Assignment on

The Functions of Bangladesh Development Bank and its Role for Economic
Development of Bangladesh
Course Title: Advanced Development Economics

Course Code: ECO 506

Submitted To

Sirajul Islam

Chairman and Assistant Professor, Department of Economics

BUBT

Submitted By

Name: Md. Mizanur Rahman

ID: 19201206008

Intake: 37

Program: M.Sc in Economics

Date of Submission: 7th May, 2020

Introduction
Banking Industry is one of the promising industries of our country. Generally by the word
“Bank” we can easily understand that, the financial institution that deals with money. There
are different types of banks that provide service to customers like: Central Bank, Agricultural
Bank, State Owned Commercial Bank, Private Commercial Bank, Industrial Bank, Foreign
Commercial Bank, Saving Bank and Exchange Bank etc. But when we use the term Bank it
generally means the “Commercial Bank”, the primary contributors to the economy of a
country. It helps to flow funds from surplus unit to deficit unit and through this it facilitated
the efficient allocation of the resources as well as accelerated economic growth. The main
thing is that how it operates and presenting its activities for the purpose of serving customer
requirements to increase their well being in the sense of wealth. Bank also provides many
services for clients to make their life easy in this busy life. In this competitive environment in
the world of today, the entire bank increases their facilities in favour of their customers to
retain them and capture more shares of the market to be the leader. Therefore, it can be said
that the rate of interest is one of the main factors in attracting customers.

Today’s business world is so dynamic and competitive that organizations are always looking
for talented, skilful and adroit graduates who belong to high degree of adaptability and
thinking quality. These business graduates will be the core part of business organization
someday. So business graduates need to have both theoretical & practical knowledge to
manage the business activity properly. In order to be familiar with a bank’s culture and to
gain some practical knowledge about it, one needs to work in those departments. As a
development bank, BDBL primarily remains committed to provide long-term industrial
financing. It is also includes commercial banking activities including foreign exchanging and
international trade financing. Bangladesh Development Bank Ltd (BDBL) is the prime
concern of development financing institution of country that extends financial assistance both
in local and foreign currencies for setting up new industries to boost up the industrial policy
and financial reforms program of government towards market economy.

Overview of Bangladesh Development Bank Limited

Bangladesh Development Bank Limited (BDBL) is the preferred choice in banking for
friendly and personalized services, cutting edge technology, tailored solutions for business
needs, global reach in trade and commerce and high yield on investments. BDBL had been
widely acclaimed by the business community from small business to large traders and
industrial conglomerates, including the top rated corporate borrower for forward looking
business outlook and innovative financing solutions. The Bank offers the full range of
banking and investment services for personal and corporate customers, backed by the latest
technology and a team of highly motivated employees. The Bank has launched Online
Banking services (i-Banking), joined a countrywide shared ATM network and has introduced
a co-branded credit card. A process is also underway to provide e-business facility to the
bank's clientele through Online and Home banking solutions.
History
With the decision of the Government, Bangladesh Development Bank Ltd. (BDBL) was
incorporated on 16 November, 2009 as a Public Company Limited by shares under the
Companies Act, 1994 by amalgamation of former Bangladesh Shilpa Bank (BSB) and
Bangladesh Shilpa Rin Sangstha (BSRS), two Development Financial Institutions (DFIs) in
the public sector. Bangladesh Shilpa Bank (BSB) was established on October 31, 1972 for
accelerating the industrial pace of the country through providing loan and equity to the
industrial projects as per Bangladesh Shilpa Bank Order, 1972 (President’s Order No. 129 of
1972). With the same objective, Bangladesh Shilpa Rin Sangstha (BSRS) was also
established on October 31, 1972 as per Bangladesh Shilpa Rin Sangstha Order, 1972
(President’s Order No. 128 of 1972). Two Vendors’ Agreements were signed between the
Government of the People’s Republic of Bangladesh and the BDBL on 31 December, 2009 to
acquire and take-over all of their (BSB & BSRS) assets, benefits, rights, powers, authorities,
privileges, liabilities, borrowings and obligations and to carry on with the same business. As
a Public Limited Company, BDBL formally embarked its journey on January 03, 2010. It
extends financial assistance for setting up industries and provides all kinds of commercial
banking services to its customers through its branch network in Bangladesh.

Vision
To emerge as the country’s prime Financial Institution for supporting private sector industrial
and other projects of great significance to the country’s economic development. Also be
active participant in commercial banking by introducing new lines of product and providing
excellent services to the customers.

Mission
 To be competitive with other Banks and Financial Institutions in rendering services
 To contribute to the country’s socio-economic development by identifying new and
profitable areas for investment
 To mobilize deposit for productive investment
 To expand branch network in commercially and geographically important places
 To employ quality human resources and enhance their capability through motivation
and right –type of training at home and abroad
 To delegate maximum authority ensuring proper accountability
 To maintain continuous improvement and up-gradation in business policies and
procedures
 To adopt and adapt to new technology
 To maximize profit by strong, efficient and prudent financial performance and
 To introduce new product lines according to market needs.

Goal
Our people, products and processes are aligned to meet the demand of our discerning
customers. Our goal is to achieve a distinction like the luminaries in the sky. Our prime
objective is to deliver a quality that demonstrates a true reflection of our vision.

Functions of Bangladesh Development Bank

Bangladesh Development Bank Limited (BDBL) extends term loan facilities in local and
foreign currencies to industrial projects (both new and BMRE) IN THE PRIVATE AND
Public Sectors. Besides, the bank also performs the following activities:

• It extends term loans by giving special priority to the SME enterprises for achieving
self reliance as well as increasing productions and empowerment of women.
• Proving working capital loan to industrial projects.
• Provides Equity support in the form of underwriting and bridge loan to public limited
companies.
• Issues guarantees on behalf of borrowers for repayment of loan
• Extends commercial banking services along with deposit mobilization
• Purchases and sales shares or securities of enlisted companies for BDBL and on
behalf of its customers as member of Dhaka Stock Exchange Ltd. And Chittagong
Sock Exchange Ltd. (CSE) for capital Market Development.
• Conduct Projects promotional activities along with preparation of various subject oral
study reports.

Product/Service Scheme
The bank is always committed to serve the clients with the best values and innovative
products and services to enrich its portfolio at the client’s demands and desires.

1. Development Banking

• Industrial loan with emphasis on syndicated arrangement (power & energy,

telecommunication, fiber optic cable, etc)
• Public-Private Partnership (PPP) project (port development, transport &
communication, like road, water & air ways etc)
• Small and Medium Enterprise (SME like IT industries i.e. development of hardware
and software)
• Agro-based venture depending on indigenous raw materials (like jute twin/yarn
industries)
• Green banking (environment & eco-friendly industries like automatic brick kiln,
renewable energy, effluent treatment plant, etc)
• Lease financing.
• Real estate business (including housing loan)

2. Commercial & Foreign Exchange Business

a. Deposit Banking

• Current deposit.
 • Saving deposit.
• Short term deposit.
• Fixed deposit.
• Deposit pensions Scheme.
• Other special saving deposit.
• School banking (new)-
a) 5 year term BDBL Sanchay Shceme (BDBKSS).
b) 10 year term Shikkha Sanchay Shceme (SSS).
c) 10 year term Chikisha Sanchay Shceme (CSS).

b. Short term loans

• Cash credit (Hypothecation).

• Cash credit (Pledge).
• Secured advances (General).
• Retail banking-
a) customer’s credit.
b) Personal loan.

Trade/Foreign trade financing-

a) Export cash credit.

b) Packing credit.
c) Purchase of local & foreign documentary bill.
d) Payment against documents (PAD).
e) Loan against imported merchandise (LIM).
f) loan against trust receipt (LTR).

c. Foreign Exchange

• Local L/C.
• Import L/C.
• Export L/C.
• Back to back L/C.
• Foreign remittance.
• Foreign exchange buy & sale.

3. Capital Market operations

• Share/ Security trading

• Underwriting
• Brokerage house services
• Mutual fund operation
• Banker’s to public issues

4. Other activities of BDBL

Apart from identification and development of viable projects, the bank assists the interested
entrepreneurs in selecting industrial projects having appropriate technology and potential
market by providing advisory services and various information/data.

a. Training

For upgrading the professional competence and skills of its employees, the bank is
continually arranging training programs both at home and abroad. Every FY they spent a lot
of money for training programs and seminars.

b. Observance of National Days

Important national days like National Martyrs and International Mother Language day on
February 21. Independence Day on March 26, Victory day on December 16 and National
Mourn day were observed with due to respect and solemnity. Floral wreaths were laid at the
Shaheed Meenar and at National Martyrs Memorial to pay homage to the martyrs who made
supreme sacrifice to uphold the dignity of the mother tongue and achieve independence of the
country.

c. Corporate Social Responsibilities

The banks functions are not only limited to industrial financing , it is also committed to be
known as an institution that builds long term relationship and delivers awards to its clients
for regular payment of loans as well as responsible for its employees and communities. The
bank promotes various socio-cultural activities, like picnic, sports, etc. for gearing and
cheering up its employees, financial assistance to the bank’s employees, and financial
assistance to the severe ailing employees for proper treatment. Besides, the bank also donates
to charitable institution and government’s relief fund.

SWOT Analysis of BDBL

A SWOT analysis gives the stakeholders a perfect picture of a bank’s performance which is
as follows:

Strengths of BDBL

• BDBL is unique in its nature having both specialized and commercial operation. It is
regarded as a development bank as well as commercial one.
• BDBL has Skilled financial management, good credit control and few bad debts.
• A strong balance sheet. Access to extensive credit, a strong credit rating, and a good
relationship with the bank and other sources of finance.
• Skilled employees, successful recruitment, and effective training and development.
• Govt. support and Encouragement.
• One of the fundamental objectives of BDBL is to boost up small medium industries.

Weaknesses of BDBL
 • Decision making process is lengthy.
• Lack of promotional activities.
• Less diversified product and services line. The salary of BDBL is not high enough
related with other commercial bank operating in Bangladesh.
• MAN/Internet/on-line services in BDBL is not upgraded, many of their works through
manually.

Opportunities of BDBL

• There are huge demand of micro-credit, small and medium scale finance.
• There are opportunities of innovation in the banking industry.
• Bangladesh economy is expanding rapidly, so the need of bank is growing up.

Threats of BDBL

• More and less all the competition in the banking industry are competent , so to survive
BASIC Bank no. of defaults loan is 37% which is real threats of bank business.
• Due to government institution many of the banking decision basic by political
government
• Too much interrupted by international assistance institutions like World Bank, IMF,
WTO.

Bangladesh Economy and Industrial Development

BDBL setting new standards in the Banking sector in the time of turbulent economic
conditions. From the very inception it plays a vital role in the national economy. To keep
pace with the motto, they provide proper attention on every department including the Human
Resources Department and an important function of this HR Department is Training and
Development. Banking sectors no more depends on a traditional method of banking. In this
competitive world, this sector has trenched its wings wide enough to cover any kind of
financial service anywhere in this world. The Bangladesh economy is confronted with the
stiff competitive challenges in the context of the free market economy and present
globalization. The economic crisis is further aggravated by the persistent hike of oil price and
some other necessary importable items in the international market as well as political unrest
along with many other internal shocks. Accommodating the challenges alongside for
maintaining macroeconomic stabilization as well as moderate CPI inflation and for achieving
desired economic growth , various measures are undertaken by the government and the
central bank like , cautious and restricted Monetary policy, reality based fiscal policy, strong
participation of modern sector in the economic activities lead to greater success in the
manufacturing sub-sector aided by continued growth in service sector , unique export
growth of the readymade garments (RMG) industry despite phasing out of global multi fibre
arrangement MFA highest growth in the remittance flow has made possible to achieve a
sustainable economic stable economic stabilization for the country which is very helpful for
industrial sector development in this country. Vital issues relating to Bangladesh economy
are:

• Domestic savings and investments

 • Foreign trade including import and export business.
• Gross official foreign exchange reserve
• Total official foreign aid disbursement
• Money supply including supply of narrow money and broad money
• Wage earners remittances including transfer of fund through electronic system along
with opening of monitoring cell in different banks and taking actions against hundi.
• Price situation which includes customer price inflation , etc

Conclusion
Most of the banks of Bangladesh are offering a wide array of financial services including new
types of loans and advances and some whole new services are lunched every year. As a
government owned bank, Bangladesh Development Bank Ltd. (BDBL) also has to discover
new scopes to reach its goal. As it is a state owned bank, it should go to the people’s heart
through various schemes. It should follow a mix lending policies designed to improve the
quality of its portfolio and reduce its risk exposure so that in near future when competition
among banks will serve more it can stand with its own entity.

As consider industrial band BDBL intends to set standards as the market leader in
Bangladesh. It demonstrates that a locally owned institution can provide efficient, friendly
and modern banking service on a profitable basis. Human Resource Management Department
is the most confidential department for any organization as well as Human Resources
Management in BDBL. The BDBL is a bank that confirms the best service to the customers
as well as to the employees by Human Resource Division. BDBL is the fastest growing Bank
in Bangladesh. Through BDBL is government supported organization it has strong capital
adequacy and after merger now BDBL operate business fairly well. BDBL corporate social
responsibility (CSR) based on ethical values following by people, planet, and the profit are in
compliance with legal and regulatory requirements which encompass employees, customers,
business associates, shareholders, suppliers, regulatory authorities and the community at
large. BDBL main intention is to rapid industrialization as such bank always try to invest
productive sectors rather than commercial banking system. BDBL has already developed
goodwill among its clientele by offering its excellent services. This success has resulted from
the dedication, commitment and dynamic leadership among its management over the periods.
The BDBL therefore emphasizes on persuasions rather than going for legal action in order to
recover its classified loans. Bank considers the practical aspects of the project being sick and
extends further finance or reschedules the repayment period. Into eliminate those problems to
increase in do are encouraging in the sense that it shows efficient management can lead to
successful banking business in Bangladesh. This could be source of useful lessons to the total
banking sector. BDBL being the best among the government owned banks and should go
hand in hand with modern banking system and culture to retain and improve the present
position in the financial arena.

BDBL is one of the prime development financing institutions in Bangladesh to accelerate the
pace of industrialization of the country. It plays significant role in the industrial development
of Bangladesh. As a finance institution it has both strength and weakness. Though, it is said
that the contribution of BDBL is below the expectation & it fails to achieve the target, at
present BDBL has taken so many steps for the expansion of industrial sector development.
Today’s base of industrial development is totally based on Bangladesh Development Bank
Limited, so by any means we cannot deny the generous contribution of BDBL in the
industrial development sector.

Reference
1. BDNews24.com. 2010. New development bank begins operations. [ONLINE]
Available at: http://bdnews24.com/bangladesh/2010/01/03/new-development-bank-
begins-operations1. [Accessed 19 January 16]
2. The Daily Star 2012. Development Bank takes off [ONLINE] Available at:
http:/thedailystar.com/bangladesh/2012/07/05/development-bank-takes-off. [Accessed
19 January 16]
3. Bangladesh Development Bank LTD Annual Report 2016
4. Bangladesh Development Bank Ltd. 2015. Bangladesh Development Bank. [ONLINE]
Available at: https://en.wikipedia.org/wiki/Bangladesh_Development_Bank.
[Accessed 18 January 16].
5. Bangladesh Development Bank Ltd. 2014. Corporate Profile. [ONLINE] Available at:
http://www.bdbl.com.bd/AboutUs_Corporate_info.php. [Accessed 13 January 16]