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Performance Evaluation of L/C Operations of MBL

Farzana Akter RunaID: 13102280Program:BBA

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Presentation OutlineIntroductory PartOrganizational PartFinancial PartResearch PartActual Task Part2

L/C Operations of MBl

Introductory Part3

Objectives

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Limitations

5Time Duration of the reportConfidentialityLack of CommunicationLack of cooperation of clients

Methodology

6Selection of the topic:Identifying data sources:Collection of dataClassification, Analysis, Interpretations and Presentation of dataFindings of the studyFinal report preparation

Organizational Part7

Head office61,Dilkusha Commercial AreaDhaka, Bangladesh

Legal FormPublic Limited CompanyCorporate SloganEfficiency is our strength.CatagoryCommercialTypePrivateDate of Incorporation20th May,1999Inauguration of First Branch2nd June,1999Paid up CapitalTaka 12000 million(2015)Chairmen of the BoardM. S. AhsanName of Managing DirectorKazi Mashiur RahmanNumber of Branches119Number of Employees2017E-mailit@mblbd.com

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Company Profile

9Name Mercantile Bank LimitedIncorporated in Bangladesh -May 20, 1999Commenced commercial operation -June 02, 1999Number of Branches -109 (10 new branches in 21st December,2016)Authorized Capital -Tk. 12000.00 million Paid-up Capital -Tk. 7391.57million Total assets -TK. 182800.17 million Special emphasis -Export, Import, Trade Finance, SME Finance, Retail Credit and Finance to women Entrepreneurs

Background of MBL

Vision: Would make Finest Corporate Citizens

Mission: Will become most caring, focused for equitable growth based on diversified deployment of resources and nevertheless will remain healthy and gainfully profitable bank.

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Vision & Mission

11Strategic objectives To increase shareholders value To achieve economic value addition To be market leader in product innovation To be one of the top three financial institutions in Bangladesh in terms of efficiency To be one of the top five financial institutions in Bangladesh in terms of market share in all significant market segments they serveFinancial Objectives-To achieve 20% return on shareholders equity or more, on average.

Objectives of MBL

12Organogram of MBL

Management Hierarchy of MBL

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14 M.H Ahsan Chairman Md. Anwarul Haque Vice Chairman A.K.M Shaheed Reza Vice Chairman Dr Mahmood Osman Imam Independent Director Dr. Md. Rahmat Ullah Independent Director Alhaz Akram Hossain (Humayun)

Board of Directors

Cont.

15 A.S.M. Feroz Alam Director M.Amanullah Director Md. Abdul Hannan Director Morshed Alam, MP Director Alhaj Mosarref Hossain Director Md. Sahabuddin Alam Director

16Departmental Structure of MBL

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SStrengthsWWeakness

OOpportunitiesTThreatsSatisfactory operational efficiencyDiversified product linesLow human resource turnoverExperienced Management TeamFavorable reputation in the banking industryDont follow any long-term strategiesDepends on fixed depositLack of strong promotional sector.Limited branch networkSME businessReal time online bankingOpportunity in retail bankingCan provide more attractive and deposit facilities and credit facilitiesUnfavorable changes of Government rules and regulationsIncreasing Interest RateIncreasing Market RiskMarket pressure for Dollar crisis

SWOT Analysis

Internal FactorsExternal Factors

18Internal FactorsWeight(out of 1)Rating(out of 5)Weighted ScoreStrengths.10.09.20.15.11

.12.10.07.061.003.003.005.004.003.15

3.003.002.903.00.30.271.60.35

.36.30.20.183.56Satisfactory operational efficiencyDiversified product linesLow human resource turnoverExperienced Management TeamFavorable reputation in the banking industryWeaknesses:Dont follow any long-term strategiesDepends on fixed depositLack of strong promotional sector.Limited branch network Total

Internal Factor Analysis Summary

19External FactorsWeight(out of 1)Rating(out of 5)Weighted ScoreOpportunities.15.20.20.10

.12

.08.10.051.003.005.004.004.00

3.00

3.002.754.000.451.250.800.4

0.36

0.240.28.203.98Opportunity in retail bankingSME businessReal time online bankingCan provide more attractive and deposit facilities and credit facilitiesThreatsUnfavorable changes of Government rules and regulationsIncreasing Interest RateIncreasing Market RiskMarket pressure for Dollar crisisTotal =

External Factor Analysis Summary

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20Internal Factor(IFAS)

External Factors(EFAS)Strengths (S)-Satisfactory operational efficiency-Diversified product lines-Low human resource turnover-Experienced Management Team-Favorable reputation in the banking industryWeaknesses (W)-Dont follow any long-term strategies-Depends on fixed deposit-Lack of strong promotional sector.-Limited branch networkOpportunities (O)-SME business-Real time online banking-Opportunity in retail banking-Can provide more attractive deposit facilities and credit facilities SO-As the bank has satisfactory operating efficiency it can use it to improve retail banking-The bank can use its good will to grasp the opportunity of SME business.WO-As the branch network is limited it can grasp the real time online banking opportunity to five better service-Can provide more attractive deposit and credit facility which will automatically help to remove the weakness of weak promotional sector.Threats (T)-Unfavorable changes of Government rules and regulations-Increasing Interest Rate-Increasing Market Risk-Market pressure for Dollar crisisST-Diversified product line can be used to get rid of the threat of market pressure for dollar crisis.- Experienced management team can handle the situation of increased interest rate and market risk.WT-Long term strategies should follow so that it can help to find a alternative solution in time of increased interest rate and market rate.-Dependence on fixed should deposit can create problem if there is sudden change in government rules and regulations. So the dependence should decrease

TWOS Matrix

21Strategic FactorsWeight(out of 1)Rating(out of 5)Weighted ScoreDurationShortInter-mediateLongS- Diversified product linesS-Low human resource turnover

W- Depends on fixed depositW- Lack of strong promotional sector

O- SME businessO- Opportunity in retail banking

T- Increasing rates of interestT- Market pressure for Dollar crisis

Total.15.10

.17.09

.10.10

.12.17

14.505.00

3.502.75

4.14.3

2.83.000.6750.50

0.595.2475

.41.43

.336.51

3.7035***

**

***

Strategic Factor Analysis Summary

22PEST Analysis

Porters Five Forces :

23High HighMediumModerately lowHigh

Competitors of MBL24 Banks NameEstablished YearLogosEastern Bank Ltd.1992Al-Arafah Islami Bank Ltd.1995Primer Bank Ltd.1999EXIM Bank Ltd.1999Bank Asia Ltd1999Trust Bank Ltd.1999Standrad Bank Ltd.1999Shahjalal Islami Bank Ltd.2001

25Product Mix

Products and Services of MBLDepositLoanCards- Current Deposit Account - Saving Deposit Account - Fixed Deposit Account - Double Benefit Deposit Scheme - Mashik Sanchay Prakalpa - Quarterly Benefit Deposit Scheme - 1.5 times Benefit Deposit Scheme - Advance Benefit Deposit Scheme - Special Savings Scheme - School Banking - Educational Planning Deposit Scheme - Super Benefit Deposit Scheme -Consumer credit scheme - Doctor credit scheme - Rural planning scheme - Lease Financing - Any purpose loan - Educational loan - Car loan - Home loan - Dual card - Debit Card - Prepaid Card Supplementary Card - Visa Card

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Performance of the Bank

Indicators20112012201320142015Authorized Capital8,000.008,000.0012,000.0012,000.0012,000.00Paid-Up Capital4,968.106,110.756,599.617,391.577,391.57Deposits102,262.02132,093.64124,566.97140,475.84154,869.52Investments24,645.3841,314.1930,090.6032,184.0933,829.46

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Financial Part

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Ratio Analysis :

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Cont.

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Cont.

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Cont.

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Cont.

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Cont.

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Financial Highlights

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Actual Task Part36

Job Description as an intern of MBL Uttara Branch

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General Banking Department:

38Customer DealingAssisting officerMaintaining registry bookCheque book related work

Foreign Exchange Department

39Advising Registry entry Preparing Forward LetterMaintaining files and keeping records Preparing monthly statementOther Tasks

Cash Section

40Entry of Cheque number and deposited amountGive entry in registry book.

Observations

41The working environment was very comfortableThe employees of the bank from top to bottom were very cooperative and helpful.

L/C Operations of MBL42

Foreign Exchange43

Import L/C

44Parties of L/C-Mandatory Parties are:Importer/ Buyer/ ApplicantOpening Bank/ Issuing bankAdvising Bank/ Notifying BankExporter/ Seller/ BeneficiaryOptional Parties (In case of need) are:Negotiating BankConfirming BankPaying/ reimbursing bankImport Procedure

Cont.

45Requirement for ImportAn account with MBL, Uttara BranchValid Import Registration Certificate (IRC), annual import number is mentionedhere.Tax Paying Identification Number (TIN)Pro-forma InvoiceMembership CertificateLCAF (Letter of Credit Authorization form) properly attestedOne set of IMP FormInsurance Cover note with money receiptDP noteLetter of arrangement.Others

CONT

46L/C ApplicationAdvising the Import L/CPresentation of DocumentsRetirement of DocumentsPayment Procedure of Import DocumentsDate of PaymentPreparing Sale MemoRequisition for the Foreign CurrencyTransmission of MessageLoan against Trust Receipt (LTR)

Export L/C

47Formalities Required For Export L/CExport Registration Certificate (ERC) The EXP FormSecuring the OrderSigning of the ContractProcuring the MaterialsRegistration of SaleShipment of Goods

Cont..

48Back-to-Back Letter of CreditPayment of Back-to-Back L/CInland Letter of Credit (ILC):Local Bill Purchase

Performance of Import & Export L/C49

Research Part50

Problem Statement

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To know why some L/C are not operating as fast as othersDocumentation ProcessPayment DelayCredit Limit

Methodology of the StudyPrimary Sources:Face to face conversation, Interview with the account holders, bank manager, executives and clientsData collected through the questionnaire.

Secondary Sources:Secondary data are collected from the following sources:Annual reports of MBLPublished documentsOfficial filesData available with the website of MBL.Different publication of Bangladesh bank and Bangladesh economic reviews.Outlets of Bangladesh Institute of Bank Management.

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Sampling Plan:Sample Unit: Customer of Selected branch Sample Frame: 400 Foreign exchange customersSampling Size: 50 customerSampling Procedure : Probability Sampling (Simple Random Sampling)

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5450 people including both male (78%) and female (22%)

Sample Size

Questionnaires ScaleStrongly Disagree ......1Disagree ...2Neither Agree nor Disagree ..3Agree 4Strongly Agree .....5Hypotheses Test

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Hypothesis Development

56H1: The documentation process while opening a L/C is complex.(need minimum 13 documents)H2: MBL provides the list of necessary documents to customer before opening a L/CH3: Difference between the deposit amount and L/C amount in MBL is high (25%)H4: MBL provides the facility to adjust the credit limit of L/C.H5: The process of renewing a L/C is complicated.H6: The balance transfer procedure of payment of MBL is fast.

Hypothesis TestingLiker Scale H1H2H3H4H5H61= Strongly Disagree 5504002= Disagree 10466503= Neither agree nor disagree6546714= Agree222430243065= Strongly Agree7121010843Total166184194180191242Average 3.323.603.883.603.824.84Standard Deviation1.261.22.871.17.820.42Z-test value4.555.2311.54.443.3939.40

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Graphical Representation

01. HA: Documentation process while opening L/C is complex (need minimum 13 documents) H0: Documentation process while opening L/C is simple enough.

I want to test the null hypothesis Ho: = 2.5 HA: > 2.5 n = 50 Since the sample size n > 30 so, I may use Z - test. Here ,

=3.32 = 1.26 Zcal = (

)/ (/n) = 4.55At 5% level of significance, follows Z distribution Z 0.05= 1.645Since Z cal> Z tab,the null hypothesis is not accepted. So at 5% level of significance, it can be said that Documentation process while opening L/C is complex .58

Hypothesis -159

Calculation: H-1

=3.32 =79.38 ==1.5876 = = 1.26Zcal = ( )/ (/n) = = 4.55

Cont..02. HA : MBL provides the list of necessary documents before opening a L/C.

H0: MBL does not provide the list of necessary documents before opening a L/C.

I want to test the null hypothesis HO: = 2.5 HA: > 2.5 n = 50Since the sample size n > 30 so, I may use Z - test.Here = 3.60 = 1.22 Zcal = ( )/ (/n) = 5.23At 5% level of significance, follows Z distribution Z 0.05= 1.645

Since Z cal> Z tab,the null hypothesis is rejected. So at 5% level of significance, it can be said that : MBL provides the list of necessary documents before opening a L/C.

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Hypothesis - 261

Calculation: H-2

=3.60

=74.42

= =1.4884 =

= 1.22Zcal = ( )/ (/n) = = 5.23

Cont03. . HA: Difference between the deposit amount and the L/C amount in high (25%).

H0Difference between the deposit amount and the L/C amount in Low.

I want to test the null hypothesis HO: = 2.5 HA: > 2.5 n = 50Since the sample size n > 30 so, I may use Z - test.Here, = 3.88 = 0.87 Zcal = ( )/ (/n) = 11.5At 5% level of significance, follows Z distribution Z 0.05= 1.645Since Z cal> Z tab,the null hypothesis is rejected. So at 5% level of significance, it can be said that Difference between the deposit amount and the L/C amount in high (25%).

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Hypothesis-363

Calculation: H-3

=3.88

=37.845 = =.7569 = = 0.87Zcal = ( )/ (/n) = = 11.5

Cont..04. HA: MBL provides the facility to adjust the credit limit of L/C.

H0: MBL does not provide the facility to adjust the credit limit of L/C.

I want to test the null hypothesis HO: = 2.5 HA: > 2.5 n = 50Since the sample size n > 30 so, I may use Z - test.Here = 3.60 = 1.17 Zcal = ( )/ (/n) = 4.44

At 5% level of significance, follows Z distribution Z 0.05= 1.645Since Z cal> Z tab,the null hypothesis is rejected. So at 5% level of significance, it can be said that MBL provides the facility to adjust the credit limit of L/C.

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Hypothesis-465

Calculation: H-4 =3.60

=68.445 = =1.3689 = = 1.17Zcal = ( )/ (/n) = = 4.44

Cont..05. HA: The process of renewing a L/C is complicated.

Ho: The process of renewing a L/C is not that much complicated.

I want to test the null hypothesis HO: = 2.5 HA: > 2.5 n = 50Since the sample size n > 30 so, I may use Z - test.Here , = 3.82 =0.82 Zcal = ( )/ (/n) = 3.39At 5% level of significance, follows Z distribution Z 0.05= 1.645Since Z cal> Z tab, the null hypothesis is rejected. So at 5% level of significance, it can be said that The process of renewing a L/C is complicated.

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Hypothesis-567

Calculation: H-5

=3.82

=33.62 = =.6724 = = .82Zcal = ( )/ (/n) = = 3.39

Cont..06..HA: The balance transfer procedure of payment of MBL is fast.

Ho: The balance transfer procedure of payment of MBL is not that much fast.

I want to test the null hypothesis HO: = 2.5 HA: > 2.5 n = 50Since the sample size n > 30 so, I may use Z - test. Here = 4.84 =0.42 Zcal = ( )/ (/n) = 39.40At 5% level of significance, follows Z distribution Z 0.05= 1.645Since Z cal> Z tab,the null hypothesis is rejected. So at 5% level of significance, it can be said that The balance transfer procedure of payment of MBL is fast..

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Hypothesis-669

Calculation: H-6

=4.84 =8.72 = =.17

= = .42Zcal = ( )/ (/n) = = 39.40

Findings70H1: The documentation process while opening a L/C is complex.(need minimum 13 documents)44% are agreed, 14% respondents are strongly agreed that the documentation process while opening a L/C id complex. 12% respondents remain neutral20%respondents are disagreed, and another 10% strongly disagreed. H2: MBL provides the list of necessary documents to customer before opening a L/C48%respondents are agreed, 24% respondents are strongly agreed, 10% respondents are neither agreed nor disagreed, 8% respondents are disagreed, and 12% respondents are strongly disagreed in statement that MBL provides the document list.

Cont.71H3: Difference between the deposit amount and L/C amount in MBL is high (25%)According to 60% clients the gap between the deposit amount and L/C amount is high and 20% strongly agreed the fact. 8% respondents remained neutral, 12% said that difference is not that much hamperingH4: MBL provides the facility to adjust the credit limit of L/C.Here 48% clients accepted that MBL provides the facility to adjust the L/C limit and 20% strongly goes with the statement. 12% clients were moderate ; and only 8% disagreed.

Cont.72H5: The process of renewing a L/C is complicated.60% respondents identified that The process of renewing L/C is complicated.,16% respondents are strongly agreed, 14% respondents were remained neutral.10% respondents are disagreed. So most of the respondentsH6: The balance transfer procedure of payment of MBL is fast.86% respondents strongly agreed that the balance transfer procedure of payment of MBL is fast. 12% agree the statement 2% were moderate, they neither agree nor disagree the fact.

RecommendationShould maintain proper transparency in the documentation process so that the clients does not get disturbed.Should make sure that each and every client are getting the List of necessary documents and should be more sincere in providing the documents as some are not agreeing with the statement.Should re-think about the difference between the deposit amount and L/C amount if they can make the gap reasonable as majority are unsatisfied and may even switch the bank which will incur a huge loss.Bank should think about bringing some packages about L/C where client would have the chance to choose as per their need.Need to be more cooperative while renewing a L/C and should inform the client if any documents need to be changed.Should bring some attractive and innovative payment procedure which is faster than other banks.

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Conclusion...

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Thank You All. 75

Do you have any question?76