Probashi Kallyan Bank Making it work

This specialized bank for expatriate Bangladeshis should break away from the ineffective mould of most state-owned banks and emerge as a vibrant institution of modern banking by Maswood Alam Khan

We are happy to learn that an expatriate welfare bank in the name of “Probashi Kallyan Bank” (PKB) is about to start operation this month to provide banking services, especially to nonresident Bangladeshis who are working overseas. A specialized bank, PKB, to be headquartered at the Expatriate Welfare Bhaban in Dhaka, is embarking upon its maiden journey with an authorized capital of Tk 500 crore and a paid-up capital of Tk 100 crore.

Mr. C M Koyes Sami, an experienced and aggressive banker, has been appointed as the managing director of PKB which would have a 12-member board of directors to be constituted soon.

According to news reports, the government has allocated Tk 5 crore as government’s share of the paid-up capital and the remaining Tk 95 crore is to be defrayed by the Wage Earners’ Welfare Fund. Expatriates will get loans at 10 percent interest and people wishing to go abroad with overseas employment will get collateral-free loans at the same rate of interest from PKB.

The continuous flow of incoming remittances from wage earners and on account of exportations increasing at an average annual growth of 20 percent during the last 33 years, has been the most robust driving force for economic growth of Bangladesh. This has been instrumental in reducing the people’s level of poverty to a great extent. Notwithstanding a widening trade deficit, incoming remittances have bolstered the country’s foreign exchange reserves to the tune of US$ 10 billion 550 million as of March, 2010, the great bulk of which emanates from Bangladeshi workers mainly in the Middle Eastern countries. A great number of Bangladeshi expatriates work in Malaysia, South Korea, Japan, Australia, Canada and USA. They remit hard currency to their dependents in Bangladesh. Bangladesh Bank figures show that an average of more than 700 thousand people went abroad per year over the last three years. More than 5 million Bangladeshi people currently live abroad.

Each Bangladeshi migrant worker saves and remits to Bangladesh an average of US$ 825 annually. According to the Finance Ministry, the inflow of foreign remittances stood at an equivalent of Tk 74,000 crore in 2009 of which 66 percent came from expatriates working abroad and the rest from exports. Most of the wage earners ultimately come back home after a few years when they don’t find any scope to permanently settle in the countries of their work.

The Bangladeshi Diaspora who ultimately settle permanently with their families and dependents in different developed countries like Australia, America, Canada, and a few European countries like Italy have not much remittance contribution to the growing foreign exchange reserves compared to those whose dependents have to stay back in Bangladesh. The government has to be more attentive to these migrant workers who are spending the prime time of their lives working abroad and sweating blood to help the country’s growth by their hard labor and who will eventually spend the rest of their lives back home. Probashi Kallyan Bank, as one of the instruments of the government, may play a great role in ensuring a better future for these poor people in a variety of ways.

Given my experience in state-owned banks for 33 long years, I can say Probashi Kallyan Bank (PKB) can really play a pivotal role in bringing true welfare for the expatriate Bangladeshi wage earners if we can take lessons from our past mistakes in handling different state-owned enterprises. There are both strengths and weaknesses in our state-owned banks like Bangladesh Krishi Bank, Karma Sangsthan Bank, etc. What is needed for the new PKB management to do is to make use of those inherent strengths which have historically been misused and to get rid of those weaknesses that are the unfortunate results of the mindset of the stakeholders. It is vital that the new bank PKB is allowed to function in competition with other banks having wide latitude of liberty and autonomy with the least intervention from the government and other regulatory bodies.

Let me broach a few questions to our policy makers who would determine the terms of reference for PKB. Simple answers of “yes” and “no” may give a clear picture about the future of the new bank which is about to start its journey.

Will PKB employees enjoy similar pay and perks that are now being offered by different state-owned banks, which have of late been liberalized as limited companies, like Sonali Bank, Janata Bank and Agrani Bank? The answer, to my humble opinion, should be “Yes”. Will the PKB board of directors be constituted with non-political members and with young professionals like teachers of BUET who are technology-savvy? The answer should be “Yes”. Will the PKB board of directors be entrusted with powers and prerogatives to decide on the whole gamut of administrative and financial matters without having to get approval from the government at every step if such decisions are essential for competitive survival in the market? The answer should be “Yes”. Should PKB employees, like the government employees, take it for granted that their jobs are permanent and they can perform their duties lackadaisically without fear of being fired or demoted? The answer must be “No”. Once self-sufficient, can the PKB Board decide to expand its network and diversify its areas of business the way banks in different countries of the world do? For an example of such diversification of business, can PKB with their own profit earned invest the same in non-banking businesses the way Islami Bank Ltd. is having their own hospital network, though running hospitals is in no way a banking job? The answer should be “Yes” for competitive survival. Should our government give special protection to PKB at its formative stage by offering subsidies so that PKB in comparison to other banks can offer better rates of interest to attract new clients and customers? The answer should be “Yes”

Lastly, will Probashi Kallyan Bank be treated as a stepchild after a new political party assumes power to run the government in the future? God knows the answer better!

The above questions cropped on the basis of some of the sweet and sour experiences I gathered in different state-owned banks.

Pay and perks
When one finds colleagues doing the same job in a different bank drawing better pay and perks one is frustrated. A dispirited employee loses his sense of belongingness with his employer and gets involved in corruption in a bid to make good the disparity. Bankers working, for example, in Karma Sangsthan Bank or Bangladesh Krishi Bank have of late been demoralized finding their colleagues of similar status getting much more pay and perks working in Sonali Bank or Janata Bank or for that matter in a private bank. PKB and the policy makers should take lessons from the frustrations of these bankers.

Constituents of Board of Directors
Members of Board of Directors of most of the state-owned banks are chosen more on political consideration than on expertise and experience in policy and decision making. Of course, there are members in different boards of the banks who are very experienced, but they are very old with extremely conditioned mindsets, not at all amenable to new ideas and technologies of modern banking.

The policy makers while choosing members of PKB Board should make sure that a good number of the board members are computer-savvy or at least reasonably knowledgeable about modern banking and enthusiastic in introducing modern technologies in PKB at a time when automations have taken over the work of the front offices of any modern bank.

Powers and prerogatives
Bankers in state-owned banks struggle to convince the bureaucrats about the basics and essentialities of banking operations. The Ministry of Establishment and the Ministry of Finance could not be convinced about the necessity of mobile phones in banking business as there was no provision in the Telephone Policy of the government for mobile phones that could be allowed for a bank officer to use. The Board of Directors of RAKUB and BKB were convinced about the necessity of mobile phones and accordingly granted some of the field officials to use mobile phones. But the concerned ministries have not yet approved the decision of the boards and many such employees of the banks found their salaries and pension benefits deducted by the bills of their mobile phones used for the benefit of the banks. There are hundreds of such instances where state-owned banks had to incur huge opportunity costs due to lack of understanding on the part of the bureaucrats.

Taking jobs granted
The most pernicious influence of employees of a state-owned bank on the drive to work with competitive zeal is their mindset about permanency of their jobs. Once you get a job in a state-owned bank you think your job is permanent no matter whether you work or not. Only those employees in state-owned banks who are sycophants of their bosses excel in their career.

Diversifying areas of business
In many countries post offices sell snacks and knickknacks, banks sell theatre tickets in order to make a little bit of extra money using their idle resources to diversify their areas of business. Islami Bank Ltd. in Bangladesh is doing roaring business in remittance and also making money and at the same time offering welfare services to their employees by establishing networks of medical services. Bangladesh Army is operating hotels and BDR employees are running grocery stores using their manpower. What’s the harm? Why should banks not be allowed to do whatever they like that may supplement their income by way of doing lawful businesses? Profits derived from such non-banking businesses may be better utilized for the welfare of Bangladeshi expatriates by offering them better products at better prices.

Better exchange value and rates of interest
At its formative stage PKB should be given by the government wide-ranging subsidies and exclusive rights to float some attractive products that other banks would be debarred from selling to public at least for five years because PKB initially may find it difficult to compete with many private and state-owned banks who are involved in banking businesses for a long time. PKB, on the strength of government subsidies, may offer better exchange value to the remitters through their overseas correspondents and exchange houses and a better rate of interest for term deposits in local accounts of the beneficiaries which other banks cannot afford for their higher cost of funds. Such nurturing of a welfare bank through government subsidy for a specific period of time should not be taken by other banks as a discriminatory policy.

Becoming a stepchild with change of government
The single most destructive culture of politics in our country is perhaps the practice of hating anything that was done by a previous government run by a different political party. Karma Sangsthan Bank was set up by Awami League government. The subsequent government of BNP did not do much for the growth of that bank. Similarly, whatever BNP government did during their term of governance was looked at with furrowed eyebrows by the subsequent Awami League government. Probashi Kallyan Bank is setting its journey during Awami League’s term. God knows what would be the fate of this bank if there is a change in the political party that would run the next governments.

Probashi Kallyan Bank will be offering collateral-free loans to Bangladeshi people who would wish to go abroad with employment. But, PKB has to be extra cautious in this regard because a similar scheme adopted by Agrani Bank in the early 1990s did not succeed and it was next to impossible to trace those borrowers who took loans for their defraying expenses on account of overseas employments.

Rural people take loans from banks, especially from Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank, in the name of cultivation of crops, interestingly for banana and ginger cultivation that allows maximum credit limit and spending the loans for sending their wards abroad with overseas employment. Bank managers knowing full well that the loans instead of investing in banana or ginger cultivation would be spent for defraying expenses of overseas employment turn a blind eye to the misappropriation as long as the land property against which the loans are disbursed are genuine and mortgaged. For loans to people wishing to go abroad with overseas employment PKB can target those potential clients by offering a greater credit limit than the limits allowed for banana or ginger cultivations by BKB and RAKUB.

Smart Cards

Probashi Kallyan Bank will have to open its outlets at home and abroad as has been specified in the Probashi Kallyan Bank Bill 2010. PKB may open some outlets at some strategic locations for full-fledged banking operation. But at the initial stage PKB may undertake a campaign to open mainly electronic accounts at its main branch for anybody living anywhere in the country or abroad and issue smart cards to the account holders. There may be a variety of smart cards like “Debit Card” for the beneficiaries of remittances to draw money from ATM and “Deposit Card” for remitters themselves where a remitter’s savings can be accumulated the way savings are accumulated in a normal savings account in a bank branch. Such a “Deposit Card” would be very attractive to a remitter if s/he can check the transactions and balances of his account through password-based accessing into his electronic account in the PKB website.

Based on my experience as a banker I am confident PKB can mobilize huge amount of deposits and do good remittance business if they launch a new product that is akin to Deposit Pension Scheme meant only for the remitters at a low rate of interest with a guarantee that on maturity the account holder would get the equivalent of dollar value. PKB may name such a product as “Taka Deposit Pension Scheme at Dollar Value” and issue smart cards in the name of “Dollar DPS Card”. During my tenure as chief representative of Agrani Bank in Malaysia for three years from 1995 till 1998 I talked to many Bangladeshi expatriates and tried to glean information about their money plans. They are not interested in opening FC Accounts in an AD Branch in Bangladesh as they have no plan to take their funds in foreign currency back to a foreign country. What they are basically afraid of is depreciation of their money value by inflation. That is why they prefer buying real estate to depositing money in banks.

PKB by offering such smart cards in the name of “Dollar DPS Card” for “Taka Deposit Pension Scheme at Dollar Value” at a low rate of interest can guarantee inflation protection of depositor’s money in Taka, discourage the remitters from investing in unproductive sectors like those of real estate, mobilize deposit and help improve liquidity in the banking sector.

Maswood Alam Khan is a retired banker. He had worked in Agrani Bank in different capacities before he served RAKUB and BKB as General Manager. From Maryland, USA maswood@hotmail.com

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