If someone goes to 840 Kazi Para, Rokeya Sharani, Mirpur, Dhaka-1216 s/he will see a 5 storied well decorated building tagged by "EXIM Bank Hospital". This building has been hired by EXIM Bank to set up a hospital dedicated for the welfare of the underprivileged people of the society. That is just a single example of EXIM Bank's charity. Exim bank puts aside at least 2% of their annual profit every year for the foundation to conduct Corporate Social Responsibilities(CSR) activities. The mainstream CSR activities that are carried out through this foundation are:
- Healthcare service
- Scholarship program for poor brilliant students
- Education Promotion Scheme(Interest free loan)
- Helping people affected by natural calamities
- Helping people who lives in slums
- Donation to educational institutions to setup computer lab
- Beautification of Dhaka City
Healthcare service: A 5 storied building having 10,000 sft floor space at 840 Kazi Para, Rokeya Sarani,Mirpur, Dhaka-1216 has been hired to set up Exim Bank Hospital. The decoration of this hospital is completed. A doctor has been recruited who is working as a resident director of the hospital. Other doctors and hospital staffs have been in the process of selection through recruitment notice already published in the national dailies.
Scholarship program: This is a stipend package for poor and meritorious students that takes care of the beneficiaries throughout their student life. EXIM Bank Scholarship Programme, launched in 2006 with 61 poor and meritorious students selected from different reputed educational institutions of Dhaka City including Govt. Laboratory High School, Viqarunnissa Noon School and College, Dhaka University, BUET, Dhaka Medical College, etc. enrolled as many as 1000 students from around 150 reputed educational institutions across the country by 31 December 2008. They are enrolled in the this programme to be taken care of for their whole educational life subject to their fulfillment of the eligibility criteria that include satisfactory academic results, non-involvement in student politics, financial insolvency etc. So far Tk. 19.3 million has been disbursed as scholarship under this programme.
Education Promotion Scheme(Interest free loan): Under Education Promotion Scheme, interest-free loan is provided for poor and meritorious students to help them bear monthly educational expenditure including academic expenses, food, accommodation, etc. The quard is disbursed to the selected students in monthly installments till their accomplishing the master degree. Under this programme the students are required to repay the amount (only the principal amount) in long-term monthly installments after they have joined a confirmed job accomplishing their education properly. By 31 December 2008, Tk. 19.7 million was sanctioned to take care of around 138 poor and meritorious students from a number of reputed educational institutions like Dhaka University, Chittagong University, Dhaka Medical College, BUET, Bangladesh Agricultural University, Shahjalal University of Science and Technology etc.
Helping people affected by natural calamities: Another vital area they are dealing with as a part of their CSR activities is helping people to survive natural calamities. Under this welfare programme, EXIM Bank provides relief in cash for flood, fire or cyclone victims and cold-stricken people. The aim of these CSR activities is to help the target group to overcome their provisional sufferings and contribute to the socio-economic growth as soon as possible.
Helping people in slum areas: Besides natural calamities, fire breaks out sometimes in slum areas that guts the shanties and renders the affected people totally helpless. In that situation, they help the victims fight against the hard days and return to normal life.
Donation to educational institutions to setup computer lab: Exim Bank has donated to Dhaka University and Chittagong University to set up two computer labs that will help the students of those universities to acquire ICT knowledge. This will certainly help the students to be ready to take the challenges of this competitive information technology based society.
Beautification of Dhaka City: In response to the call of the Dhaka City Corporation, EXIM Bank has been sharing a good portion of the mammoth task of beautifying the capital since 2005. To make the capital a modern city, enriched with adequate urban amenities, EXIM Bank always joins hands with the government.
In brief, EXIM Bank is greatly involved in the social welfares and that is helping our city and country to a great extent. Initiatives like this are welcome by the common people and they expect more Banks to be involved in such activities. If all the corporate organizations work together, they can build a better Bangladesh in near future. EXIM Bank can be a very good example for the others.
In Bangladesh now different commercial banks and the non banking financial organizations are operating there business. And every organization now involved attracting the retail customers that means the middle income group people of the country. To draw their attention the sells persons of different organization try to knock every possible door. These activities of different organization increase the interest about this sector. As both commercial banks and the non financial institutes are in the market, so it makes confusion to the general people about the activities of these organizations. This article helps the customers to makes differentiate between these.
Banks, usually a corporation, that accepts deposits, makes loans, pays checks, and performs related services for the public. The Bank Holding Company Act of 1956 defines a bank as any depository financial institution that accepts checking accounts (checks) or makes commercial loans, and its deposits are insured by a federal deposit insurance agency. A bank acts as a middleman between suppliers of funds and users of funds, substituting its own credit judgment for that of the ultimate suppliers of funds, collecting those funds from three sources: checking accounts, savings, and time deposits; short-term borrowings from other banks; and equity capital. A bank earns money by reinvesting these funds in longer-term assets. A Commercial Bank invests funds gathered from depositors and other sources principally in loans. An investment bank manages securities for clients and for its own trading account. In making loans, a bank assumes both interest rate risk and credit risk.
The commercial banks are described now a day by many agents of economic development and social change. Their functions and roll are undergoing revolutionary changes client coverage and extended beyond imagination.
While many people believe that banks play only narrow roll in the economy taking deposit and making loans the modern banks has bad to adopt new roles to remain competitive and responsive to public needs. Baking’s principal roles today are as follows:
The intermediary role:
Transforming saving received primarily from household into credit for business firm and others in order to make investment in new building, equipment and other goods.
The payment role:
Carrying out payment for goods and services on behalf of their customers.
The guarantor role:
Standing behind their customers to pay off customer debts, when those customers are unable to pay.
The risk management role:
Assisting customer in preparing financially for the risk of lost to property and persons.
The saving / investment advisers’ role:
Aiding customers in fulfilling their long rang goals for a better life by building, managing, and protecting savings.
The safekeeping/certification of value role:
Safeguarding a customer’s valuables and appraising and certifying their true market
The agency role:
Acting on behalf of customers to manage and protect their property or issue and redeem their securities.
The policy role:
Saving as a conduit for govt. policy in attempting to regulate the growth of the economy and pursue social goals.
Non-bank financial institutions represent one of the most important parts of a financial system. In Bangladesh, NBFIs are new in the financial system as compared to banking financial institutions (BFIs). A total of 25 NBFIs are now working in the country. The NBFIs sector in Bangladesh consisting primarily of the development financial institutions, leasing enterprises, investment companies, merchant bankers etc. The financing modes of the NBFIs are long term in nature. Traditionally, our banking financial institutions are involved in term lending activities, which are mostly unfamiliar products for them. Inefficiency of BFIs in long-term loan management has already leaded an enormous volume of outstanding loan in our country. At this backdrop, in order to ensure flow of term loans and to meet the credit gap, NBFIs have immense importance in the economy. In addition, non-bank financial sector is important to increase the mobilization of term savings and for the sake of providing support services to the capital market.
The basic difference may include:-
- A Bank is an organization that accepts customer cash deposits and then provides financial services like bank accounts, loans, share trading account, mutual funds, etc.
- A NBFC (Non Banking Financial Company) is an organization that does not accept customer cash deposits but provides all financial services except bank accounts.
- A bank interacts directly with customers while an NBFI interacts with banks and governments
- A bank indulges in a number of activities relating to finance with a range of customers, while an NBFI is mainly concerned with the term loan needs of large enterprises
- A bank deals with both internal and international customers while an NBFI is mainly concerned with the finances of foreign companies
- A bank's man interest is to help in business transactions and savings/investment activities while an NBFI's main interest is in the stabilization of the currency
Besides the differences between the both commercial banks and the non banking financial institutions they play both for the development of the economic structure of the country. If the both play positively than it can be said that, the development of the country is sure.
- Article Written By: Md. Mahfuzur Rahman, BankInfoBd
Recently Islamic banking system becomes so much popular that a major number of commercial bank’s in Bangladesh introducing their Islamic banking branches in all important areas. As the advancement of the satellite channel every one can know about the benefits of Islamic banking, and in Bangladesh more over 90% people believes in Islam. So for attracting the huge number of population every commercial bank’s of the country try to perform the Islamic banking. For the persons who are interested about the Islamic banking and for others it is need to know something about the Shariah based banking.
The Islamic banking concept is started from the golden stage of Islam. During the Islamic Golden Age, early forms of proto-capitalism and free markets were present in the Caliphate, where an early market economy and an early form of mercantilism were developed between the 8th-12th centuries, which some refer to as "Islamic capitalism".
Before establishment of the Islamic banking concept, some other issues was established to control that economy which include, bills of exchange, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the earliest forms of capital (al-mal), capital accumulation (nama al-mal), cheques, promissory notes, trusts (see Waqf), transactional accounts and loaning. On the basis of these concepts the modern Islamic banking concept is established. In the early stage of 1946 the first Islamic banking concept is thinking by the Anwar Qureshi. On the basis of his proposed interest free banking at present we get this modern banking concept.
At present we define Islamic Bank as “An Islamic Bank is a Financial Institution whose statutes, rules, and regulations expressly state its commitments to the Principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operation” According to Islamic Banking Act 1983 of Malaysia: “An Islamic Bank is a company which carrying on Islamic Banking Business. …Islamic Banking Business means banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam.” Riba and Shariah is the most common word of Islamic bank, let’s see what its means, The word "Riba" means excess, increase or addition, which according to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money).
The definition of riba in classical Islamic jurisprudence was "surplus value without counterpart", or "to ensure equivalency in real value", and that "numerical value was immaterial." And the Shariah is the Islamic rules enforced in the banking. The rules of Shariah are known as Fiqh al-Muamalat (Islamic rules on transactions).
The basic difference between the conventional banking and the Islamic banking are, the Islamic banking system is based on the profit loss based, where the conventional banking system is purely based on the interest based. In the conventional banking all liabilities are carried by the banks and the customers are not treated as their partner but in the Islamic banking system the customers are treated as the partners of the banks and for the all the liabilities are carried by the both the customers and the banks.
There are some principals of Islamic banks are available, which include
- The absence of interest-based (riba) transactions;
- The avoidance of economic activities involving oppression.
- The avoidance of economic activities involving speculation
- The introduction of an Islamic tax, zakat;
- The discouragement of the production of goods and services which contradict the Islamic value (haram)
With out this there are others differences are available, by seeing these one can easily differentiate the Islamic banking system from the conventional banking system, these includes,
- The functions and operating modes of conventional banks are based on fully manmade principles.
- It does not deal with Zakat.
- The investor is assured of a predetermined rate of interest.
- A conventional bank has to guarantee all its deposits.
- Lending money and getting it back with compounding interest is the fundamental function of the conventional banks.
- It can charge additional money (penalty and compounded interest) in case of defaulters.
- Very often it results in the bank’s own interest becoming prominent. It makes no effort to ensure growth with equity.
- For interest-based commercial banks, borrowing from the money market is relatively easier.
- Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations.
- The conventional banks give greater emphasis on credit-worthiness of the clients.
- The status of a conventional bank, in relation to its clients, is that of creditor and debtors.
- It aims at maximizing profit without any restriction.
- The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah.
- In the modern Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat.
- In contrast, it promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur).
- Islamic bank can only guarantee deposits for deposit account, which is based on the principle of al-wadiah, thus the depositors are guaranteed repayment of their funds, however if the account is based on the mudarabah concept, client have to share in a loss position.
- Participation in partnership business is the fundamental function of the Islamic banks. So we have to understand our customer’s business very well.
- The Islamic banks have no provision to charge any extra money from the defaulters. Only small amount of compensation and these proceeds is given to charity. Rebates are give for early settlement at the Bank’s discretion.
- It gives due importance to the public interest. Its ultimate aim is to ensure growth with equity.
- For the Islamic banks, it must be based on a Shariah approved underlying transaction.
- Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.
- The Islamic banks, on the other hand, give greater emphasis on the viability of the projects.
- The status of Islamic bank in relation to its clients is that of partners, investors and trader, buyer and seller.
- It also aims at maximizing profit but subject to Shariah restrictions.
By considering all aspects it can be said that, the Islamic banking concept is well balanced for the both owners and the customers. And this concept is well structured for the development of the society and it is beneficiary for all groups of people, for the equal balance of the social economy and help to build the strong economic structure of the country.
- Article Written By: Md. Mahfuzur Rahman , BankInfoBd
Prime Bank’s retail loan process can change the view of getting loan and may be the model for the others
The present traditions of banks are now being changed, the banks now run for the retail customers besides the corporate customers. Moreover the number of banks and their branches in every city is increasing day by day so at present every bank tries to knock in every single person of each city. In our country a good number of the people are middle class, to meet their need every bank try to reach this class of people with the variety of segmented loans. Like the other banks, Prime Bank retail loans help the middle income group and help them to fill there desire and give theme a new way to live. Prime Bank retail loan include the house hold durable loans, education loan, car loan, any purpose loan, marriage loan, advance against salary, hospitalization loan, travel loan, doctors loan, CNG conversion loan with a simple condition. For getting the consumer loan from the Prime Bank, one may need to fill the application form and also required the other documents, after that no inquire is needed for the loan and the customers can get the loan with in the shortage possible time. The first stage of credit assessment and approval process is a customer application. The application must provide adequate information to enable the bank to assess the credit. As a minimum, the application must request for sufficient information to verify the existence of the individual and to facilitate the collection effort, including skip tracing and security checks. The information in the application must also established “Know your Customer” (KYC). Specific information should include;
- Telephone and address contact details
- Employment/business details.
- Income details
- Income & Expenditure Statement
- Personal Net worth Statement
- Residence details
- Credit references and guarantors details
All application must be checked for complete information so that initial review of the application enables the selection of better proposal for accelerated processing and quick reflection of those that do not meet minimum criteria of the product. However, application should not be rejected purely on the basis of incomplete information if the proposal merits consideration appropriate follow up should be initiated. After the application the bank officers scrutinizes the applications, than after the assessment the loan proposal is sent to the head office to check and approved the loan. After satisfaction of the application the higher authority approved the loan and sent it to the specific branch to conduct the next process.
The loan is sanction to the customer by the branch after completing the disbursement process. And to complete the whole process the Prime Bank takes a few days which may be the model for the others. The interest of the consumer loan in between 15% to 18% and the any purpose loan of the Prime Bank gives the freedom to the customers to use the amount in any purpose. More over the variety of the segmentation of the Prime Bank’s retail loan and overall performance makes them to become one of the most successful bank of Bangladesh with in the short time.
- Article Written By: Md. Mahfuzur Rahman, BankInfoBd