Dhaka Bank is increasingly embracing digital transformation to serve its clients better as tech-savvy customers expect advanced services and products, its top executive said.
“Digital innovations are the next big thing in the banking sector. And we have decided to embrace the transformation to make banking easier,” said Syed Mahbubur Rahman, managing director of Dhaka Bank.
He said consumers were increasingly choosing banks based on their digital capabilities. So, mere online fund transfers from one branch to another and availability of a list of recent transactions on a smartphone are no longer deemed satisfactory.
On the occasion of its 24th founding anniversary, the private commercial bank has taken up a plan to run 90 percent of its SME and retail banking programme using digital platforms within the next two years.
The second-generation bank, which commenced its commercial operation in 1995, has already rolled out a number of digital banking products.
A few months back the bank introduced blockchain technology, the first of its kind in the country, on a pilot basis to help exporters and importers carry out banking from offices or homes.
The move is allowing clients to submit all export and import-related documents digitally. The businesses are being allowed to carry out trade-related procedures just by turning up at a branch once.
The bank is one of the leading players in trade-based financing in Bangladesh. It accounts for more than 3 percent of the country’s total trade volume.
Import payments through the bank stood at Tk 12,517 crore last year, up 17.67 percent year-on-year while export earnings channeled through the bank increased 15.71 percent to Tk 1,384 crore.
“The blockchain technology will perk up the trade-based financing,” Rahman told The Daily Star in an interview recently.
Historically, Dhaka Bank has been focused on wholesale banking but it has started shifting more attention to retail and SME banking.
Of the Tk 18,062 crore disbursed as loans as of December last year, wholesale banking accounted for 80 percent, followed by the SME sector at 17 percent and retail banking at 3 percent.
As per the new plan, the bank will reduce the volume of wholesale banking to 50 percent and increase SME credits to 30 percent and retail loans to 20 percent within the next three years.
“The bank has introduced digital banking services to materialise the plan,” Rahman said.
Under the retail banking operation, the bank has recently launched a product named “Dhaka Bank e-Loan”, a first in Bangladesh, which will help clients get personal loans without any physical contact with the bank’s officials.
Everything -- from submitting loan applications to processing relevant works -- will be done through the digital platform. Initially, the loans will be available for clients with payroll accounts with the bank.
The payroll account holders will come to know within 72 hours whether they will be getting the loan or not. The bank has introduced a signature credit card that gives cardholders access to more than 1,000 airport lounges in 130 countries.
“Cardholders will not require using any priority card to avail services at the lounges. For the first time in the country’s banking sector, we have introduced such a unique facility,” Rahman said.
Rahman joined Dhaka Bank in 2015. Prior to that, he worked at Brac Bank as managing director and nearly a dozen local and global banks and non-bank financial institutions.
For the SME sector, the lender has rolled out three digital platforms – i-Khata, i-Samadhan and Dhaka Bank MSME Bazar – to facilitate entrepreneurs.
Entrepreneurs can give inputs about their daily transactions into i-Khata through an app and the information will help create a financial profile of the users. On the basis of the profile, the bank will extend financing to the clients.
i-Samadhan, another app-based solution, is giving decisions to SME clients on real-time basis whether they qualify for a loan or not. Dhaka Bank MSME Bazar – a web-based shopping centre – has created the opportunity for women entrepreneurs to display their products.
Customers from anywhere in the country can buy products from the platform online.
“But Dhaka Bank is not satisfied about what we have done so far. We have a long way to go keeping pace with the latest innovation in the global banking arena. We want to offer all kinds of business solutions,” Rahman said.
“More digital platforms will have to be introduced in the days ahead to fulfill the demand of young clients.”
The embracing of the latest innovations has started to pay off. The Banker, a concern of Financial Times, recognised the lender as the “Best Bank of the Year 2018” in Bangladesh.
Rahman also touched upon a number of issues confronting the banking sector.
He said liquidity pressure and the upward trend of default loans were the main problems and these should be addressed immediately.
“Strengthening the bad loan recovery procedures will help banks mitigate the ongoing liquidity stress.”
A large amount of the delinquent loans is now stuck with courts, mounting pressure on banks, said Rahman, also the chairman of the Association of Bankers, Bangladesh, a platform of the managing directors of private banks.
He said the banking sector has been going through various challenges and the hope was that the central bank has taken initiatives to amend laws related to the financial sector.
“But the process should be completed immediately or else the crisis will prolong.”
Rahman said habitual defaulters should be brought to book in order to restore discipline in the banking sector. “But there is no explanation about who the willful defaulters are. The central bank should define them.”
Default loans soared to Tk 110,874 crore as of March this year.
The CEO said a vibrant bond market could resolve the liquidity crunch in the banking sector in the long run. Lenders are now compelled to disburse long-term loans by mobilising short-term deposits, which frequently creates a fund mismatch, he said.
He said a stable interest rate was also important to run the banking sector smoothly. The government has recently moved to bring down the lending to single-digit.
“This is good and we also want to do it. But dictation is not the way to manage the rate,” he said. “Only the market can determine the rate, otherwise the banking industry will face volatility,” said Rahman, who attained an MBA from the Institute of Business Administration at the University of Dhaka.