Customer Satisfaction on Repayment Behavior of Brac Bank

This report focus to overview on Customer satisfaction on repayment Behavior about Services and product Quality of Brac Bank Limited. Other objectives are analysis about General activities and SME Loan of Brac Bank and analyze the customers satisfaction in Brac Bank. Report also focus on to know the Customers preference about the product and service. Finally draw SWOT analysis and identify the problems and weaknesses of Brac Bank.

Problem Statement:

The topic of the report is “customer satisfaction on repayment Behavior: A case On Brac Bank Ltd”.

This topic serves dual purposes, number one is for my learning purpose and another one is, measuring the customers’ satisfaction on repayment Behavior toward Brac Bank Ltd. This report describes that in which factors customers are how much satisfied. And also an analysis as well as some recommendations for providing better service to the customers.

Objectives :

To have an overview on Customers’ satisfaction on repayment Behavior about Services and product Quality of Brac Bank Ltd.

To accomplish this objective, following specific objectives have been covered:

• To develop knowledge about repayment Behavior of loan
• To develop knowledge about General activities and SME Loan of Brac Bank Ltd
• To analyze the customers satisfaction in Brac Bank Ltd
• To know the Customers preference about the product and service.
• To identify the problems and weaknesses of Brac Bank Ltd

Methodology

Research Design: This research is used for finding out the satisfaction level of the customers’ of Brac Bank Ltd and submitting a recommendation making the processing easy towards better customer service for Brac Bank Ltd. This is a descriptive research.

Research Approach: To find out the level of customer satisfaction on repayment behavior the researcher collected data from the new and old customers who have take loan and repayment from Brac Bank. Not taken any opinion from the loan Brower because there is no similarity between taken loan and repayment. Then the research is qualitative in its approach.

Sampling Method:

This study was conducted by different people who have taken loan. And since 2001 to present approximately there are 85 loan Brower who have taken loan. Some of them are do not provided loan perfectly. As the number of loan taker is small so that the sample size was also small. From those I took 35 loan takers from different place as my sample size, non probability convenience sampling was taken to complete this research. The questionnaire was distributed to that loan taker and the percentage of response is 100%.

Survey Instruments: A structured questionnaire designed on the basis of Likert scale used for business research is the main instrument of this survey.

Data Collection:

• Primary Sources: Primary source of data is the face to face conversation with the loan taker. They answered the questions which mentioned in the questionnaire. And they wrote their suggestions according to their opinions. A questionnaire was designed for this survey to measure their satisfaction level.
• Secondary Sources: Annual reports and training, some data which has published and which hasn’t published yet of Brac Bank was the source of secondary data. Internet, newspaper and different websites were also used as a source of secondary data.

Data processing methodology: Collected data was entered in the research software called SPSS. Using SPSS, Frequency analysis and percentage was calculated for all questions and responses. Finally analysis of total output was used for recommendation.

ORGANIZATIONAL BACGROUND

History of Brac Bank Ltd (BBL):

Preamble: BRAC Bank Limited, with institutional shareholdings by BRAC, International Finance Corporation (IFC) and Shore cap International, has been the fastest growing Bank in 2004 and 2005. The Bank operates under a “double bottom line” agenda where profit and social responsibility go hand in hand as it strives towards a poverty-free, enlightened Bangladesh.

A fully operational Commercial Bank, BRAC Bank focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business, which hitherto has remained largely untapped within the country. In the last five years of operation, the Bank has disbursed over BDT 1500 crore in loans to nearly 50,000 small and medium entrepreneurs. The management of the Bank believes that this sector of the economy can contribute the most to the rapid generation of employment in Bangladesh. Since inception in July 2001, the Bank’s footprint has grown to 26 branches, 350 SME unit offices and 19 ATM sites across the country, and the customer base has expanded to 200,000 deposit and 45,000 advance accounts. In the years ahead BRAC Bank expects to introduce many more services and products as well as add a wider network of SME unit offices, Retail Branches and ATMs and paid up capital of the same bank is Tk 500.million.

Background of the Organization: BRAC Bank Limited is a scheduled commercial bank in Bangladesh. It established in Bangladesh under the Banking Companies Act, 1991 and incorporated as private limited company on 20 May 1999 under the Companies Act, 1994. The primary objective of the Bank is to provide all kinds of banking business. At the very beginning the Bank faced some legal obligation because the High Court of Bangladesh suspended activity of the Bank and it could fail to start its operations till 03 June 2001. Eventually, the judgment of the High Court was set aside and dismissed by the Appellate Division of the Supreme Court on 04 June 2001 and the Bank has started its operations from July 04, 2001. The Chairman of the Bank is Mr. Fazle Hasan Abed. Now the Managing Director of the bank is Mr. Imran Rahman. The bank has made a reasonable progress due to its visionary management people and its appropriate policy and implementation.

Since its inception PR is giving emphasize on four things:

(a)  Quality provide (in Loan)

(b)  Commitment (for timely handover)

(c)  Service (to the clients)

(d)  Satisfaction (of the clients)

Departments of BRAC Bank Ltd:

If the jobs are not organized according to their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively. If the departmentalization is not fitted for the particular works there would be haphazard situation and the efficiency of particular department will decline. BRAC Bank Ltd. has does this work properly. There are 18 departments in BRAC Bank Ltd. These departments are as follows:

1. Human Resources Department
2. Financial Administration Department
3. Asset Operations Department
4. Credit Division
5. SME Division
6. Internal Control & Compliance Department
7. Marketing & Product Development Department
8. Impaired Asset Management Department
9. Remittance Operation Department
10. Treasury Front
11. Treasury Back
12. General Infrastructure Service
13. Information Technology Department
14. Customer Service Delivery
15. Cards Division
16. Call Center
17. Cash Management Department
18. Secured Remittance Department

Services / Products of BBL:

There are five different business units generating business BRAC Bank Limited:

• Small & Medium Enterprise (SME)
• Corporate Banking
• Retail Banking
• Treasury
• Remittance Services

All the units are being operated in a centralized manner to minimize costs and risks.

Small & Medium Enterprise (SME):

For SME loan operation, BRAC Bank Ltd has in total 900 unit offices, 80 zonal office, 12 territory and 1800 Customer Relationship Officers. These CROs work for the Bank to converge clients for getting the SME loan. Once CROs get the loan application and if it is less than 500,000 TK then zonal officer has the authority to approve the loan. But if it is above 500,000 then the CROs send it to Head Office for all necessary approval. After approving the loan then Asset Operation Department starts its work. As the scopes of businesses are growing, the amount of files and disbursement is getting bigger. In May 2007, AOD has processed 3249 files amounting Tk. 1,235,200,000. So SME Division’s success greatly relies on the performance.

SME Products-

1. Prothoma Rin.
2. Supplier Finance.
3. Anonno Rin.
4. Digoon Rin.
5. AroggoRin.
6. Pathshala Rin.
7. Opurbo Rin.

Corporate Banking:

Categories- the facilities our corporate Division offers to our customers are mainly of two-Funded Facilities:-

Funded tells us that this type of facilities allows the customer to have money ‘on his hand’ for use i.e. he will get money as to meet his business demand. Examples are-

• Working Capital Loan.
• Over Draft Facility.
• Term Loan.
• Lease Finance.
• Demand Loan.

Non-Funded Facilities-

Non-Funded facilities are those type of facilities where customers don’t get fund on their hand rather get Bank’s Guarantee service to do international trading-import and export. Letters of Credit, Bank guarantees etc. are the examples of the non-funded facilities.

Treasury

Money Market Desk

BRAC Bank has a strong presence in the Treasury Market in Bangladesh. The Money Market Desk of the Treasury Division mainly deals in Bangladeshi Taka transactions. The basic activities undertaken by the Money Market Desk are:

• Management of Statutory Reserves viz. Cash Reserve Ratio (CRR) & Statutory Liquidity Ratio (SLR)
• Daily Funds & Liquidity Management
• Investment Management

Treasury Services

• Call/Overnight Lending & Borrowing
• Term Money Borrowing & Lending
• Repurchase Agreement
• Treasury Bills (T-Bills)

 Monitoring:

Area of Monitoring-

The purpose is to know the entire business condition and all aspects of the borrowers so that mishap can be avoided.

1. Business Condition: The most important task of the CRO to monitor the business frequently, it will help him to understand whether the business is running well or not, and accordingly advice the borrower, whenever necessary. The frequency of monitoring should be at least once month if all things are in order.
2. Production: The CRO will monitor the production activities of the business and if there is any problem in the production process, the CRO will try to help the entrepreneur to solve the problem. On the other hand the CRO can also stop the misuse of the loan other than for the purpose for which the loan was disbursed.
3. Sales: Monitoring sales proceed is another important task of the CRO it will help him to forecast the monthly sales revenue, credit sales etc. which will ensure the recovery of the monthly loan repayments from the enterprise as well as to take necessary steps for future loans.
4. Investment: It is very important to ensure that the entire loan has been invested in the manner invented. If the money is utilized in other areas, then it may not be possible to recover the loan.

Terms and Conditions of SME Loan:

The SME department of BRAC Bank will provide small loans to potential borrower under the following terms and condition:

• The potential borrowers and enterprises have to fulfill the selection criteria
• The loan amount is between Tk 2 lacs to 30 lacs.
• SME will impose loan processing fees for evaluation/ processing a loan proposal as following:

Table: Loan processing fees

Loan can be repaid in two ways:

1. In equal monthly loan installment with monthly interest payment, or
2. By one single payment at maturity, with interest repayable a quarter end residual on maturity

• Loan may have various validates, such as, 3 months, 4 months, 6 months, 9 months, 12 months, 15 months, 18 months, 24 months, 30 months and 36 months.
• The borrower must open a bank account with the same bank and branch where the SME has its account
• Loan that approved will be disbursed to the client through that account by account payee cheque in the following manner: Borrower name, Account name, Banks name and Branch’s name
• The loan will be realized by 1^st every months, starting from the very next months whatever the date of disbursement, through account payee cheque in favor of BRAC Bank Limited A/C. With Bank’s named and branches name
• The borrower will install a signboard in a visible place of business or manufacturing unit mentioned that financed by “BRAC Bank Limited”.
• The borrower has to give necessary and adequate collateral and other securities as per bank’s requirement and procedures.
• SME, BRAC Bank may provide 100% of the Net Required Working Capital but not exceeding 75% of the aggregate value of the Inventory and Account Receivables. Such loan may be given for periods not exceeding 18 months. Loan could also be considered for shorter periods including one time principal repayment facility, as stated in loan product sheet.
• In case of fixed asset Financing 50% of the acquisition cost of the fixed asset may be considered. While evaluating loans against fixed asset, adequate grace period may be considered depending on the cash generation after the installation of the fixed assets. Maximum period to be considered including grace period may be for 36 months.

Customer Handling (CH):

In our country currently 52 banks are working with the people through varieties of their attractive products and services and the competition among them is very high. For sustaining, they are offering various types of innovative product for better service for their valuable clients, so, to reach the closer best to the clients’ direct marketing gaining momentum in the country. In terms of SME, its targeted entrepreneurs are the subjects of dealings to achieve the objectives of BRAC Bank and its policy is to contact with clients directly with a confident manner. Some key activities of a CRO:

• Conducting Survey Properly
• Individual contact with entrepreneur for selecting potential borrower
• Deliver BRAC Bank’s products and other services
• Keeping in close touch with clients to develop mutually beneficial long term relationship

Disbursement & Repayment Status:

This status from 2007 to 2009 (Amounts in Crore) is shown as below:

Table : Disbursement and repayment amount in crore

For January 2009:

(Amounts in Crore)

We can see that the status of disbursement & repayment is increasing day by day. So it is hoped that in future, it will be increasing.

Competitors:

In terms of World Bank advice, most of the private banks are ready to provide small or micro credit loans to the clients because small loans are less risky than the corporate loan. At the recent trend, many banks like Standard Chartered, Islami Bank of Bangladesh, Eastern Bank Limited, Southeast Bank, Dutch Bangla Bank Limited etc are going to take many aggressive steps in terms of small loan to clients.Standard chartered bank already sent marketing troops surrounding the cities for providing loans and deposits. CITI Bank is going to start retail service business for capturing the market. So competitor’s analysis is important factor to carry out in the long run business for any organizations. Among these banks, many of them have lower interest rates but lots of hidden costs and services.

Performance of Brac Bank Ltd:

BRAC Bank Limited will be the most successful private sector commercial bank in our country, though it started its operation few years back. It has achieved the trust of the general people and made reasonable contribution to the economy of the country by helping the people investing allowing credit facility.

Capital Fund: The authorized and paid up capital of BBL is TK.1000 million and TK.500 million respectively.  The paid up capital is one of the strongest in the banking industry. The bank is going to raise its paid up capital in the month September, 2006 by TK.500 million with issuing public share of 5, 00,000 of TK.100 each.

Internal and External source of cash

(Amount in Taka)

Analysis Turnover

SWOT analysis:

Strengths:

• The number of branches is more than any other bank in our country.
• Provide better loan service
• Brac bank Ltd has already established a favorable reputation in the banking industry of the country.
• A good number of experienced bankers in its management.
• The numbers of depositors are more than other bank in our country.
• Largest private sector commercial bank of Bangladesh.
• Management team is very qualified.
• Highest most profitable bank in Bangladesh.

Weaknesses:

• The activities of bank are maintained by manually in the rural area.
• Lack of employee satisfaction.
• Lack of modern information technology being practiced.
• Many competitors.
• Salary is fewer amounts other than competitors.

Opportunities:

• Many area SME network coverage
• Their network service is whole the country, so people get more service here.
• Brac Bank can collect deposit from rural area that other bank can not do because of their huge branches.
• The income of people is increasing day by day.
• People are interested in getting personal loan with lower interest rate.
• High contribution in economic development
• Money transfer easily in any branches of Bangladesh.

Threats:

• Many banks offer different type of product that people like than Brac Bank.
• Banking competitors are increasing.
• Some time the recruitment process is not effective.

Areas of improvement:

Working process of CRO:

The working process that they are followed is not very speedy. All the process takes manual involvement. Another thing is sometimes organization remain busy for interest incresing. And before completing the interest they can’t provide the loan. And many of time they fill soil by truck. It’s a slow process.

Facilities for employees:

BRAC Bank Ltd(BBL) tries to give all types of facilities that they want for better performance. But still there is some lacking like there is nothing to entertain. So that employees get bored. As well as the working hour is 10am to 7pm. It is also be shorted.

Equipments:

They use computer, printer and papers as equipments. Computer that they are using is very old version and it is need to replace so that it can work effectively. On the other hand Data file that they use for identify the information is need to be updated because so many changes has happened in recent year.

Summery Of Findings

All over the world the dimension of Banking has been changing rapidly due to Deregulation, Technological innovation and Globalization. Banking in Bangladesh has to keep pace with the global change. Now Banks must compete in the market place both with local institutions as well as foreign ones. To survive and thrive in such a competitive banking world. So that a study has been made up on the customers’ of BRAC Bank to measure that how much satisfied they are. To complete this research a survey was conducted on 35 customers of BBL. The findings are as follows:

Among 35 respondents 32 respondents were male and rests of 3 were female. There are four categories level of education but most of the respondents are less than SSC-SSC. In occupation wise highest numbers of respondents are Businessman and Student. Most of the respondents are in income range of 75,001-1, 00,000. Among the 35 respondents most of them taken loan from BBL. After completing the survey we saw that respondents are strongly satisfied that taking loan from this bank is easy. Customers satisfied with the interest rate. After analysis this statement, I found that most of the respondents give their opinion as a strongly agreed. Customers get waiver based on repayment. it does so. After analysis this statement, I found that most of the respondents are strongly agreed. Because of their reputation. The respondents are very satisfied about the bank are nearby to my locality. After analysis this statement I found that most of the respondents follow the rules and regulation of the loan. The respondents are very satisfied that this bank provides competitive facilities.

Customer relative officers (CRO) are very friendly. After analysis this statement, I found that most of the respondents are strongly agreed. Because of their relation. Most of the respondents are very satisfied about the repayment system of the BBL.Respondents were strongly satisfied with the terms and conditions of Small & Medium Enterprises (SME) that they provide.CRO give more practical suggestion to acquire knowledge of loan. After analysis this statement, I found that most of the respondents are strongly agreed.

Most of the respondents are very satisfied because CRO are available during the consulting hour. Overall loan facilities for the client are excellent .after analysis this statement, I found that most of the respondents give their opinion as a strongly disagreed. After completing the survey we saw that respondents are strongly dissatisfied that the loan they provide is proportionate to the asset customer deposit. Most of the respondents are strongly satisfied that there is uninterrupted loan supply in this bank. According to the nature of loan taker business that the respondents were very satisfied. Most of the respondents are strongly agree that overall performance of this loan section is better of BBL.I will recommend to my relative to take loan in this bank. After analysis this statement, I found that most of the respondents are strongly agreed.

This bank is depending on the customers’ interest and satisfaction. So that BBL always concern about satisfaction of customers’. Finally observing all the factors we can include here that the customers of BBL is very much satisfied about the loan service of BRAC Bank.

Conclusion

In fact, BRAC Bank promotes broad-based participation in the Bangladesh economy through the provision of high quality and modern banking services. From my research I also found loan has more priority in terms of selecting the different type of schemes according to the customer satisfaction on repayment. I present this report on the basis of the knowledge and experience gained during the internship period. Throughout the report my objective is to seek and find out the customer satisfaction on repayment behavior of Brac bank Ltd. From this report I found that most of the customers of the bank are satisfied about the loan service of the bank. BRAC bank has established their image as one of the best loan service provider for its potential customers. And SME loan is one of such quality product through which they offer the small and mediocre entrepreneurs a quality banking services and earn the maximum profit as well. The recovery rate of this loan is 97%, which is extremely good in comparison to any other bank’s recovery rate. Brac Bank has made it possible as the loan is given to experienced, small and mediocre entrepreneurs most of whom are middle aged, slightly educated and having moderate income and this class of people is very loyal. But they can serve this class of customers with more commitment and loyalty and they can turn the recovery rate to 100%.

BRAC Bank Ltd started with a vision to be the most efficient financial intermediary in the country and it believes that the day is not far off when it will reach its desired goal.BRAC Bank Limited looks forward to a new horizon with a distinctive mission to become a highly competitive modern and transparent institution comparable to any of its kind at home and abroad.

RECOMMENDATIONS:

From my research and analysis I got lot of result about the customers’ satisfaction on repayment behavior of BRAC bank Ltd. I identified that many of the respondents from my sample aware about the loan service of banking activities. I have come up with some points. The points are as below:

• Overall loan facilities for the client are excellent. But I found that most of the customers have given the disagreed opinion with the statement.
• The loan they provide is proportionate to the asset I deposit. Because I found that most of the customers have given the disagreed opinion with the statement is BRAC Bank Ltd keeps customers informed about when services will be performed.
• CRO give more practical suggestion to acquire knowledge of loan. Because I found that most of the customers were highly dissatisfied for CRO give more practical suggestion of loan
• Decentralization may save time and helpful for effective decision making.