Muklesur Rahman has a portfolio of 35 years of experience in reputed local and foreign banks. He played a pioneering role in every area of banking, ranging from retail banking to risk management. He is now the Managing Director and CEO of Shimanto Bank Limited. His vision and mission is to create banks that are more techno-centric, advanced and inclusive.
“Approximately 500,000 students graduate each year; the job markets does not have enough vacancies to accommodate this influx. Thus, we want to create entrepreneurial opportunities for them by 2021.”
When did you start your career as a Banker?
After completing Master Degree from the University Of Dhaka, I wanted to take up banking as my profession so I joined City Bank Ltd in the year 1983. After that, I joined United Commercial Bank Limited where I learned the basics of banking alongside a few other relatable practices and operations. Subsequently, I joined Standard Chartered Bank in 1995 and gained international experience while working there and later joined Citi NA.
I worked for Eastern Bank Limited (EBL) as a Deputy Managing Director for six years starting from 2007. Besides, I was the first Managing Director and CEO of NRB Bank Ltd in 2013 when the bank was newly established. Finally, in the year 2016, I joined Shimanto Bank as its first Managing Director and CEO and started contributing with a specific vision to boost the country in the socio-economic development sector.
What is your vision towards this bank?
Shimanto Bank, owned by BGB Welfare Trust, started its operation on 9th Oct 2016. As we move forward, our plan is to focus on retail and SME Banking. We want to bring the unbanked population of our country into the banking net through SME banking. We are building it as a Techno centric Bank while emphasizing on the Small and Medium Enterprise Banking to create Entrepreneurship and expansion. Besides, we even plan on introducing agent banking and want to establish SME club financing. Approximately 500,000 students graduate each year; the job market does not have enough vacancies to accommodate this influx. Thus, we want to create entrepreneurial opportunities for them by 2021.
You cite governance as one of the major issues in Bangladesh. Could you elaborate upon that?
The main issue with banks in our country is lack of governance. As mentioned in the Banking Companies Act 1991, one member from one family was allowed to be on the board of a bank for a term of three years; this is now going to change to four members from one family for a term of nine years, making it more family-centric. This isn’t a healthy step for the banking sector as it will make it harder for the future leaders to run the banks. With the rising burden of the Non-Performing Loan (NPL), Bangladesh is currently facing an alarming situation. Besides, Bangladesh is now referred to as the emerging tiger of Asia. With a GDP growth rate of 6% plus, we have come quite far. Our per capita income has risen to $1,600 and helped us hit the $32 billion mark in the foreign exchange reserve. However, even if the economic indicators are leaning towards a positive direction, failure to have a proper governance system may hinder our sustainability in the long run.
What will be the scenario after the diminishing of fiat money?
As I mentioned earlier, we have a cash-based economy. Wide cash transaction still takes place in Khatunganj, Moulivi Bazar. The government and banking sector must work together to introduce digital/plastic money, implement E-Commerce and Mobile Banking across the country. This will make tracking of money easier and ensure Anti Money Laundering and Combating Terrorist financing taking place. Above all ethics and morality must be brushed upon to control corruption from rising.
How important is financial inclusion for the development of rural areas in Bangladesh? What tools can be used to ensure its proper implementation?
Today, corporate banking requires a wider approach than to just have your operations in Dhaka and Chittagong. When the Prime Minister inaugurated Shimanto Bank, I proposed to use the potentials of Border Guard Bangladesh (BGB). I announced the idea of exploring the rural economy by establishing BGB outside the capital. Financial inclusion is imperative in this era and the right facilities need to be disseminated. With a rise in our per capita income, it has become important to recognize that the only forces behind the development of the rural economy are mostly NGOs and Micro Finance Institutions whose rate of interest has gone up to 25% or more. Thus, it’s time for us to step forward with agent banking. Moreover, the increasing number of smartphone users may lead to the success of such a concept. But, we must target another 20 years to effectively penetrate the rural economy of Bangladesh. Our current number of branches of these 57 banks is more than 9,000 in number, across the country, which is not sufficient enough to serve 1.6 billion people. Nonetheless, it is highly important to establish a good governance first before moving in that direction.
Talking about the tools, we are currently relying on the agent and mobile banking for financial inclusion. Drastic developments have been brought to the Hill Tracks. Unfortunately, the facilities do not exist as of yet. As a BGB bank, we can explore that region by making further use of our tools.
What more are you offering your clients compared to other banks?
We provide unlimited trust to our clients and this is ensured by strictly abiding by certain processes and rules. We want to reach out to more people by means of capitalizing. I have committed to achieving certain goals and providing certain amenities to clients within the next five years, and I hope to live by that.
In addition, we are tailoring our products and services as per customer’s appetite. We are also focusing to provide our services through automation and technology. Being a BGB-owned Bank, we are providing services at very reasonable prices in the form of fees and interest Rate.
How does the existence of default loan hinder Bangladesh’s economic progress?
Presently as per a Bangladesh Bank report, the country’s NPL is facing an upward trend and is now at 10.67%. This situation has to be controlled otherwise it will have the negative impact on our present economic growth and the depositors might end up losing confidence in the banking system. A combination of growing NPL and Assets concentration if unchecked will also bring negative growth in the economy.
The nation has 57 banks, a majority of which is private. The only share of the defaulted loan is on the government banks, all of which are under the control of Banking Division of Ministry of Finance. The degree of autonomy granted to the Central Bank is an important indicator of good governance and the continuous subject of matter in most developing countries. Therefore, our strategy must focus on establishing good governance, creating skilled human resources for the banking and financial institutions and establishing accountability.
What sort of default cultures can we observe in our country?
Furthermore, the economy is suffering due to bad loans which are associated with the underlying default cultural practices. But this should not be the association made. There are three types of default culture: intentional, habitual, and situational. Somebody facing a loss in the business can be regarded as a situational default. While the habitual default is when someone repays a sum of Tk. 13,500,000 twenty days later than the day it is due. In this case, the person is traced continuously until the sum is repaid. However, the generic default is when there is no trace of who has the money and where it is invested; it is similar to that of Hallmark or Bismillah. In such cases, our country lacks behind to establish accountability.
What measures can be taken to prevent default culture from taking place?
Bangladesh has 90 million smart card holders of which only 1.8 million credit card owners. Thus, it is very necessary to integrate our services with smart cards. Developed countries generally prevent it from socially and economically blacklisting such defaulters. For instance, if you are a credit card or loan defaulter in America, it is possible to find out your history using your ID.
In the last ten years, Bangladesh Bank has facilitated the methods of automation by generating Credit Information Bureau (CIB) reports and software like Electronic Fund Transfer Network (EFTN) and Real Time Gross Settlement (RTGS). A change in culture is necessary to make such automation sustain. Strict laws must be ensured for breaking the rules. Besides, imprisonment of a defaulter cannot be the only solution rather one needs to cut the problem from the roots.
What leads to the inefficient performance of the top management in the hierarchy of public banks?
A new regulation has been established, which requires other banks to seek consent from Bangladesh Bank in any decision such as removing a Managing Director from their post. The MD and CEO are appointed by the Board on a contractual basis give rise to lack of commitment. The contracts of the Managing Directors are renewed obliging to the orders of Directors. They can work until a certain age limit and are accountable for many things similarly like the divisional heads. However, when a Managing Director of a government bank faces aboard, the uncertainty of the contract disables the person from performing well as at that moment one may feel that their contribution is not appreciated enough.
What are the possible challenges faced by the modern day banks?
The bank is a business of interest. We live in a cash-based economy where we are getting the deposit from people and giving the loan to people. The only difference is that we are making money through 5% spread. On the other hand, the Government is offering Savings Certificate. The ceiling to make a profit on these savings certificates (Sanchayapatra) is 11% or more. As a result, depositors are more interested in that deal and are asking for a higher rate of interest for their deposits. Thus, banks are facing challenges in pricing for deposit and lending. Apart from these, there is also a dearth of skilled manpower and good governance in their boards.
Where is Bangladesh heading next?
During the last ten years, our economic indicators are in right directions but we are yet to focus more on sustainable development. Achieving the goal of a middle-income country would require us to create good governance and skilled manpower in the economy.