Jamuna Bank: aiming for the top spot



Five years ago, with falsified documents, Bismillah Towels started with Tk 180 crore from Jamuna Bank – an incident that caused wholesale changes in how the third-generation lender works.

"Now there's no chance of a loan scam like this," said Shafiqul Alam, general manager of Jamuna Bank, at The Daily Star in an interview.

Shortly after the loan scam in 2012, Jamuna introduced a centralized banking system, in which branch officials do not have the power to give the go-ahead for loan proposals without authorization of the registered office.

"Many banks resist switching to the centralized system due to the cost of labor, but they should, if they want to reduce the risk of loan scams."

In the traditional system, branch officials are still sensitive to collusion with malicious borrowers.

Jamuna has also introduced world-class core banking software to manage risks and improve its service standards.

The incident, it can be said, was a turning point for Jamuna in all respects, and Alam, who joined the bank in 2013, is leading the positive changes.

The Bank's non-performing loan rose from almost 10% to 4.05% in 2016. Its other indicators, such as loans, deposits, net income, earnings per share or cost- benefit have all been an upward trajectory.

Growing efforts to offer better services to clients are working well for sponsors and general shareholders of banks: for 2016, Jamuna paid a dividend of 20 percent, which is the highest in five years.

In 2016, the bank registered Tk 450 crore as profit, and Alam expects it to reach the Tk brand 500 crore this year.

Encouraged by the financial stability that he has found, Jamuna is now making loans to small and medium-sized businesses.

The bank has set a target of increasing its exposure to SME loans to 18 percent of its total loan portfolio by the end of the year from 14 per cent.

"We are getting better rates of loans to SMEs and the default rate is also low," said Alam, who began his banking career at ANZ Grindlays Bank.

The lending rate in the banking sector is likely to face rapidly rising due to the increase in credit demand in the private sector.

The interest rate on deposits has already started rising up in July, resulting in a two and a half year decline, according to data from the Bank of Bangladesh.

The weighted average interest rate on deposits was 4.89% in July, up from 4.84% in June.

The interest rate was down since January 2015, when lenders provided 7.26 percent.

Private sector credit growth reached 16.94% in July – the highest in five years and well above the target set by the central bank for the first half of the year of 16.2% 2017-18.

Jamuna recorded a 25% growth in private sector credit in June, well above the industry average, Alam said.

The bank has put more effort to improve the size of its loan book to overcome the losses caused by the Bismillah scam.

"We have already overcome the losses by improving the quality of the loans we have disbursed over the past two years."

In 2012, the total outstanding loans of the bank was Tk 5,000 crore, which climbed to Tk 12,700 crore at the end of June this year.

Jamuna now aims to be among the best banks in five years, he said.

"The market is very competitive due to the high number of banks"

Previously, the central bank had to force banks to reduce the interest rate but with little success.

"Now the interest rate is falling automatically. It is not necessary for the authorities to interfere in this aspect."

Alam is very excited about prospects in the SME sector as the economy of Bangladesh develops.

"The price of SMB products is high and, at the same time, the default rate is low."

About the growing demand for consumer finance, he said that the purchasing power of the middle class is expanding.

"Overall, retail loans are risky, but consumer financing remains a very small part of the loan portfolio of the industry."

Consumer credit rose 31.29 percent year-on-year in 2009 to Tk 29,500 crore in 2016, according to BB data. The segment accounted for 4.37 percent of total outstanding loans in the economy.

In June, Jamuna has 112 branches across the country with 2,495 employees.



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