RAHEL AHMED Managing Director & CEO of Prime Bank Limited since 14th December 2017 is currently the youngest bank CEO in town and also one of the youngest bank CEOs ever in the history of Bangladesh’s banking arena. He also hails from the then ANZ Grindlays’ generation that currently dominates the top spots among major private banks in the country. Rahel brings along more than 22 years of professional exposure in banking industry of both domestic and international markets with multinational and regional banks, in various capacities spanning over the Wholesale Banking domain that includes specialization in Islamic Banking. He commenced his career in ANZ Grindlays Bank as a Management Trainee and moved up the ladder in their Corporate Banking space focusing mostly in Mid to Large Corporate clientele base. Thereafter, he worked for Standard Chartered Bank in Bangladesh in the capacity of the Head of Local & International Corporates. Before joining in his current role, he served for 7 plus years in two of the largest regional Banks of Middle East and was actively involved in raising large debt for international corporate, sovereign and financial institutions within Middle East and other regions. During the last 2.5 years, he spearheaded the ongoing Centralization Process/Business Process reengineering and let alone the successful Corporate Business of Prime Bank Limited. He has received Outstanding Employee and CEO award during his career on multiple occasions, from Standard Chartered Bank and First Gulf Bank, in recognition of his outstanding performance.
As I was led through an automatic passage door to the tidy cabin at half past ten in the morning, I observed a bunch of employees working at their designated computers ready to deliver their best. Managing Director and Chief Executive Officer of Prime Bank, Rahel Ahmed was comfortably sipping his morning coffee. He fondly mentioned how the Grindlays’ Management Trainee program groomed and instilled the leadership qualities in him and many others from that generation. Rahel further slipped into the detailed insights on the functionalities of his bank.
When talked about the core banking policy, he mentions that the way banks work here is almost similar to how they work globally. The only difference, he adds, is that are few products and services used more often in other geographies than they are in Bangladesh. “Banks are often known to be the data mines as we deal with customer data and the management information system. Thus, the more robust the system is, the easier it gets to better meet the customer requirements and offer tailor made futuristic solutions,” explains Rahel. He further expands that Prime bank has recently upgraded to one of the best core banking system available globally. The bank has leaped from the previous version to the newest version of their core banking system software to ease out the customer convenience. “Prime Bank has been a corporate-focused bank for the most part of its life till date; this sector roughly represents around 75% of the bank’s balance sheet. The bank has done a lot of restructuring in its operations and business processes in the past few years and a part of our mission and vision is to bring a balance between Corporate, SME and Consumer Banking as a whole,” states Rahel.
As we look at it from a macro economical point of view, Rahel elaborates that corporate banking has played a major role in the development of the economy over the past few decades, “The growth of the Textile, RMG and other manufacturing sectors, alongside the development of infrastructure and the availability of power and energy, is directly linked with the contributions from leading banks namely Prime and other renowned ones. Furthermore, the expansion of the middle-class segment of the population has led to increased consumerism which has resulted in a purchasing power and current per capita income worth $1,600.” The estimated vision of the State as he speaks is to increase such variables to $12,000 by 2041 when the economy size would be worth approximately $3 trillion. Previously Bangladesh was more of an agriculture-based economy, which has now moved to more of a manufacturing-led one. Moreover, Rahel describes, “New developments in the economy like women empowerment has made them more open to choices; thus, promoting consumerism on an even larger scale. As for example, the local toiletries industry has evolved greatly compared to multinationals in lieu of the growth and expansion of the local market demand. All of these are having a ripple effect on the growth of consumer banking.”
He further explains his concern on how the increasing number of Nonperforming Loans (NPLs) day by day is affecting the competitive dynamics. Rahel postulates, “The Nonperforming Loans are affecting the optimum level of competitiveness almost all the banks in the industry. There are a couple of ways NPLs can be looked upon, one being a willful default for which the assessment or due diligence process needs to be more robust for many of the banks/financial institutions. On the other hand, Bangladesh economy has scaled up but not to the extent that will require 57 odd number of banks. The increasing competition with no major difference in the buying ability has brought every bank under the pressure of making a profit and has thus, deteriorated the quality of the due diligence process in such banks.”
Another aspect he cited here is from recent changes of Indian Banking laws, which has refurbished their solvency and bankruptcy act entirely along with the policy of non-performing loans. He explains the situation, “The tightening has brought many respected firms under the category of NPL, and the banks have further disseminated the loans amongst more solvent firms to get rid of the issue. The government of India has also been investing huge on state-owned banks, which is a step that our government may follow to drive such toxic portfolios away. Thus, it is only after all these have been implemented, that the Bangladesh banking sector may be further developed.”
When asked about the major challenges faced by the banks regarding corporate banking and the way Prime Bank plans to tackle them, he replies, “Amongst the major challenges that lie are the existence of too many banks where due diligence process gets compromised many a times by most, in the process. Good corporates often are allured to overtrade or stretch their financial obligation backed by offering of more facilities than actually required and the chances of double financing tends to increase. On the other hand, when the banks here are supporting corporates, they lack in providing the amount of infrastructure support that is gained by other competitors of such corporates from Vietnam, India, China, etc. Similarly, it is also said a huge bulk of the idle money is locked within the state-owned banks who are not lending as much as we speak but preventing the local private banks from growing further due to non-access of that cheaper liquidity.”
The merger between banks would be one of the profound solutions when it comes to such problems as the combined power of such banks can easily drive the toxic portfolios out. The even distribution of the idle money can also help to further facilitate growth.
Leading banks have now shifted focus from money lending to providing banking solutions and the business in Bangladesh has scaled up greatly as a whole. Prime Bank now plays an advisory role alongside. Rahel elaborates upon this role, “As the corporates are getting larger they are requiring more treasury management; thus, Prime Bank also provides cash management solutions alongside. The bank also gives 360-degree solutions, taking care of the trade financing and trade solution services. Export Credit Agency (ECA) financing and supply chain management solutions also form a part of the bank’s portfolio now. We are not only lending money now but also supporting the SME growth by offering end to end solutions towards the suppliers and distributors of our large corporate clients.”
Ahmed also details on how the agro-based industries and Small Medium Enterprises (SMEs) are yet to have proper access to the commercial banks as the banks have yet to increase their reach regarding the agro-based industries and SMEs, “The Central Bank has now made it mandatory for banks to dedicate a certain percentage of their services to the agro-based industries. Prime Bank is performing well in that line directly as well as by affiliation with NGOs to reduce the barrier when it comes to reaching consumers residing in the very remote rural areas.”
In regards to the rising concerns about cyber heist Rahel elaborates that it has greatly increased alongside the use of IT in almost every sector in Bangladesh, “Prime Bank has upgraded their IT system to its latest version. Constant security checks and assessments make the system quite reliable. As a part of security measure we have also hired IT specialists often termed as “ethical hackers” who continuously monitor and fix loopholes that exist in the current system.”
Rahel takes the last sip of his coffee. He mentions that the core banking system of the local banks are almost at par with those existing worldwide. However, in terms of product offering and solution based banking, Bangladesh is catching up. He ends on a hopeful note mentioning a new higher-class segment of the population is predicted to come into the scene very soon which will require wealth management services like the way it happens in the western world, increasing the demand for banking services further.
Rahel illustrates how local banks are in a race to match the global pace:
If we talk about globalization, Bangladesh’s economy has evolved greatly in the past two decades, and the banks here are no exceptions to that globally. They may definitely not be on par with the multinational ones who have stronger system and support back up but are adapting quite well to the changes in the consumer demand pattern. Being a private local bank, Prime Bank has limitations when it comes to investing in systems at a scale in which multinationals do, but the reach of technology within the limitations these days have made our operations grow extensively.
When talking about process, there is no doubt that the garment industry has made the most progress in that sector. However, the banking sector alongside has come beyond the use of traditional methods of banking to a more integrated system that allows the process to be quicker resulting in more satisfied customers. Most of the leading local banks here have roughly 80% of the products and services available globally, and the changing demand is now being met more often than usual.
If we are to talk about Bangladesh, specifically from the corporate banking perspective, I would say that in the past 7 to 10 years this sector has become more mature. We have come past the use of the basic trade-finance, plain vanilla, products and are now more inclined towards commercial banking and issuing of bonds. ECA financing has also been introduced to support the power generation issues, and it will not be long when you see Islamic Sukuk being introduced as well.