A.K.M. Shaheed Reza is the Chairman of Mercantile Bank Limited; he devoutly allied himself in business in 1993 and over the last 25 years, he became a successful business entrepreneur in Textile and Readymade Garments Industry in Bangladesh. He has expertise in mass media and plays a praiseworthy role in social services with benevolent works for the society.
A.K.M. Shaheed Reza after completion of post-graduation in management started his career as a Banker in 1986. But creative aptitude did not allow him to confine in the regular job. Ultimately he quit and started his journey towards the business world.
With versatile experience in various business segments, he holds the Chairmanship of Reza Group. He is the sole proprietor of Bangla Radio FM 95.2, Director of National Credit Rating Agency and Director of the reputed English Daily “The Daily Observer”. Even with his conglomerate life, Reza never has forgotten the people of his soil. To associate himself more closely with his people, Reza took the responsibility as the President of Feni Chambers of Commerce and Industry. He is also director of The Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) and Chairman of Global Insurance Limited. Previously he also served as a Chairman of Board Executive Committee & Audit Committee of Mercantile Bank Limited.
Mr. Reza is attached to a number of educational and social institutions. His dedication to the overall development of rural education system is notable. Presently he serves as the Chairman of the Managing Committee of Dhalia High School, Bagerhat High School and Thakurhat Government Primary School of Feni district. Apart from these, he is the founder of Progati Balika Bidda Niketan and Nurul-Rawnak Diabetics health care center, Rajnagor, Feni. He is the life member of Feni Diabetic Association and Vice President of Heart Foundation and also the Trustee Member and Vice President of Feni University. Many meritorious underprivileged students are getting financial assistance for higher education through his philanthropic acts. Throughout his life, he truly believes commitment, work ethic, and positive attitude could lead a person towards a success.
“Initiatives, such as the provision for 2.5% credit for agriculture, opening of more rural banking branches, agent banking, mobile banking ensures access of the underprivileged population to different types of financial services.”
There are 58 banks, among them NCB, Islami Banks, Privately owned Commercial Banks, Development Financial Institutions and Foreign Banks are working. Although we have a huge unbanked population, what are the prospects of the banking industry?
With a population of more than 166 million, the adult banking population remains low (less than 60%). Banks have taken strong initiatives in the last few years to widen the coverage of banking services, especially by including the unbanked and disadvantaged section of the society in the formal financial system as an initiative of financial inclusion. Initiatives, such as the provision for 2.5% credit for agriculture, opening of more rural banking branches, agent banking, mobile banking ensures access of the underprivileged population to different types of financial services. As a bank of Bangladesh, our objective is to bring the poor and underprivileged groups such as farmers, landless laborers, small enterprises, urban slum dwellers, migrants, women under the purview of financial inclusion and financial literacy. With our wide variety of deposit and loan products, Mercantile Bank is contributing positively towards the stable and equitable growth of the country’s GDP.
The use of IT is huge and Mobile Banking and Agent banking is growing larger day by day; at the same time, there are rising chances of the cyberheist. How big is the threat of cybersecurity? How is your bank dealing with cybersecurity issues?
Recently, cybercrime is an alarming issue what keeps the bankers’ up at night. Not only Bangladesh, globally it is an increasing anxiety to keep customer data safe from hackers and fraudsters. A recent report reveals that banks and financial institutions worldwide came under cyber attack every 39 seconds in 2016. The study stated that 64% of the cyber attacks occurred in 2016 were web-based, 62% were due to phishing and social engineering, 59% for malware and botnets and 51% as a denial of service. We have to keep in mind that as banks are continuing to expand through online and mobile services, they are becoming prime targets for cyber attacks. In Bangladesh, agent banking accounts reached over 8.73 lakh and approx. 40% adults have access to mobile financial services. Since Mobile Banking and Agent banking are growing wider gradually, it is obvious to put an emphasis on formulating cybersecurity guidelines. Mercantile Bank is emphasizing very much on the need to improve the skills of its bankers so that any possible cyber threat could be prevented keeping our customers feel comfortable using our banking services.
Plastic money is emerging globally; along with other transactional methods, it will entirely replace cash transactions. What are your thoughts in this regards?
Most people think of a cashless society as something of a distant future. Unfortunately, that is simply not the case. The reality is that a cashless society is much closer than most us think. Today, only 7% of all transactions in the United States are done with cash. In Sweden, only about 3% of all transactions still involve cash. Our financial system is dramatically changing, and cash is rapidly becoming less important. We live in a digital world and national governments and big banks are encouraging the move away from paper currency and coins. So accessing plastic money at every step of a transaction can help create a cashless society. Excessive cash can lead to suppression of the poor, tax evasion and corruption. But we need more homework before cashless initiative approaching across the country. Accommodating with the principle of demonetization, our neighbor country India already has commenced to “jumpstart a transition’ to a cashless society. Using of plastic money: Travel Card, Debit Card and Credit card, could be an important step to move towards a digitalized economy.
What is your core banking policy and at this stage of globalization how do you on coping with changing banking policies?
In recent years, the financial industry has undergone rapid changes across the globe. In the digital era, consumers are becoming more and more accustomed to internet banking. At Mercantile Bank we are adopting latest technology in line with our business and day to day customer’s financial needs. We are also giving attention to our current generational clients by understanding their goals and preferences. We believe, a big part of the growth of core banking can be attributed to the surge in retail business in Bangladesh. Mercantile Bank is strengthening its foothold, both in terms of latest technology and need-based products for its clients.
What is your corporate social responsibility policy? How do you contribute through CSR in respect to Global Social Responsibility?
As we believe Corporate Social Responsibility is not only charity but also a part of good corporate governance. Following the Sustainable Development Goals (SDG), we concentrate on the cutting-edge issues such as Education, Environment, Sports, and Workplace and Community streams. Mercantile Bank Limited (MBL) sees that the amalgamation of corporate citizenship into its core business practice – using its employees, its products and services, and philanthropy – is a powerful tool for its cultural change. We believe this synergy reduces risk, increases revenue, intensify client relationships and, of course, has a positive impact on its corporate image.
There are NPLs (non-performing loans) and at the same time, the interest cap is very high. How will this affect the competition?
This is obvious that bad debt-fuelled growth in banking will force to come to a screeching halt at some point. And latterly, it turns to Non-Performing Loans (a zero yield asset) that puts the bank in a vulnerable situation. In this connection, MBL meticulously tries to conduct a quality lending process from loan origination to recovery. And as a result, our NPL rate is dropped by 5% this year.
There are many reasons that cause to revolve a good loan into bad or default loan. In this regard, banks need favorable banking regulations to overcome the trauma. We also need to rethink about the monotonous tradition of deposit and loan lifespan in banks. We are getting the deposit for five years, on the contrary, how could we provide a loan to others for ten years? We might consider simple interest rate instead of the compound rate of interest in a calculation.
It is challenging to compete in the market with the evil trend of loan embezzlement and the same time we are exercising with the high-interest cap. But again, we are aware of to intercept any unhealthy competition in the market. In this regards, I believe an effective lending decision making process, monitoring the supervision systems and substantial resolution mechanisms along with an integrated Bangladesh Bank Guideline, could reduce NPLs rate gradually. And the panacea would certainly explore a healthy competition within the banking Industry.
MBL (Mercantile Bank Limited) is consistently unique and innovative. What new products are you introducing?
We are a vision-driven financial institution. As a chair of the board, my plan is to assimilate our bank with the state-of-the-art technology. Our focus is to provide innovative market-leading client experience. To ensure such measures, I believe we have to prepare our employees with mandatory knowledge of global regulatory framework so that they can be able to meet emerging needs of the clients.
We are planning to form two new subsidiary companies. One of them is Venture Capital and under its umbrella, we have initiated a new product called ‘Udoyon’ for the startups, which have been designed to bring the young entrepreneurs into the business arena. We are also going to launch investment banking to expedite the growth of country’s capital market. We also associate ourselves to flourish our Merchant Banking wing.
What is the portion of retail banking in your revenue? What are your plans for proceeding in this regards?
As I mentioned earlier, there is a huge scope of retail banking in this highly dense country. Bangladesh is witnessing the positive growth in the uptake of retail loans for the past 10 years. Retail banking has been growing at double-digits for the past few years, riding on the growing middle class. Size of the consumer finance market (retail loan) is Tk. 1,582.6 billion now (June 2017). This has grown from Tk. 685 billion in 2015 (Dec) to Tk.1,041 billion in 2016 (Dec) with a year-on-year growth of 52%. Consumer finance market pie has grown to 13% of total commercial bank financing in 2017. Recent reports also project that consumer finance market would be 21% by 2020.
With 121 branches along with agent banking, mobile financial services ‘My Cash’, Mercantile bank has already triggered its growth with its retail/consumer banking through various competitive products like personal loan, home loan, educational loan, deposits, credit card, mobile banking, agent banking and other depository services. Our skilled and trained bankers are working relentlessly in developing innovative retail banking product and services according to our customers’ day-to-day needs. Electronic banking has become one of the most demanded and latest technologies in the banking sector. We also ensure that our customers are brought to the loop of using digital devices in their banking practices. Our customers’ interest gets the paramount importance at every desk of Mercantile Bank. We are and will remain very much candid for retail banking business in the market.
Banks are an important instrument of controlling macroeconomic balance. There are many banks in our country. What are your views on this situation?
I started my career in banking in the early years’ between 1986 and 1993. Over the years, I observed that Bangladesh’s economy is mainly driven by the banking sector. Among 170 million people, only 20% people have access to banking services through nine thousand bank branches across the country. Hence, we need to change the conventional model of banking and have to penetrate more in rural areas rather than queuing in urban or semi-urban area. We have to change our traditional approach in the banking system. In this regards, we can think of using solar power in remote branches situated in thousands of villages. Financial inclusion is an urgent need for our economy. Besides regular banking services, bankers may act as a financial advisors to create more entrepreneurs or investors.