Brac Bank plans to double its business in the next four years: MD

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The bank has also firmly established itself in the provision of MFS (mobile financial service) through its bKash platform, the country’s leading MFS provider.

January 23, 2022, 11:30 a.m.

Last modification: January 23, 2022, 3:28 PM

Selim RF Hussain. Sketch: TBS

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Selim RF Hussain. Sketch: TBS

Private commercial bank Brac, a leader in mobile banking and financial services for SMEs (small and medium-sized enterprises), now plans to double its business over the next four years.

The bank, which has invested heavily in technology over the past four years, will now leverage that investment by expanding digital services across the country.

Selim RF Hussain, Managing Director and CEO of Brac Bank, was directly recruited by Brac Bank founder Sir Fazle Hasan Abed in 2015 with a commitment to increase SME business from 38% to 50% , because the main program of the bank is financial inclusion.

The bank finally met its objective as its SME portfolio increased to 53%. The bank has also firmly established itself in the provision of MFS (mobile financial service) through its bKash platform, the country’s leading MFS provider.

Recently, Selim RF Hussain, shared the upcoming plans of the country’s largest SME bank in an interview with The Business Standard, marking the bank’s 20th anniversary.

The Business Standard: What is the bank’s vision for moving forward?

Selim RF Hussein: If we look at the two years since the pandemic, what has happened is that consumer behavior around the world has changed and now everyone is shopping online.

They also buy their basic necessities online. You can even see people ordering toothbrushes and toothpaste online. People are getting used to buying everything online. Everyone has learned this behavior online.

You will see that all businesses, whether retail or wholesale, are now online. Thus, Brac Bank is investing in this digital transition. And many more digital banking services will be seen in the future.

The digital success of Brac Bank that you see today, we started planning in 2018. It took us almost a year to plan before investing. This year, the investment in digital will be around 30 million dollars. So I think other banks should focus on that as well.

We plan to double the bank’s business in the next four years. The board reappointed me for another four years until I retired. And we have now adopted an ambitious plan to double our business in all segments over the next four years.

Infographic: TBS

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Brac Bank plans to double its business in the next four years

Infographic: TBS

We have been able to increase SME activity to 50% in 2020 and we want this figure to be 55-60%. Other than that, we have made great strides in corporate and personal banking.

We have about 30% business business. And for the retail trade, it is around 17-18%. No bank in Bangladesh has such a diversified business.

This is Brac Bank’s greatest strength. In this way, it is possible to compensate one segment using the other.

TBS: Just as BKash leads MFS, Brac Bank is at the forefront of banking. What is the story of this success?

SRFH: There are so many reasons and we are just celebrating our 20th anniversary.

The first reason is probably that the bank is well structured with a small board of seven directors. Three of them are appointed to Brac while four are independent.

Our chairman is an independent director – Dr Ahsan Mansur. Thus, the governance, transparency and compliance aspects of the bank are strong. No other bank has all of this. If you look at the board and management, there is a strong management team led by myself.

The Board of Directors never interferes with management regarding day-to-day operations. The board sets policies and regularly measures performance. That’s it… it doesn’t come into any other area. Management is free to work independently, grow the business and grow it.

What the board of directors wants is for management to work as it sees fit and to move the bank forward. It’s independence and segregation between board and management, and I don’t know if any other bank in Bangladesh has that. You know it well. This is the main reason why Brac Bank is doing so well.

Another reason is teamwork. There are about 8,500 workers here. It’s a big bank.

Hard work, integrity and commitment exist in the team. It’s extraordinary and the whole team is very strong. It is a strong team that is allowed to work professionally and independently.

TBS: How was your six-year journey with Brac Bank?

SRFH: Six years ago, the bank was in the middle of the table, it was an average bank. Today it is one of the leading banks, in terms of most financial indicators.

In terms of banking governance, ethics, sustainable finance and pure financial metrics – return on assets, return on equity, capital adequacy, portfolio quality, credit ratings, market capital – you can see that Brac Bank is in the lead for all these indicators.

Currently, the market capital is over Tk 8,200 crore, the highest among banks, according to the Dhaka Stock Exchange.

I am very proud that in four to six years, we have gone from the middle of the table to the top. Today, we dominate many aspects of the banking industry.

Note that the net profit of the bank amounted to Tk 284 crore in the first half of last year. The bank’s delinquent loan rate was 3.65% in June last year, according to the bank.

TBS: As you deal more with SMEs, is the single digit lending rate a challenge for you?

SRFH: The market rate in this segment was around 16%. Bringing 8% down to 9% from there created a huge shortfall. At that time, our cost-income ratio was 170 Tk.

Simply put, we had to spend 170 Tk to earn one hundred taka. We would have to make a loss of Tk70. By the end of the year, the cost/income ratio had come down to around 80% using various tools, thanks to the intervention of technology. This year, we plan to bring it down to 60%.

TBS: Were there any layoffs during this period?

SRFH: No. In fact, a lot of people were recruited last year. This year, we plan to hire 1,800 people and open all 360 branches. You might be wondering why we are investing in technology and also opening all these sub-branches. Why invest in it too?

Let me explain, there are several challenges to consider. We believe that a purely digital service will not survive in Bangladesh because we still have many years ahead of us compared to Europe, China or Singapore. We think silver will be relevant here, especially when looking at the whole country.

I have already told you that we want to double our turnover. We want to double both our market share and the number of customers. Likewise, we want to introduce large-scale banking services all over Bangladesh, in every district and upazila.

We understand that pure digital banking may not be relevant in many cases. That is why we are pursuing a combined strategy. We will provide services in the digital and physical domains.

You can use internet banking or an organization can use our Corporate Banking payment solution, but people living in villages may not understand this. They may prefer to use a banking agent solution. We want our banking solutions to be accessible to everyone.

TBS: What is the biggest challenge for the bank in the post-pandemic period?

SRFH: I think the biggest challenge for bankers will be collecting loans. Managing NPLs will be the biggest challenge for the banking industry.

This is why the status of a loan, what has been provided and what has not been provided, all need to be closely monitored. Not only in 2022, but also in 2023.

The big lenders in our country tend not to repay their loans.

However, as I mentioned, 53% of our total loans are for the SME sector. There, we recognize the customers’ ability to pay as well as their willingness to repay the loan. They have no tendency to flee to Canada, England, Singapore or Malaysia with money.

But our client companies are different. Even if they have money, they often don’t want to pay. The legal framework of our country is not enough to dissuade them. It is a difficult situation.

There is also a challenge in investing in technology. The old banking methods can be used for one or two years, maybe not more than that. Customers need instant, high-quality digital service. Customers now want to benefit from banking services at home or in the car. That’s why we have to develop a plan. And we have to invest.

TBS: How do you like to spend your free time?

SRFH: Personally, I like to spend time reading storybooks. I watch TV a lot, especially cricket and football which are my passion. I love watching European football matches all night. I played a lot of cricket when I was very young.

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