The private commercial Brac Bank, which is leading SME (small and medium enterprise) banking and mobile financial services, now plans to double its business in the next four years.
The bank, which has invested heavily in technology in the last four years, will now reap from the investment by expanding digital services across the country.
Selim RF Hussain, the Managing Director and Chief Executive Officer of Brac Bank, was directly recruited by Brac Bank founder Sir Fazle Hasan Abed in 2015, with the commitment of increasing SME business from 38% to 50%, as the bank's prime agenda is financial inclusion.
The bank has finally fulfilled its target as its SMEs portfolio has grown to 53%. The bank also established a strong foothold in providing MFS (mobile financial service) through its bKash platform, the leading MFS provider in the country.
Recently, Selim RF Hussain, shared the country's largest SME bank's upcoming plans in an interview with The Business Standard, marking the bank's 20th anniversary.
The Business Standard: What is the vision of the bank moving forward?
Selim RF Hussain: If we look at the two years since the pandemic, what has happened is that the behaviour of consumers all over the world has changed and now everyone is shopping online.
They also buy their daily necessities online. People can even be seen ordering toothbrushes and toothpaste online. People are getting used to buying everything online. Everyone has learned this online behaviour.
You will see that every business, be it retail or wholesale, is moving online now. So, 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 began planning for it in 2018. It took us almost a year to plan before we invested. This year, the investment in digital technology will be near about $30 million. So I think other banks should also focus on this.
We plan to double the bank's business in the next four years. The board has reappointed me for another four years right up to my retirement. And we have now taken an ambitious plan to double our business across all segments in the next four years.
We were able to take the SME business to 50% mark in 2020 and we want the figure to be 55-60%. Apart from this, we have made great progress in corporate and retail banking.
We have about 30% of corporate business. And for retail business, it is around 17-18%. No bank in Bangladesh has such a diversified business.
That is the biggest strength of Brac Bank. This way, it is possible to compensate for one segment using the other.
TBS: Just as BKash is leading MFSs, Brac Bank is at the forefront in leading the banks. What is the story behind this success?
SRFH: There are so many reasons and we are just celebrating our 20-year anniversary.
The first reason is probably that the bank is well-structured with a small board of seven directors. Three of them are nominated from Brac while four are independent.
Our chairman is an independent director - Dr Ahsan Mansur. So, the bank's governance, transparency and compliance aspects are strong. No other bank has all these. If you take a look at the board and management, there is a strong management team led by myself.
The board never interferes with management concerning day-to-day operations. The board sets the policies and measures the performance regularly. That is it… it does not interfere in any other area. Management is free to work independently, build the business and expand it.
What the board wants is for the management to work the way it wants to, and take the bank forward. This is independence and segregation between the board and management, and I do not know if any other bank in Bangladesh has that. You know this well. This is the primary reason for Brac Bank doing so well.
Another reason is teamwork. There are around 8,500 workers here. It is a big bank.
Hard work, integrity and commitment exists in the team. It is extraordinary and the whole team is very strong. It is a strong team that is allowed to work professionally and independently.
TBS: How has your six-year journey with Brac Bank been?
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 bank 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 leads in all these indicators.
Currently, the market capital is above Tk 8,200 crore, highest among banks, according to Dhaka Stock Exchange.
I am very proud that in four to six years we have moved from the middle of the table to the top. Now, we are dominating many aspects of the banking sector.
Note that the net profit of the bank stood at Tk 284 crore in the first half of last year. The rate of default loans of the bank was 3.65% as of 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 about 16%. Bringing in 8%-9% from there created a huge revenue shortfall. At that point in time, our cost-income ratio was Tk170.
In layman's terms, we had to spend Tk170 to earn a hundred taka. We would have to make a loss of Tk70. At the end of the year, the cost-income ratio came down to about 80 % by using various tools, through the intervention of technology. This year we plan to bring it down to 60 %.
TBS: Were there any lay-offs during this time?
SRFH: No. In fact, many people were recruited last year. This year, we plan to recruit 1,800 people and open all 360 sub-branches. You may wonder why we are investing in technology and also opening all these sub-branches. Why invest in that too?
Let me explain, there are multiple challenges to consider. We believe that a purely digital service will not survive in Bangladesh because we still have many years to go compared to Europe, China or Singapore. We feel that cash will be relevant here, especially when we look at the whole country.
I told you before that we want to double our business. We want to double both our market share and the number of customers. Similarly, we want to introduce banking on a large scale 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 on the digital as well as physical realms.
You might use internet banking or an organisation may take our Corporate Banking payment solution, but individuals living in villages may not understand it. They may prefer using an agent banking solution. We want our banking solutions to be for 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 recovering loans. NPL management will be the biggest challenge for the banking sector.
That is why the condition of a loan, what has been provided and what has not been done, all need to be closely monitored. Not only in 2022, but also in 2023.
There is a tendency among large lenders in our country not to pay back their loans.
However, as I have mentioned, 53 % of our total loans are to the SME sector. There, we recognise the customers' ability to pay as well as their willingness in repaying the loan. There is no tendency among them to flee to Canada, England, Singapore or Malaysia with money.
But our corporate customers are different. Even if they have money, they often do not want to pay. The legal framework of our country is not enough to deter them. It is a difficult situation.
There is also a challenge in investing in technology. The old ways of banking can be done for one or two years, maybe not more than that. Customers need to be provided instant and digital high-quality service. Customers now want to avail banking services at home or in the car. That is why we have to come up with a plan. And we must invest.
TBS: How do you like to spend your leisure time?
SRFH: I personally like to spend time reading storybooks. I watch a lot of TV, especially cricket and football, which are my passion. I love watching European football games all night long. I used to play a lot of cricket when I was very young.