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.
Selim RF Hussain. Sketch: TBS
Selim RF Hussain. Sketch: 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.