Report on Bangladesh Development Bank Limited

Background of Bangladesh Development Bank Ltd

 Historical Background of BDBL

Bangladesh Development Bank Limited (BDBL) is fully state owned Bank of Bangladesh which came to effective at 3^rd January 2010. Bangladesh Shilpo Bank (BSB) and Bangladesh Shilpo Rin Songstha(BSRS) were merge into Bangladesh Development Bank Ltd (BDBL) at 16^th November 2009 and come to effective at 3rd January 2010. In addition commercial banking, BDBL provides financial and technical assistance to broaden the private as well as public sector industrial base of the country. It prioritizes, especially, Export Oriented/Export Linkage industrial units, Efficient Import Substitution, Joint Ventures, Commercialization of local technology and promotion of agro-based industry.

Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Songstha (BSRS), with almost similar functions, were established on 31^st December, 1972 under the presidential order no. 129 to provide loans and facilities to industrial institutions, help to set up new industries and expand investment in Bangladesh. But the two companies failed to meet expectations. In 1992, the government moved to privatize BSRS, which remained unaccomplished due to some complexities. The companies board sat on December 8 to fix a vendor agreement schedule with the government, the BDBL organogram, employee pay structure and select office space for the bank’s headquarter. As per merger plans, the accounts of the two organization’s consolidated by December 2009.

The paid up capital of the merged company will amount to 400 crore. Before merged the paid-up capital of BSB was Tk. 200 crore was Tk. 70 crore for BSRS. Making adjustments to the reserve funds of the two companies will raise the capital. In the meantime, BSRS raised its funds to Tk. 200 crore. As per BDBL operational plans, the bank will operate across the country by setting up branches at district levels. At present, BSB has 15 branches while BSRS has 2. 

Institutional Overview:

 Sources of Fund

• Paid up capital
• Loan from Government of Bangladesh
• Loan from Bangladesh bank
• Commercial Banks
• Local/overseas Financial Institutions
• Suppliers’ Credit

 Ownership

At least 51% of the authorized capital of BDBL be subscribed by Government and remaining 49 percent be subscribed by Bangladeshi nationals or by local or foreign Financial Institutions. Presently, 100 percent ownership of the Bank belongs to the Government.

 Nature of Business

Bangladesh Development both in local and foreign currencies for setting up new industries and rehabilitation of sick industries. Besides, the bank started full-fledged commercial banking function from 1993. Bank Limited (BDBL) as the prime development financing institution of the country extends financial assistance.

  Bank’s Functions

Bangladesh Development Bank Limited (BDBL) extends term loan facilities in local and foreign currencies to industrial projects (both new and BMRE) in the private and public sectors. Besides, the bank also performs the following activities:

• Extends term loans by giving special priority to the Small and Medium Enterprises ( SMEs ) for achieving self-reliance as well as enhancing production and employment including empowerment of women
• Provides working capital loans to industrial projects;
• Provides equity support in the form of underwriting and bridge loan to public limited companies.
• Issues guarantees on behalf of borrowers for repayment of loan;
• Extends commercials banking services along with deposit mobilization;
• Purchases and sales shares/securities  of enlisted companies for BDBL and on behalf of  its customers as member of Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange (CSE) Ltd. for capital market development;
• Conducts projects promotional activities along with preparation of various sub-sect oral study reports.

 Board of Directors

The overall policy formulation and the general direction of the Bank’s operation vested in the Board of Directors appointed by the Government. This Board of Directors consists of 9 (nine) members including the Chairman and the Managing Director. The Managing Director is the Chief Executive Officer (CEO) of the Bank.

Training & Development of Human Resource: 

Bank have a Training Department for upgrading the professional competence and skills of its Officers and Staff. Below are the main functions of Training Department:-

• To prepare & implement Annual Training Program.
• To impart training of the Officers/Staff regarding business & operations of the Bank.
• To adopt measures to hold in-house training and make arrangements to send Bank’s Officers to overseas training programs.
• To establish liaison with domestic & overseas organizations relating to training.
• To send Officers to local training institutions for improving professional skills; and
• To organize Seminar/Workshop/Symposium on key economic/banking issues.

 Credit Rating

Bangladesh bank made  mandatory for all banks from January, 2007 to have themselves credit rated by a Credit Rating Agency vide BPRD circular no. 6   of July 5, 2007. For compiling with the circular, Bangladesh has appointed credit rating information & Services limited (CRISL) to conduct Credit Rating of the bank. Accordingly, a memorandum to understanding (MOU) had   signed in between the BSB and CRISL. The credit rating of the bank for FY20006-07

  Risk Management

Risk, to varying degrees, is involved virtually in all types of business activities. The financial services proving organizations are not different from this. The risk exposures mainly include credit, market, liquidity, operational, etc. Bangladesh bank has identified 5 core risk areas relating to banking operations. These are:

1. Credit risk
2. Asset & liability /balance sheet
3. Foreign exchange risk
4. Money laundering risks
5. Internal control & compliance risks

In congruence with the CRM guidelines of Bangladesh bank, BDBL prepared 6 sub manual for its compliance.

 Advisory Services

Apart from identification and development of viable projects, the bank assists the interested entrepreneurs in selecting industrial projects having appropriate technology and potential market by providing advisory services and huge information.

 Training          

For upgrading the professional competence and skills of its employees, the Bank is continually arranging training programs both at home and abroad. During FY 2008-09, 370 officers participated in 68 in-house and local trainings programs and seminar. Besides officer was sent abroad for training. In 2008-09 about TK. 0.03 million was spent for training purpose. During FY 2008-09 an internal “special training working for the users of software modules developed by EATL under computation scheme of BDBL “was arranged where 107 officers, 10 staff, other senior level executive.

 Computerization         

To improve the working efficiency and provide better customer service, computerization of Bank’s activities is going on. In this regard, the Bank has undertaken a far-flung action plan. The bank installed activities of LAN & WAN in different Zonal offices and branch offices. In FY2008-09 26 additional modern computers along with network accessories was installed in Dhaka commercial branch office as well as zonal and branch offices outside of Dhaka. Besides these 1 remote access server 9(RAS0 and 1 WAN server and 18 computers were installed.

  Corporate Social Responsibility

The banks functions are not only limited to industrial financing , it is also committed to be known as an institution that builds long term relationship and delivers  awards to its clients for regular  payment of loans as well as responsible for its employees and communities. The bank promotes various socio-cultural activities, like picnic, sports, etc. for gearing and cheering up its employees, financial assistance to the bank’s employees, and financial assistance to the severe ailing employees for proper treatment. Besides, the bank also donates to charitable institution and government’s relief fund.

 Achievement of the Bank in FY 2008-09

• Recovery of loan Tk. 908 million (96% of the target).
• Sanction of loan Tk. 446 million.
• Disbursement of loan Tk. 638 million.
• Income from purchase and sale of shares Tk. 130 million.
• Provision of loan kept Tk. 1237 million as against required provision of Tk. 1212 million.
• Capital surplus Tk. 917 million.
• DSL payment Tk. 574 million in cash.
• Liquidation of loan accounts of 29 projects.
• Rephasement/ Rescheduling of loan accounts of 14 projects.
• Net Asset Value Per Share Tk. 1727 (value of per share Tk. 1000.
• Earning Per Share (EPS) Tk. 127 (value of per share Tk. 1000.

Bangladesh Economy and Industrial Development

The Bangladesh economy is confronted with the stiff competitive challenges in the context of the free market economy and present globalization. The economic crisis is further aggravated by the persistent hike of oil price and some other necessary importable items in the international market as well as political unrest along with many other internal shocks. Accommodating the challenges alongside for maintaining macro economic stabilization as well as moderate CPI inflation and for achieving desired economic growth , various measures are undertaken by the government and the central bank like , cautious and restricted Monetary policy, reality based fiscal policy, strong participation of modern sector in the economic activities lead to greater success in the manufacturing sub-sector aided by continued  growth in service sector , unique export  growth  of the readymade garments (RMG) industry despite phasing out of global multi  fiber arrangement MFA highest growth in the  remittance flow has made possible to achieve a sustainable economic stable economic stabilization for the country which is very helpful for industrial sector development in this country. Vital issues relating to Bangladesh economy are:

• Domestic savings and investments
• Foreign trade   including import and export business.
• Gross official foreign exchange reserve
• Total official foreign aid disbursement
• Money supply including supply of narrow money and broad money
• Wage earners remittances including transfer of fund through electronic system   along with opening of monitoring cell in different banks and taking actions against hundi.
• Price situation which includes customer price inflation , etc

Role to Promote Industrial Development of BDBLConcept of Industrial Development

Bangladesh Development Bank Limited (BDBL) is one of the most important Development Finance Institution (DFI) of the county which spreads financial aid both in local and foreign currencies for setting up new industries in Bangladesh. It also focuses on the Balancing Modernization Reconstruction and Explanation (BMRE) of existing industries and rehabilitation of sick industries to boost-up the industrial development of the Bangladesh by ensuring the consistency with the industrial policy and financial reform programs of the government towards market economy. Besides these, BDBL issues guarantee for repayment of loans to foreign companies, organizations, extends equity support by way of purchasing shares and underwriting public issue of shares of the companies with limited liabilities. With a view to create dynamism and diversity in its activities, the bank started full-fledged commercial banking function form 1993. This enables the bank – financed projects to obtain commercial banking services including working capital loans, the bank extend financial, technical and advisory services to the interested entrepreneurs in setting up of industrial units which broadly indicates the cordial support of BDBL in the industrial development sector of Bangladesh.

List of Industrial Sectors that BDBL can Issue Loan:

• Food and related gods
• Fruits / vegetables processing industries.
• Textile industries
• Spinning industries
• Specialized textile
• Knit composite

Leather and leather related goods:

• Leather shoes
• Other goods (Gloves, bag, jacket, luggage etc)

Chemical and pharmaceuticals:

• Chemicals for leather processing
• Other chemicals
• Servicing industries
• BSCIR developed technology dependent projects.

The other sectors that government declared are thrust sector. Export oriented project dependent on indigenous raw material and agro-based industries will get preference for new financial issue. Besides the above mentioned project new potential projects also considerable Other especially encouraged sectors are: Spinning, Specialized textile, terry Towel, knit composite, leather processing, chemicals, industries based upon the technologies developed by BCSIR, etc

How to Approach BDBL for Financial Aid:

When and entrepreneur wants to approach for financial help s/he should fulfill the following requirements:

• Any potential entrepreneur seeking financial assistance from BDBL can obtain Bank’s Standard Questionnaire Form (BSQF), which is different for new projects and BMRE projects   along with the detailed guidelines, on payment of Tk. 1000.00 – (one thousand) only.
• There is no fixed time limit for submission of loan proposal to the bank after issuance of the BSQF.
• 1/8th of 1% of the project cost subject to a maximum of Tk. 1,00,000 is to be deposited as evaluation fee with the BDBL while submitting the loan proposal irrespective of whether a project is approved or not.
• In case of joint venture/co-financing projects, the sponsors are required to make project deposit and pay evaluation fee at prevailing rates to the respective financial institutions on pro rata basis.
• Project proposal involving loans exceeding Tk. 50.00 lac require, among others, submission of techno-economic feasibility   report with the proposal.
• Proposal submission must be completed with necessary documents following standard checklist   distributed with the BSQF.
• Only fully documented loan proposals are accepted for processing. Bank’s final decision regarding sanction/rejection of loan is communicated within 2 (two) months from the date of receipt of the fully documented loan proposal.

 Project Check List:

LOAN PROPOSAL FOR SETTING UP OF NEW/BMRE INDUSTRY
please tick mark the items below to ensure
that the Loan Application is complete

 Preparing Feasibility Report:

To get loan from BDBL by an entrepreneur a feasibility report must be prepared

Requirements for preparing feasibility of the project:

Technical aspects

Cost of the project.
Annual production capacity & manufacturing process.
Location, infrastructural facilities feature and estimated cost of the land.
Civil drawing(s) and cost of civil works.
Estimated cost of machinery with installation.
Annual requirement of raw material(s) with source of availability.
All input output data of the project.

Utility services required.
Implementation schedule.
Note: Relevant things to comply with the machinery procurement policy of the Bank.

 Market aspects

Use and users of the product.
Estimation of demand.
Market price of the proposed product(s).
Analysis/opinions on existing market competition.
Marketing strategy
Existing capacity and capacity under development, if any.

Financial aspects

Cost of the project & Means of finance.
Debt-Equity Ratio.
Fixed Assets Coverage Ratio (FACR) to be considered as 1.50.
Capital Structure.
Assumptions of Financial Evaluation.
Profit Estimation.
Sensitivity analysis.
Debt Service Coverage Ratio (DSCR).
Break Even Analysis.
Cash flow statement.
Projected Balance sheet.
Internal Rate of Return (IRR).

 Management aspects

Structure & Shares.
Memorandum of Articles and relevant (Joint Stock Company’s) registration certificates.
Introduction to members of the proposed management, relevant experience, net worth (asset declaration).
Comparison of equity proposed and net worth declared.
Source of working capital or working capital loan.

Note: Lending Risk Analysis (LRA) with estimate of Z-score and Y-score estimation required for proposed loan amount more than Bangladesh taka 5.00 million.

 Recent simplifications:

No documents of assets declared as net worth need to be submitted to BDBLs.
Loan proposal be processed within 60 days after submission of application with full documents   required.
Apart from limited company Partnership and Proprietorship concern too will be financed
against FACR-Fixed Asset Coverage Ratio 2 times.

 Securities against Loan

Security of Loans:

• Mortgage / Hypothecation of Land, Building and Machinery.
• Personal guarantee of the directors/shareholders.
• 100% Share certificates of the sponsoring directors/shareholders.
• Additional collaterals, where necessary.
• In case of rented premises fixed assets equivalent to 50% of loan amount.
• For Partnership and Proprietorship business concern 2 times security (FACR=2.00).

Project deposit:

After sanction of loan the borrowers have to deposit 10% of equity which will be released as per terms of the sanction letter.

Fees required to be deposited with the bank for new loan:

• Documentation fee.
• Charge filing fee.
• 100% share certificates issued in the name of the sponsoring directors/shareholders of the company.
• Instrument of Blank Shares Transfer Form-117 duly signed by each of the director/ share holder of the company.

Documentation required for, other than new loan case, is:

• Additional Loan
• Rephrased Loan.
• Change of Director.
• Change of Management.
• Change of Project Location (land).
• Collateral Security.
• Underwriting.

Documents/papers to be submitted after sanction of loan and for documentation of loan agreement

 Private Land (Primary/Additional/Collateral/Security):

• Title deed in respect of the land;
• Mutated Khatian of parcha;
• Up-to-date rent receipt;
• Non-encumbrance certificate with search of records for the last 12 years;
• Bia-deed, Bia-Khatians etc. in respect of the project land for chain of possessions for the last 12 years
• Approved site plan showing location and boundaries;
• Blue prints; and
• Mutation certificate.

 RAJUK, KDA, CDA & BSCIC Land:

• Allotment Letter;
• Possession Delivery certificates;
• No objection certificate to create mortgage in favor of the bank;
• Lease deed duly registered;
• Evidence of payment of purchase price; and
• Site plans.

Project land acquired by Govt. /Govt. Khash land Allotted to the Company:

• Acquisition Order;
• Requisition Order;
• Letter of Allotment;
• Possession Delivery Certificates;
• No Objection Certificate to create mortgage in favor of the bank;
• Lease deed duly registered; and
• Evidence of payment of purchase price.

The sponsoring companies are also required to submit the following papers/documents:

Private/Public Limited Company:
(a) Certified copy of Memorandum & Articles of Association;
(b) Certified copy of Incorporation/commencement of business of the company;
(c) Certified copy of the return of allotment of shares, if any;
(d) Certified copy of summary of share capital;
(e) Certified copy of share transfer deed, if any
(f)  Permission from the controller of Capital Issues for raising paid-up capital where applicable;
(g) Auditors certificates regarding the paid-up capital of the company;
(h) 100% share certificates of the directors along with blank share transfer instruments; and
(i) Any other papers/documents as may be necessary based on the terms and conditions of     sanction of loans.

 Partnership Concern:

(a)Deed of partnership
(b) Trade License
(c) TIN
(d) Audit report
(e) Tenant Agreement, if applicable.

 Proprietorship Concern:

(a)Trade License
(b) TIN
(c) Bank solvency certificate
(d) Tenant agreement, if applicable

10. ‘NOC’ from Rajuk/Municipal Authorities for setting up the project on land within their area.
11. ‘NOC’ from BSCIC authority for project to be set-up at BSCIC Industrial Estate;
12. ‘NOC’ from BPDB/DESA/BPS/TGT & DC.
13. ‘NOC’ from Department of Environment Pollution Control, where applicable;
14. ‘NOC’ from the Director, Drug Administration

 INTEREST RATE ON BDBL’s LOAN:

 Note: The actual interest rate to be changed to the Borrower company shall be the rate prevailing on the date of signing the loan agreement and the same will continue till liquidation of the loan.

Encouraging Credit Policy to Encourage Industrialization:

 Policy for BDBL’s own investment:

• Debt equity Ratio ranging from 50:50 to 60:40 depending upon the nature of the project, repayment capability, sponsor credit worthiness etc.
• Investment Limit Taka 10 crores in a single project but above Taka 10 crores may be financed in syndication.
• Working capital loan for BDBL-financed projects, especially, for operative and profitable projects under the branch offices of the bank.
• BMRE (Balancing, Modernization, Replacement and Expansion) facility given to regular good borrowers of the Bank.
• Reduction of 1.5% interest or 10% rebate of chargeable interest for regularly repaying borrowers.
• Reduction of rate of interest to attract prospective entrepreneurs.
• Introduction of lending facilities to proprietorship and partnership concerns alongside traditional financing of private and public limited companies.
• Reduction of time limit for processing of loan application from 90 to 60 days.
• Special emphasis to promote agro-based small industries.
• Sub-sectors selected by Bangladesh Bank under EEF (Equity & Entrepreneurship Fund) is encouraged for financing.
• Joint venture projects based on technical collaboration and foreign equity participation is given special preference.

 Government Policy, Especially, for Foreign Investment:

 Major Fiscal Incentives

• Generous Tax Holiday up to 12 years;
• Concessionary Tax for 5 years after completing initial 10 years;
• Duty free import of capital machinery and raw materials for export oriented industry and concessionary import for domestic industry;
• Avoidance of Double Taxation;
• Tax exemption on royalties, technical know-how fees received by any foreign collaborator, firm, company and expert;
• Exemption of income tax up to 3 years for the foreign technicians employed in industries specified in the relevant schedule of income tax ordinance;
• 100% export-oriented industry outside EPZ will be allowed to sell 20% percent of their products in the domestic market on payment of applicable duties and taxes;

  Major Non-Fiscal Incentives

• 100% foreign equity allowed;
• Unrestricted exit policy;
• Full repatriation facility of dividend, profit and invested capital;
• Complete legal protection for invested capital;
• Local and foreign borrowing allowed;
• Fund raising from local capital market allowed;
• Permanent residence permit and citizenship for foreign investors;
• Multiple Entry Visa for foreign investors and employees;
• One stop service for foreign investors by BOI/BEPZA;
• Permanent resident ship by investing a minimum of US$ 75,000 (non-reparable);

 Foreign investment is specially desired in the following categories:

• Export-oriented industries;
• To set up Industries in the Export Processing Zones (EPZs);
• Basic industries based mainly on local raw materials;
• Labor-intensive/technology-intensive/capital-intensive industries.
• High technology export-oriented or import substitution products;
• Quality enhancement, marketing and capacity building of existing industries;

 Prospective Sectors for Foreign Investment in Bangladesh:

• Textile (Ready Made Garments, Textiles, Composite Textiles).
• Frozen Foods (Frozen Shrimp, Frozen Fish, Other Items).
• Leather (Finished Leather, Leather Goods).
• Electronics (Home Appliances, Telecommunication Equipment, Semi-Conductor).
• Agro-based Industry (Fresh Fruits & Vegetables, Cooked/Semi Cooked Food Items, Canned Juice, Dairy and Poultry, Livestock and Fisheries).
• Information Technology (Data Processing, Software Development, Hardware manufacturing.
• Ceramic (Tableware, Sanitary ware, Insulator).
• Light Engineering (Machinery Parts, Bi-cycle, And Other Consumer Items).
• Natural Gas-based Industries (Electricity, Fertilizer, Petrochemicals, CNG Distribution Network).
• Telecommunication.
• Export-oriented and Export-linkage Industries.
• Steel Industry in Bangladesh.

 Steps Taken to Gear Up the Activities of Bank for Industrial Development:

• To make the bank a vibrant one, some pragmatic business plans are now under implementation, i.e.
• Gear up recovery through setting up of pragmatic recovery targets. Because if BDBL can fulfill huge targets, it will be consider as a strong participant in the industrial sector of Bangladesh.
• Expansion of new area of business.
• To put a great effort in deposit mobilization.

WORKING CAPITAL ARRANGEMENTS FOR INDUSTRIES

Working capital is like flow of blood in the organization. Without sufficient working capital all development activities may be stopped. When any organization faces serious working capital shortage then BDBL helps them to run their business smoothly. BDBL provides working capital to those projects which are financed by BDBL and are also profitable concern.

 Working Capital Finance
 Policy:
Working Capital may be financed to a project depending
on the following policies:

• To be a BDBL-financed project.
• The unit should be a profitable concern.

 Conditions:
The General terms & conditions applicable for the short term credit may be summarized as under:-

• For Hypothecated loan limit :
  Mortgage of assets valuing twice of loan amounts
• For pledged loan limit
  Mortgage of all goods, raw materials purchased under finance. In addition, mortgage of additional security amounting twice of loan amount.
• General :

(a) Current ratio should be maintained as 1.3;

(b) Rate of interest should be fall quarterly basis as per rules circulated by Bangladesh Bank and BDBL;
(c) Period of loan should he one year;
(d) Renewal of loan should depend on total recovery of loan & interest; and
(e) The loan will be governed by all terms & conditions in BDBL Manual for commercial banking.

Procedures:
The standard procedures may be classified as under:

At processing stage:

(a) Loan application should be submitted in BDBL’s specified Form;
(b) Fully documented all loan case should be placed before the Credit Committee for its      recommendation
(c) Assets to be mortgaged as security should be inspected by Bank Officials, as per effective      circulars;
(d) Loans should be sanctioned by the competent authority as per delegation of power; and
(e) All processing should be completed within three months (after submission of fully documented loan application form)

At disbursement stage

(a) All disbursement should be governed by the terms & conditions specified in the sanction letter.
(b) Documentation should be completed within one month after issuance of Sanction letter.

 Advisory Services for the Industries

No one can take fruitful decision regarding all the maters without help of others opinion, directions, and guidelines form other experts. BDBL does it as an institution. Although it is not major activity of this bank the bank assist the interested entrepreneur in selecting profitable industrial projects availing appropriate technology and potential market by providing advisory services and various types of information. BDBL not only provides advisory services for industry selection but also it provides advice regarding operational guidelines that may help the industry for their day-to-day operation. When any organization face serious problem, they come BDBL and talk with the personnel having idea on this area. BDBL has expertise in the different disciplines. For upgrading the professional competence and skills of its employees the bank is continually arranging training program both at home and abroad. These personnel are serving for industrialization of our country. Besides extending financial assistance the bank encourage prospective investors to wet-up industrial projects.

 Encourage Entrepreneurs and Co-Operations With Them For Industrialization

Entrepreneurs are the pioneers of success of a country. With unskilled or successful entrepreneur industrialization is not possible at all. BDBL always tries to find out actual entrepreneurs from the people who are interested to become a businessman. In this regard BDBL arranges different seminar, symposium for encouraging people. In some cases an entrepreneur has money but he fear to invest it in the industrial sector. However BDBL manage to remove his confusion. Although the cultural heritage of our country isn’t good at all in respect of business initiator because people are not self motivated for dong the business. If we think of our neighbor county like India and China people enjoy this profession and huge money are interesting in the new business area.

Bangladesh Development Bank Limited performing some sort of activities, which is absolutely helpful for new entrepreneurs. Economy of a country directly linked with the investment either local or foreign. Without investment employment generation policy will unable to Bangladesh Development Bank Limited or their untiring support to the economy and people as well. Emerging of new entrepreneur will make some new investment in the existing or a new potential sector. BSB plays vital role in respect of such activities.

 Affects on Infrastructural Development

Availability of infrastructure is one of the objective conditions for the development of a country. A well-knit transportation network facility can ensure the swift movement of people and goods. Since infrastructural development and industrialization are interconnected if one is developed the other one must get better with it. We can say infrastructural development is must of industrial development and enlargement. Thus the loan portfolio of commercial banks for constructions, transport and communication seems fundamental in the broader perspectives of the development of a country.

Infrastructures cover up road, gas supply, electricity, water supply etc. Good infrastructures attract investor and ultimate impact on investment. We know only domestic investment is not enough for development of a country. Foreign direct investment also require for employment generation and foreign exchange earnings. Political volatility and law order situation also responsible for discouraging people to invest money in this country. While Bangladesh Development Bank Limited take initiatives to establish industry in a new area government put special focus for infrastructural development of that area. In such a way our infrastructural development is now amazing. So it is clear that BSB also has some contribution with government for infrastructural development as initiator.

 study Related Activities for Industrialization

A research work can discover the prospective and driving force sectors for investment. Since BDBL plays important role for industrialization, so research work is needed for contribution to this sector. BDBL published some research paper on the industrialization and its future. The bank highlight on the growth of research work for making investment in high value added manufacturing industrial sectors towards achieving rapid industrialization of the country. For this, the bank prepares sub scrotal studies and reports having marketing prospects BDBL always does more or less such activities in the different ways viz. identification of potential / thrust sector for investment, measurement of viability of a particular project and observation on existing profitable or sick project. Research work will give a clear idea about a particular area for which it has been done. So research work not only helps BDBL in case of sanctioning loan but also gives us new idea for which new businessmen encourage to invest money. From such report government may take idea and give concentration on that particular sector. It is clear that research related work of Bangladesh Development Bank Limited more or less fruitful for economical development of our country. So Bangladesh Development Bank Limited should emphasize on research and research related work for finding out truth and production of new ideas.

obstacles to Industrial Development

As a developing country Bangladesh has to face a lot of obstacles in case of industrial development sector, i.e.

1) As the living cost is so high, it’s too tough to create market of new product.

2) Being not highly educated about business most of the entrepreneurs does not know how to success

3) Low quality of infrastructural system is a great giant to industrial development

4) Lack of natural resource is one of the most important obstacles.

5) Lack of technological knowledge is one of the most gigantic hindrances in case of industrial development

6) Political instability is an obstacle which highly hinder the development of industrial sector

7) Unskilled labor is a great problem for which industrial development is mostly affected

8) Proper implication of industrial policy, rules and regulations are not always applied, so it greatly hampers the industrial development sector of Bangladesh

Contribution of BDBL as a Loan Provider to Different Sectors Loan Sanction

 Introduction

After appraising the project, Project appraisal committee submits the project appraisal report, on the basis of that a project is approved. If the project is approved, loan is sanctioned to the proposed project. During FY 2008-09 the Bank sanctioned total long loan of tk.1050 million to 36 projects and short term loan of tk.10 million to 7 projects and disbursed tk.616 million to 40 projects.

 Loan Sanction Procedure:

First of all, a client who wants to have a loan asks for an application form, which is known as Bangladesh Standard Questionnaire form (BSQE). He has to pay one eighth of one percent cash money 1/8th of 1% of the total loan amount with the filled form. The person is required to submit necessary papers and documents by the bank the information generally consist of

• Name of the product
• Name & designation of the entrepreneur
• Types of Project
• Types of Products
• Site of the Project
• Amount of the Project
• Copy of memorandum, articles of association and other papers relating to legality of the projects.
• Site, production process flow diagram etc.

When all the required papers and documents are submitted along with the fee Tk. 1000 plus l/8^lh of 1% of total loan amount, the proposal is then under consideration of judging the project viability.

 Sanction of long-term Loans:

The Bank kept on sanctioning of term loans during FY 2008-2009 this year local currency loan of BDT 436 million was sanctioned to 27 projects. Of the total sanctioned amount tk.316 million was for 12 new projects, and an additional loan of Tk. 74 million for 5 ongoing projects.

 sanction of term loan                             

                                                Source: Annual Report 2008-2009

Commitment and Disbursement of term Loans:

During FY 2008-2009, the bank made commitment of Tk. 511 million in local currency to 8 projects. During the period, the bank disbursed term loans of Tk. 616  million in local currency to 40 projects and FY 2007-2008 these was403 million and 384 million respectively.

Commitment and disbursement of term loan

Source: Annual Report 2008-2009

 Loan sanction scenery of BDBL over last 10 years (Amount in thousand BDT)

Here 10 years loan sanction of BSB to various sectors has been shown in the table:

 Loan Sanction of BDBL in 10 Sectors

 Sector-wise position of Bank’s Loan portfolio:

1. Food & Allied products:

   During FY 2008-09 total number of food and allied products projects in the loan portfolio stood at 48 with a total loan outstanding of Tk. 352 million. In the preceding year under this sector the total member of projects of the loan portfolio stood t 46 with a total loan outstanding of Tk. 1335 million. In FY 2007-08 total numbers of projects and total loan outstanding are decreased comparing to the previous FY under this Food and Allied products.

 Jute & Allied products:

During FY 2008-09 total members of jute and Allied products projects in the loan portfolio stood at 1 with a total loan outstanding of Tk. 1 million. In the preceding year under this sector the total member of projects of the loan portfolio stood at 2 with a total loan outstanding of Tk. 1.38 million. In FY 2008-09 the member of project 1 and loan amount Tk. 0.38 million are decreased comparing to the FY 2007-08 under this jute and allied products.

During FY 2004-05 to FY 2008-09 there is decreased trend from previous year. During FY 2004-05  total  member of Jute and allied products projects in the loan outstanding of Tk, 674 million, total member of projects 5 and loan outstanding amount Tk. 673 million is decreased in FY 2008-09 comparing to the FY 2004-05 under this jute and allied products.. Cotton, woolen and synthetic Textiles:

 During FY 2008-09 total members of cotton, wooden and synthetic textiles projects in the loan portfolio stood at 49 with a total loan outstanding of Tk. 4653 million. In the preceding year under this sector the total no. of projects of the loan portfolio stood at 52 with a total loan outstanding Tk. 4401.15 million. In FY 2008-09 the total member of projects 3 are decreased and loan outstanding amount Tk. 234 million are increased comparing to the financial year 2007-08 under this cotton wooden and synthetic Textiles sectors.

During financial year 2004-05 total numbers of cotton woolen and synthetic Textiles projects in the loan portfolio stood at 87 with a total loan outstanding at Tk. 4148 million. The total member of projects 38 is increased and loan outstanding Tk. 487 million is also decreased comparing to the financial year 2008-09 under this cotton woolen and authentic Textiles sectors.

  Paper, Paper products and printing:

 During FY 2008-09 total numbers of paper, paper products and printing projects in he loan portfolio stood at 6 with a total loan outstanding of Tk. 124 million. In the preceding year under this sector the total member of projects of the loan portfolio stood at 6 with a total loan outstanding of Tk. 130.31 million.

In FY 2008-09 the total member of projects remain unchanged and loan outstanding amount 6.31 million are decreased comparing to the financial year 2007-08 under this paper, paper products and printing sectors. Tannery and leather products:

 During FY 2008-09 total member of Tannery and leather products projects in the loan portfolio stood at 4 with a loan outstanding of Tk. 79 million. In the preceding year under this sector the total number of projects of the loan portfolio stood at 4 with a total loan outstanding of Tk. 89 million. In FY 2008-09 the total member of projects has no change and loan outstanding amount 10 million are also decreased comparing to the FY 2007-08 under this Tannery and leather products sectors.

During FY 2004-05 total member of Tannery and leather products projects in the loan portfolio stood at 9 with a total loan outstanding of Tk. 333 million. The total member of projects 5 is decreased and loan outstanding amount Tk. 254 million also decreased in FY 2008-09 comparing to the FY 2004-05 under this paper, paper products and printing sectors.

 Non-metallic Mineral products:

 During FY 2008-09 total no. of Non-metallic Mineral products projects in the loan portfolio stood at 03 with a total loan outstanding of Tk. 41 million. In the preceding year under this sector the total number of projects of the loan portfolio stood at 3 with a total loan outstanding of Tk. 57 million. In FY 2008-09 the total number at projects has no change and loan outstanding amount Tk. 16 million are decreased comparing to the FY 2003-04 under this non-metallic Mineral products factory.

Forest and wooden products:

 During FY 2008-09 total member of forest and wooden products project in the loan portfolio stood at zero. In the preceding year under this sector the total no. of projects of the loan portfolio stood also zero.

During FY 2004-05 total number of forest and wooden products projects in the loan portfolio stood 2 with a total loan outstanding of Tk. 10 million. The total member of projects 2 is decreased and loan outstanding amount Tk. 10 million also decreased in FY 2008-09 comparing to the FY 2004-05 under this forest and wooden products sectors.   Electrical Machinery and goods: 

 During FY 2008-09 total numbers of machinery and spare parts projects in the loan portfolio stood at 1 with a total loan outstanding of Tk. 33 million. In the preceding year under this sector the total member of projects of the loan portfolio stood also 1 with a total loan outstanding of Tk. 21 million. In FY 2007-08 total numbers of projects remain unchanged but loan amount decreased comparing to the FY 2008-09 under this Machinery and spare parts sectors.Machinery and spare parts: 

 During FY 20084-09 total numbers of machinery and spare parts projects in the loan portfolio stood at 4 with a total loan outstanding of Tk. 20 million. In the preceding year under this sector the total member of projects of the loan portfolio stood at 5 with a total loan outstanding of Tk. 25 million. In FY 20087-09 total number of projects is decreased comparing to the FY 2007-08 under this Machinery and spare parts sectors. Service Industries:

 During FY 2008-09 total number of service industries projects in the loan portfolio stood at 30 with a total loan outstanding of Tk 196 million. In preceding year under this sector the total number of projects of the loan portfolio stood at 27 with a total loan outstanding of Tk. 207 million. In FY 2008-09 the total numbers of projects 3 are increased but total loan amount Tk.11 million decreased comparing to the FY 2007-08 under this service Industries sectors.Miscellaneous: 

 During FY 2008-09 total numbers of miscellaneous projects in the loan portfolio stood at 3 with a total loan outstanding of Tk. 76 million. In the preceding year number this sector the total number of projects and a total loan outstanding was also same, i.e. Tk. 76 million.

During FY 2004-05 total member of projects in the loan portfolio stood at 13 with a total loan outstanding of Tk. 198 million. The total number of projects 10 and loan outstanding amount Tk. 122 million is decreased in FY 2008-09 comparing to the FY 2004-05 this miscellaneous sectors.

Metal Products:

During FY 2008-09 total number of Service Industries projects in the loan portfolio stood at 5 with a total loan outstanding of Tk. 19million. In the preceding year under this sector the total member of projects of the loan portfolio stood 3 with a total loan outstanding of Tk. 14 million. In FY 2008-09 total numbers of projects and total loan outstanding are increased comparing to the previous FY under this Service Industries.

 During FY 2008-09 total numbers of Transport and Transport Equipment projects in the loan portfolio stood at 4 with a total loan outstanding of Tk. 54million. In the preceding year under this sector the total member of projects of the loan portfolio stood 5 with a total loan outstanding of Tk. 74 million. In FY 2008-09 total numbers of projects and total loan outstanding are decreased comparing to the previous FY under this Service Industries.

  Chemical and Pharmaceuticals:

During FY 2008-09 total number of Chemical and Pharmaceuticals projects in the loan portfolio stood at 14 with a total loan outstanding of Tk. 228 million. In the preceding year under this sector the total member of projects of the loan portfolio stood 16 with a total loan outstanding of Tk. 234 million. In FY 2008-09 total numbers of projects and total loan outstanding are decreased comparing to the previous FY under this Service Industries.

Petro Chemical Products:

 During FY 2008-09 total number of Petro Chemical Products projects in the loan portfolio stood at 3 with a total loan outstanding of Tk. 107 million. In the preceding year under this sector the total member of projects of the loan portfolio stood 4 with a total loan outstanding of Tk. 123million. In FY 2008-09 total numbers of projects and total loan outstanding are decreased comparing to the previous FY under this Service Industries.

STRENGTHS OF BDBL:

• As a prime DFI, BDBL has a large number of qualified and experienced professionals.
• Structural set up and business location is strategic.
• BDBL’s asset position is quite satisfactory

  Findings of the Study

The findings of my study are as follows:

In spite of establishing new industries and contributing for creating new employment opportunities by BDBL , its role in industrial development is not satisfactory.

• The main aim of BDBL is to stimulate industrialization throughout the country.
•  Now BDBL is a loosing concern. The main causes are inadequacy of recovery of loan. In some cases they issued loan with out proper justification. As a result some project becomes sick and some had been stopped.
• The inefficient allocations of resources have created a huge amount of bad debt. In some cases security against the loan is not sufficient to recover the loan. As a result large number of projects becomes sick. Loan recovery is below the satisfactory level.
• Loan appraisal procedure is time consuming and to some extent project plan becomes irrelevant after getting the loan.
• The role of BDBL in industrial development is huge. They are promoting industrialization day by day.
• BDBL rehabilitates sick industries.
• BDBL encourages people to start businesses through their advisory services, seminar and symposium.
• BDBL is conscious about the social benefits.
• Generally BDBL grants term loan, working capital loan and bridge loan.
• Absence of up to date project appraisal manual.
• There is lack of adequate and updated information from Management Information Systems (MIS)
• There is lack of proper and quick coordination between different departments. As a result normal operations are hampered.
• BDBL has a huge amount of accumulated loss.
• Sometimes pressure group’s involvement in sanctioning loan.
• Lack of adequate attention is given to analyze risk and uncertainties associated with the projects.
• Lack of financial commitment on the part of the borrower, the result being the failure of mobilization of equity by them in future means they divert their equity in other purpose after getting the loan amount.
• Unstable policy of the government due to political changes over time.  

RECOMMENDATIONS

From my tinny knowledge the suggestions are:

• BDBL should establish a central database for its project appraisal system.
• BDBL should give more concentration on physical investigation before issuing loan.
• BDBL may use up to date software that may help in automatic selection of profitable projects according to some predetermined criteria.
• The Bank should introduce modern communication systems. So that every department or unit can get information in their desk.
• Loan sanctioning procedure should be easier for the sponsors.
• Time duration of loan sanctioning procedure should be reduced.
• Project appraisal manual should be updated.
• Reduce the political interference in case of loan sanctioning for establishment of the project.
• Proper and quick coordination between different departments should be ensured.
• More effective market research should be conducted.
• Experienced and motivated entrepreneur should be allowed for sanctioning the loan.
• They should start online banking service as early as possible for providing prompt response to the customers so that customers are able to know their transaction status and various necessary information whenever they need.
• Encouraging the borrower to repay the loan in time.
• Both primary and secondary database of the BDBL should be improved and strengthen.
• More emphasis should be taken into consideration on the effect of a project to measure socio-economic cost and benefit.
• Responsibility should be established to all according to their involvement in appraisal of project.
• BDBL has some skill manpower such as Engineer, Economist, Business executives, Lawyers and so forth who are ignorant of use of modern technological equipments. So BDBL should arrange for training campaign to make them familiar with modern technology so that they can exploit the modern technology for organizational advancement.
• BDBL can arrange training programs for the entrepreneurs of those projects which are financed by BDBL.
• BDBL should ensure adequate supply of modern technological instrument, such as, computers, access to Internet.
• BDBL can target its website as an important medium of advertisement for informing customers about their services and products. Therefore it should regularly update its website.
• BDBL may also go for online application procedure for its loan application processing that may reduce much paperwork, duplicity of work, and harassment of employees significantly.

Conclusion

BDBL is one of the prime development financing institutions in Bangladesh to accelerate the pace of industrialization of the country. It plays significant role in the industrial development of Bangladesh. As a finance institution it has both strength and weakness. Though, it is said that the contribution of BDBL is below the expectation & it fails to achieve the target, at present BDBL has taken so many steps for the expansion of industrial sector development. Today’s base of industrial development is totally based on Bangladesh Development Bank Limited, so by any means we cannot deny the generous contribution of BDBL in the industrial development sector.