro environmental opportunities and constraints:
This is also moderate in the banking industry as there are both opportunities and threat to this sector toward the growth and development of the bank. Details have been discussed in the section of MES. •
Industry size:
The banking sector of the country is considerably large. According to the Scheduled Bank Statistics of Bangladesh Bank 1996, there are a total of 35 banks with 5,886 branches located countrywide and internationally. The industry is then categorized in to NCB’s , PCB’s and FCB’s. •
Intensity of competition:
There is a severe intensity of competition in the banking industry of Bangladesh. The competition ranges among NCB’s, PCB’s and FCB’S. •
Industry predisposition to unionization:
This trend is relatively low. Excluding the NCB’s the industry’s predisposition to unionization is low since trade unionism is banned in the PCB’s and the FCB’S.
•
Role of innovation in the industry:
This is relatively high as the banking industry is going through a reform and new banks are launching new products or services. Latest introduction of services or innovation includes ATM, Telebanking , credit cards and on line banking operations. •
Business Unit Strength: (SBL Strength )
Market share: SBL’s market share is increasing rapidly in terms of deposits and loans and advances. With in a short span of time, SBL has establishes a firm footing among the new comers in the banking sector. Firm Profitability: This is major strength for the bank. In 1997, the bank earned a record profit among the new comers and this way beyond the management’s expectation or projection on profitability. Service Quality: This is also of moderate standard. The bank is striving to provide speedy quality service to its customers, a standard that can be compared with that of the foreign banks. Managerial and personnel talent : As already mentioned earlier, the top management of SBL has an extensive banking skill and expertise to run the organization. The top officials have adequate skill to lead the organization in this fierce world of competition. Company reputation: SBL enjoys a favorable image in the banking community of Bangladesh particularly among the new comers. It has already established a good image with high organizational growth rate and profitability. CHAPTER THREE: Banking Customer Service Regarding It’s Various Financial Services . 3.1
Customer Services And Marketing Of Financial Services:
3. l.a Customer Services: The services rendered by an organization to the customers are known as customer services. It refers to the product, price and location and the ways organization renders services to the
customers. This is equally true in the case of the organization which acts as financial intermediaries. Thus customer services to a financial intermediaries refers to the number of products that a financial intermediaries can render to the customers and potential customers, general public at a reasonable price and suitable place. 3. 1. b Marketing Of Financial Services: Marketing of financial services refers to the process of gearing the operation of a financial intermediaries to serve the needs of it’s customers, general public. It is the entire operation of financial intermediaries looked at from the stand point of the customers and potential customers general public. Thus marketing of financial services does not mean development of new products only, but it is to make endeavor to produce and provide services to the customers and potential customers, general public according to their needs and satisfaction whether new and existing. 3. I.e Dimensions Of Transactions Of Marketing Of Financial Services: Whenever we use the term market or marketing it is meant that there will be transaction between or among parties. There are five dimensions of transactions in market or marketing which may be described as below : 1.
Participants:
Producers, sellers, facilitators, regulators, buyers and consumers are the participants in the exchange relations. They are all with their utility function. 2.
Products:
Products, services and ideas - basic design, qualities, colors, detailing etc. are considered as products in the exchange relations. 3.
Modalities:
The modalities in the exchange relations are place, time and ownership utilities, roles of participants, the organization of participants, terms channels, communications, price etc. 4.
Rules of the game:
Norms of behavior, responsibilities and liabilities of the participants are rules of the game in the exchange relations. 5.
Outcome:
In the exchange relations, satisfaction /dissatisfaction of one or more participants and their impact on subsequent transactions and nature of relationship are termed as outcome.
3.1. d Domain of Marketing of Financial Services: The domain of marketing the financial services may be seen from the following diagram. Sellers of financial services Financial intermediaries.
Buyers/Customers Of Financial services.
1
2
3
4
Sellers of financial services Buyers/Customers Financial intermediaries of financial services. Diagram 1 Domain of marketing of financial services From the domain (diagram above) it is clearly seen that cells 2 and 3 represent marketing of financial services. It means that the flow of financial services i.e., transaction takes place between the sellers! financial intermediaries and the customers of services with which marketing channels and marketing communication are related. Cells I and 4 are dark which means that no transaction can take place here.
3.1. e Marketing Approach: Marketing approach may take the following steps: Marketing Approach
Identification of Customers needs .
Achievement of Customers Satisfaction and maximization of profit
Designing and developing of Services as per need of the customers .
Managing delivery of the services to the customers price . Promotional activities
Diagram 2 Marketing approach starts from the identification of customers needs followed by three other steps as shown in the diagram above (diagram 2). Understanding customers needs and expectations is the essence of marketing. It is the main fountainhead from which emerge all other marketing activities e.g., strategy formulation, product development customer service etc. But understanding even one person is so difficult because of the complexities of human behavior and it’s changing pattern. How would a person behave in a given situation, what would he/she need and expect -these things can be predicted only with a limited degree of accuracy. Instead of completely understanding the customers a more modest target would be reducing the area of ignorance about the customers. The more we know about the customers, the closer we are to our goals. In the emerging market place (of shrinking interest, spreads and profitability, ever-growing competition etc.) getting closer to the customers, understanding what they want have become necessary. The degrees of financial intermediaries have direct relationship with the degree of understanding the customers. There are wide disparities in likes, dislikes, lifestyle and the profile of the customers of financial intermediaries. To face such situation come the Market segmentation. 3.1. f Market Segmentation: Market segmentation differentiates customers with similar financial inter mediation needs froth those with dissimilar needs. The greater the homogeneity or the lesser the heterogeneity in needs and behavior of a group of customers, called a market segment, the easier it becomes to understand them. Besides this, logic of segmentation is that it provides a solid basis on which the marketing strategy of financial intermediaries can be designed. Market segmentation usually takes care of-
(a) What products/services to market , what to market and at what price, how to persuade a prospective customer to do business with a particular financial intermediaries / marketer has to take in designing marketing strategy. (b) Segmenting the market helps the financial intermediaries evolve a distinctive marketing package for each segment based on characteristic needs of different customer segments. This in turn helps the marketer to cultivate in the customer’s mind a perception of “Psychological ownership” of financial intermediaries offerings. (e) The market must first identify market niches, which are the talk of the time, and this is possible only through market segmentation. (d) Cost effectiveness of marketing is another reason why market segmentation is frequently resorted to. Basis of segmentation Some of the popular basis of market segmentation are - geographic, demographic, psychographic , benefit, cross section and activity. Geographic Segmentation : In geographic segmentation , it may like metropolitan, urban, semi urban rural, hill track etc. Demographic Segmentation : In demographic segmentation parameters may be like sex, age, income, occupation, education etc., which also includes working women, students, land owning agriculturists, professionals etc. Demographic and geographic segmentation in combination give good bases of segmentation. Psychographic Segmentation : This segmentation is made on the basis of personality traits of the customers e.g., leader -follower types, extrovert- introvert types, conservative -liberal types etc. Segmentation along these personality traits requires a very deep understanding of customer’s psychology. Benefit Segmentation : This type of segmentation takes into account the benefit derived by the customers. As for example, “Benefit of Status”, “Benefit of Convenience”, “Benefit of Economy” etc. Cross Segmentation : This segmentation is done on the3 cross section of people like “Senior citizens”, “Affluent citizens”, “Students”, “Working women”, “Housewives”, “Young salaried people” etc. Activity Segmentation Segmentation may he made on activity wise also, like General banking, Loans and advances, Foreign exchange, Remittance scheme, International banking scheme etc. are taken care of.
3. 1.g Marketing Strategy : Marketing strategy is the key factor in achieving goals of a financial intermediaries by the way of providing various services to it’s customers and potential customers and general public. So, it is very important for a financial intermediaries to determine it’s marketing strategy critically and more rationally so as to ensure realistic and practical marketing strategies. A marketing strategy needs to be determined by taking into consideration the activities that financial intermediaries can undertake and the services it will provide during a particular period of time with all variations. While going to determine marketing strategy financial intermediaries should consider some factors which may be enumerated as under: There are 7 P’s in marketing strategy of financial intermediaries. These are product, price, place, promotion, people, process, physical evidence. Product Deposit, Lending, Remittance, International etc. Price : Price is the charges, commission, interest that are taken and given by financial intermediaries for providing and taking services. Place : Place relates from where to market the products. These are the branches from where products are marketed. Promotion : This includes (a) Personal activities (b) Impersonal activities. A personal activity mainly includes personal contact of the personnel with the customers and people. Impersonal activities are advertisement and publicity through radio, television, newspapers, journals, pamphlets, internet! web site, exhibitions, fairs etc. People : People are the customers, potential customers or the general public. This also includes people working in the financial intermediaries (marketer). Process : Process in market of financial intermediaries is based on the “value concept”. This concept basically stresses close attention to all the organizational activities which go into marketing the service to the customers. Talking of the financial intermediaries context, a typical “value chain” would encompass all activities right from the service conception stage to service designing and development, down to its marketing at the branch level.
Physical Evidence : Physical evidence as a strategic tool for the financial intermediaries devices it’s sentence from the intangibility principle. Services of financial intermediaries are intangible. And transibilising this intangible commodity is a major challenge to the marketer of financial intermediaries. As for the possible strategies for transibilisation are unkeep of branch premises, internal decorations of branch are the most important elements. Stationery used by customers like cheque books, draft leaves, statement of accounts etc. is another useful strategy of tangibilisation. Product packaging is also an example of tangibilisation strategy. It means an attractively designed product brochure, catchy brand name which a customer can easily understand pictorial design which can represent a particular product . The best transibilisation strategy is to heighten customer satisfaction. After determining market segmentation and marketing strategies , it is the responsibility of the financial intermediaries to implement them. Before implementing them the financial intermediaries must consider the following aspects: (1) The present position i.e. where is the financial intermediaries is at present? (2) What is the intention of the financial intermediaries for the future i.e., where the financial intermediaries intends to go? In other words what is the goals , objectives of the financial intermediaries to achieve? (3) What are the ways to reach the intended / objectives? In other words how to achieve the goals! Objectives? Of the three statements made above the last one (3) is the most important. Here the financial intermediaries must take into consideration the goals/objectives of the financial intermediaries on the one hand and segmentation and strategies on the other. The P’s mentioned earlier should be applied here. Proper marketing of the services of the financial intermediaries, it needs to consider the following aspects: (I)
Scanning the environment continuously.
(2) Marketing research. (3) Marketing planning- undertaking appropriate Remittance, international and other activities schemes. (4) Innovation and introduction of new products. (5)
Deposit,
Credit,
Lending,
Marketing training.
(6) Proper manpower planning. (7) Maintaining good relationship with customers, potential customers and general public. (8) Providing good customer services. (9) Using of modern technology! Mechanization etc. Being a service industry the quantity and quality of services provided by a financial intermediaries helps to satisfy and retain the present customers and also attract more and more potential customers! general public to the financial intermediaries. Because if the
present customers are satisfied they advice others to come to a particular financial intermediaries i.e., they can act as messengers of good will to the potential customers/general public. A financial intermediaries which believes that it’s main task is to innovate! discover new products to meet the needs of it’s customers, potential customers and general public and then makes endeavor to satisfy them can be termed as “marketing oriented”. 3.2
Bank Marketing And Classification Of Financial
Services : 3.2.a Bank Marketing : We define Bank Marketing as follows: “Bank marketing is the aggregate of functions directed at providing services to satisfy customer’s financial (and other related) needs and wants more effectively and efficiently than competitors keeping in view the organizational objectives of the bank”. Bank Marketing
Attract Funds Attract users of “Deposits” Funds “Advances” Attract users of “Other services The bank marketing function involves the following: 1. Market Research: Marketing begins with the information about the market in which the banks operates. This includes identification of customer’s financial needs and wants and forecasting and researching future financial market needs and information about competitors activities. 2. Product Development: Developing appropriate products to meet consumer’s financial needs. 3. Prices Of Services, Promotional Activities, And Distribution System : Through bank branches should be in accordance with guidelines and rules of the central bank (if any) looking for opportunities to satisfy customer better. 4. Developing Market Orientation And Customer: Consciousness among all the persons working in the bank. Imparting training for sales and service manner to bank’s employees at all the levels.
3.2. b Classification Of Financial Services: Banks are essentially service oriented industries and deal with various financial services as economic intermediary for financial gains. Major range of services in banks : • Services for mobilization of deposits • Services for deployment of credits • Off balance sheet services • Social-service services. The bank services offered can be broadly classified as follows: • Savings and deposits • Loan advances • Other services like draft, mail transfer and safe deposit locker etc. Different banks offer different benefits by offering various schemes which can take care of the wants of the customers. 3.3
Customer Service And Customer Expectation:
3.3.a Who is customer? Regular Customers of banks are either it’s depositors or borrowers. Need however need to become first account holder to start relationship. The simple relationship began with opening account with a deposit get deepened as time passes and relation develop in various ways. Generally there are two most important customers one is depositor and the other is borrowers. Casual Customers are those who buys services from the bank from time to time or on regular basis e.g. buy draft, TT, Purchase Prize Bonds, Shares, Savings certificate sell or buy Travelers cheques and pay out against debt, credit cards etc. Cross Country Customer- Non- Resident clients, Remitters of money fi~om abroad and investors in Bangladesh. Corporate Customers- Public limited companies and Group companies need varied types of services based on their type of business. 3.3.b What is Services? (a) Range of services offered by Banks are ever increasing and expanding. (b) Many services are need based and are customized. Corporate clients need package of service including cross country service viz. import and export etc. (c) Standard Services legally available to a customer include deposit and withdrawal of money to and from the Accounts. Giving loans/credit is another very important service. (d) Ancillary Services may include carrying out various instructions of clients for payments and collection of funds, providing investment facility, acting as trustees, Executor of trusts and offer guarantees on behalf of the customer etc. (e) Cross Country Services : Clients living abroad need very special services. These are exchange control related matters.
3.3.c Expectation Of Customers Customers Expect: (a) Safety of money and investments, Regular standard income(interest dividend) against investment and receiving payment against account promptly at lowest cost; (b) Courteous behavior and respectful replies to the queries however stupid the questions may be. Replies should be quick and may be from any distance . (c) Appreciation for being good client of long standing and incentives; (d) Availability of loans in terms of need and speedy decision in this respect and competitive rate of interest; (e) Personal proximity cum intimacy with the banks through contacts at personal level (f) As many types of new service facility as are offered modern bank e.g. withdrawal through ATM, internet computer transactions etc. 3.3.d Strategy To Meet Customers Expectation : (a) Simple and quick delivery of services through quick means; (b) Providing up to date information to the clients regularly about the full range of facilities available from the bank and the ways to get it. For example various deposit schemes, loan schemes, consumer credit facilities should be sent to the clients home and or through internet. (c) Keep the clients informed about the rating of the bank and position for assurance of the safety security. (d) Promptly give decision on prayers for loans and credit and offer the best rate. (e) Deepen the relationship through regular contact, over phone, fax internet and other sale services. Customers total should be found out and accommodated. Explain carefully and faithfully if bank is unable to accommodate a client’s request of any kind and advice him/her the best thing he/she can do in this circumstances. (f) Special booth by highly skilled persons to provide counseling on various matters. (g) The nearer the client is better. (h) Branches should be made smaller but made independent agency. 3.3.d Multi Distribution Services Vs Multi Channel Services: (a) Multiple services point (branch) may be used to deliver complete service. This point is to he terminal point. Referee at higher level shall not be needed. Each client according to his or her needs would go to required channel that can dispose off the request finally. (b) Multiple channels to distribute services. Examples ATMs with wide arrange and networks for basic services. Investment advisory countries to provide exchanging service; Corporate service offers to serve corporations under designated officers. (c) Cost of services shall depend on the channels used. 3.4 Customer Services And Development Of Financial Services: Bank as a financial intermediary fulfills the role of challenging fund from depositors to borrowers. Banks are not the only financial intermediaries. There is a whole range of non-
bank financial intermediaries which all do something in different ways. The competitive climate in the financial market of Bangladesh has been changing over last few years and at the same time changes have been taking place in government regulations and technology. The expectations of the customers are also changing. Private sector banks and foreign banks have also introduced some new innovative services. Few banks are experimenting by offering Automatic Teller Machine. Many household customers now prefer to take customer durable loans or buy on installment credit rather than saving for few years for the same. As a result of growing level of competition ‘and the rapid pace of change marketing is emerging as an important element in bank’s activities. Traditionally, banks for that matter financial system of our country have not really paid adequate attention to marketing. There is a need for banks and other financial institutions to keep pace with their competitors by adapting marketing approach and using marketing techniques for business growth. 3.4.a The Ways Of Developing Financial Services : Product Development : The marketing oriented business will keep it’s range of products or services under constant review. By doing so, it will be to recognize when the need has arisen to modify or discontinue existing services and establish the possible opportunities for the introduction of new services. New Products : The constant monitoring of the bank’s portfolio of products together with the surveys of the target market , should indicate developing voids in the product range, where potential customer needs have arisen in particular market segment which cannot be satisfied by any of the existing products or services. Similarly it should be possible to pinpoint situations in which the existing products have ceased to be full effective in satisfying the customer’s needs. In these circumstances, if adequate market research has been done, the bank will able to identify the target market segment with some accuracy and will be able to define the criteria which the new product must fulfill if it is to sell to that segment. Product Review : An important complement to the task of product development is that of review of existing products. A significant part of the marketing effort must be devoted to the monitoring of existing services and where such deterioration is found, a decision must be taken on how to remedy the situation. In essence there are three alternatives. The product may be updated and renovated so as to bring it back in line with customer requirements. Alternatively, a product can be maintained despite of it’s faults and without alteration, either because it is considered an important component of the companies image or because the product is continuing to make a profit. Place : As part of the product development process, it is necessary to consider the media through which it will be ‘delivered’ to the customer. The principal factors with the banks are now having to consider in re appraising the way they use their branches include: Automation Customer expectation of service. Centralization Over and above these considerations, of course, the banks must continually monitor their branch networks to ensure that they reflect demographic and economic change.
Pricing Advertising We have looked at the relationship between banks and their customers solely in the context of actual services which a hank can provide. Our initial focus should always be how we can be on help in filling customer needs. Customers rightly expect all the service industries to provide the right service at the right price and to recognize the fact that customers have a choice in where to place their business. It has been argued that effective customer services depend on appropriate “product—behavior” mix, to he developed keeping in mind needs and aspiration of a particular set of customers. 3.5 Maintaining Public Relations Through Marketing Of Financial Services : 3.5.a Financial Services & Public Relations : We may divide the financial services into two broad categories, viz.: 1. Deposit financial services 2. Credit (Loans & advances) financial services. When deposit financial services are designed for taking deposit funds from surplus economic units, credit financial services are designed for deploying funds to deficit economic units. In between these two services there is there is another one , which can be called as Ancillary services (to perform the guarantee role! payment role/agency role etc). The success or failure of any service or offering depends upon the perceived value and satisfaction of the target customers, for whom the service is designed for. The buyer chooses between the different offerings on the basis of which is perceived to deliver the most value. A value is a ratio between the buyer gets and what he gives. The buyer gets benefits and assumes costs. The benefits include functional benefits and economic benefits. The cost includes monetary costs, time costs, energy costs and physic costs. Thus value is given by: Value(V) =(Benefits)/(Costs) =(Functional benefits+emotional benefits)! (Monetary costs±Time costs+Energy costs+Physic costs) The customer who is choosing between two value offering, VI and V2, will examine the ratio of V1/V2 if the ratio is larger than one, he will favor V2 if the ratio is smaller than one, and he will be indifferent if the ratio equals one. The Bank! Financial Institution can increase the value of the customer offering in several ways. 1. Raise benefits 2. Reduce costs 3. Raise benefits & reduce costs 4. Raise benefits by more than the raise in costs 5. Lower benefits by less than the reduction in costs. 3.5.b Price Of The Services & Public Relations : It may be mentioned here the pricing of the service plays an important role in value determination. But these most difficult tasks have to face to face the bank authority. In pricing deposit services banks mainly follow three approaches:
• • •
Cost-plus pricing Market penetration pricing Upscale target pricing! Relationship pricing.
The financial marketplace that closely approaches perfect competition, the individual Bank has little control over it’s deposit prices in the long run. It is market place not the individual banks that ultimately sets all prices. In such a market bank management must decide if it wishes to attract more depositors at least at the bank determined price or whether it is willing to loose deposits by offering customers deposit terms different from what the market requires. At the stiff competition , presently prevailing in the financial market a newly floated bank is in race of tap the deposit, though it always does not commensurate with the income derived from that fund which may harm the growth! interest of that institution. The costly deposit that have taken by the bank to be deployed at a rate which will compensate the cost associated with that plus it’s overhead costs, price of capita], remuneration and prerequisites for it’s employees. The banking is a business not charity. With this end in view, the lender wants to chat-ge a high enough rate to ensure that each lending will be profitable will compensate the risks involved in lending. However, it must be low enough to accommodate the business customer in such a way that he/she can successfully repay the borrowing amount and not he driven away to another lender. But bank lending does not cost at the price which the Banker charged. Though it is regrettable but it is admissible that there is some hidden cost for getting loans from some banks. The delay of making decisions on the loan proposals are also involved in that hidden cost. The more competition the bank faces for getting a customer credit business, the more it will have to keep the price of that as a reasonable level. Indeed, now a days in Bangladesh, the prime credit customer is the price setter not the price taker. 3.5 c Place & Public Relations : It is to be mentioned that, the location of Bank outlets! Branches also influence the fate of marketing financial services. To provide the financial services which is the only product of a hank, it is necessary to make it’s presence at a place where it is convenient for the service users. 3.5.d Promotion & Public Relations : Promotion stands for the various activities that the company undertakes to communicate it’s services merits and to persuade target customers to buy thorn. The promotional activities involve accomplishing the following tasks successfully: 1. To inform 2. To influence To remind frequently 4. To create goodwill 5. To destroy negative image, if any. The media of carrying promotional activities might be as follows: 1. Personal contact 2. Advertising 3. Goodwill in the market.
It is evident that the good advertising is done by satisfied customers. Not only must a particular Bank Company relate constructively to customers but it must also relate to a large number of interested public. A public may he defined as follow: “A public is any group that has an actual or potential interest in or impact on a company’s ability to achieve it’s objectives. Public relations involve a variety of programs designed to promote or protect a company’s image or it’s individual Products”. A public can facilitate or impede a company’s ability to achieve its objectives. Public relations may contribute to attain the following objectives : 1. Build awareness 2. Build credibility 3. Stimulate the working force 4. Mold down promotion costs. 3.6
The Marketing Information System(MIS) in Banks :
A.
Importance Of Marketing Information :
a. Effective marketing management depends on current accurate information at almost every turn to produce superior value and satisfaction for customers. And that has to be done by knowing customer’s needs and wants. b. Increasingly, marketers are viewing information not just as an input for making better decisions, bit also an important strategic asset and marketing tool. c. The supply of information also has increased greatly. We are experiencing a mega shift from industrial to industrial age. 65% of US workforce in now engaged now producing or processing information against 17% in 1950. d. As John Neisbitt points out- “Running out of information is not a problem, drowning in it is”. So, many of the companies are studying their managers’ information needs and designing information system to meet those needs. B.
What is MIS?
A MIS is an ongoing, organized set of procedures and methods designed to generate, analyze, disseminate, store and retrieve information for use in making marketing decisions . The organized set of procedures and methods are being operated by people or equipment for needed, accurate and timely information. The Ideal MIS Has The Ability To Generate regular reports. Integrate old and new data to provide information update and identify trend. Analyze data using mathematical models Allow managers to get answers to “what if’ questions. C. Mis – Stages/Steps Of Processing Information: There are four steps in processing information through MIS. These are: • Assessing information needs • developing information • Information analysis
•
Distribution of information
1. Assessing information needs MIS-Information managers -
Like to have Need What is feasible to offer?
All Information wanted by information managers might not be feasible to offer because they may not be available or difficult for MIS to manage. following are some example of such information : Change in promotional budget of competitors for the next year Even if available, it’s impact on market Cost factor for obtaining , processing, storing . and delivery of the information. 2.
Developing information
In Formation could be developed from (a) Internal Records: To evaluate marketing performance and to identify marketing problems. Accounting department: Financial statements, cost, sales, and cash flows. Manufacturing department : Production schedule, shipment, inventories Marketing department : Demographics, psychographics, buying behavior Finance department: Financial budget. Internal records usually can be accessed more quickly and cheaply, they may not be problem free. (b)
Marketing Intelligence :
Marketing intelligence is everyday information about marketing environment. The Marketing Intelligence System determines what intelligence is needed, collects its by searching the environment and delivers it to marketing managers . Sources of information could be :