Covid-19 challenge is both a marathon and a sprint
All stakeholders must interact to enable long-term monetary recovery of Bangladesh while addressing the immediate need to save and sustain lives, said a high banker.
"The Covid-19 challenge is both a marathon and a sprint," said Naser Ezaz Bijoy, ceo of Standard Chartered Bangladesh.
His comments came as Bangladesh continues its fight against the persisting coronavirus, which impacted the exemplary gain in poverty eradication over the decades, hurt economic growth and left millions without jobs and incomes.
Bijoy said the Covid-19 situation may be the time that may test the characters of all stakeholders such as for example buyers, manufacturers, exporters, workers, bankers and insurers.
"The federal government alone can't solve all of the problems and the honourable prime minister has already done a lot. Now, everyone really needs skin in the overall game."
Now the key challenge is to defend against the emergence of the second wave of infections.
A renewed spread of the virus will generate significant pressure on the domestic healthcare system, the capability which was low to get started on with, and additional impact consumer and investor sentiment, which may affect the momentum that was regained during the last few months.
According to Bijoy, Bangladesh entered the turbulent time on a much stronger footing compared to a lot of its peers, because of low external debt to GDP, low overall public debt and comfortable debt service capability given its healthy forex reserve.
"If the government had to finance the complete $12 billion stimulus packages through forex borrowing, Bangladesh's external debt-to-GDP ratio could have been 18 per cent from 15 per cent now. But it is not needed as a big part is being done through the available liquidity in the banking system and refinancing window from the Bangladesh Bank."
But the government cannot be complacent. The united states should prioritise projects, that will generate employment and curtail investments in discretionary projects.
"Within an encouraging sign, the finance ministry has determined areas of efficiencies that can be redeployed towards the immediate priority of stimulating growth, creating employment and ensuring public health."
Bijoy has been serving the lender for more than 27 years and has held several roles in corporate banking, risk and audit in Asia, Middle East and Africa. He became the CEO of the international bank's local operations in November 2017.
He said the coronavirus pandemic prompted corporates and businesses to re-evaluate how they react to the elevated needs of the communities.
The bank had made a decision to extend payment holiday to customers in March after seeing a slump running a business activities. It accrued the interests for the quarter ending March, nonetheless it did not realise the total amount from clients, allowing more time to settle the interest obligation.
Instead, the bank made a decision to consider the needs of most clients to find out who needs what sort of support. The actions led the bank to provide needs-based payment holiday and loan extension to customers, even prior to the regulatory payment holiday was implemented. Now, it really is employed in line with the rules of the banking sector.
The bank ramped up its community engagement. It arranged 3.6 million meals for 120,000 individuals in colaboration with Brac, Kumudini Welfare Trust and Bidyanondo Foundation.
It arranged life-saving medicine and medical services for a month for 460 critical Covid-19 patients through Sajida Foundation in Dhaka and Bidyanondo Foundation in Chattogram.
Standard Chartered Bangladesh donated Tk 11.1 crore to the Unicef Bangladesh to be used for protection measures and remote education of vulnerable children. It gave Tk 2.5 crore to the Red Crescent to support health workers.
It is now dealing with the Underprivileged Children's Educational Programmes (UCEP) to re-skill persons who've lost jobs.
The bank is planning to take an initiative to teach up returnee migrants under an entrepreneurship development plan.
"If we can't utilize them gainfully, they might set off the rails," said Bijoy, who holds an MBA from the Institute of Business Administration beneath the Dhaka University.
The banking sector was struggling to contain non-performing loans even before the pandemic, and much must be done to rein in bad loans. As a result of the payment holidays, banks will not be compelled to recognise entire losses in 2020 arising out financial challenges due to pandemic.
Hence, the financial statements of 2021 may reflect the entire manifestation of the asset quality of the banking sector.
"Because of the interest cap, income potential has been subdued. So, the banking sector won't have the blissful luxury of operating just as. Banks have to make a paradigm shift in addressing the price to serve and also to scale up."
He said the adoption rate of digital services accelerated following the pandemic hit the united states.
Half of Standard Chartered Bangladesh's retail customers already are transacting online. The percentage is even higher regarding the organization banking segment.
After the pandemic has ended, the world, plus the banking, would be different, according to Bijoy. Banks need to be nimble, accelerate digitalisation and bring in innovations in order that clients can avail services on their own.
There already are 60 banks in the country. "The more you innovate, the more it is possible to retain your position and expand footprint."
As banks are becoming more digitalised, it has to give attention to cybersecurity and enhance protection, the career banker said.
The pandemic has induced a change in behaviour among all types of end-users, be it individuals and corporates, regarding how digital channels are viewed. While greater make use of online payments and online services came as a necessity during the lockdown period, these changes in behaviour will not reverse, according to Bijoy.
You will find a significant scope of digitalisation in the trade ecosystem in the united states, beginning with issuing the letter of credit (LC) to regulatory reports and customs procedures.
Standard Chartered has a customer base of 300,000 in Bangladesh and it feels that it must ramp up the number of customers. And Bijoy said it is not possible to acquire customers one at a time. It needs to be done digitally.
In 2018, Standard Chartered was among the five banks and the only foreign bank that integrated with bKash. Subsequently, 3.5 crore wallets of bKash became clients of the lender instantly. The bank can be exploring the options of agent banking.
He said the need for brick and mortar branches will be there nonetheless it would reduce gradually.
"Rather, it would be good if the lender can meet all of the requirements of customers from bills and house rent payments to paying costs to schools and making payment to other banks through the app."
He said if the united states wants to include all of the population under the financial system, whether through banks or MFS, it can't do without digital options.
In November, Bijoy would complete 3 years as the CEO.
"I am extremely delighted with the achievements within the last three years. The lender had double-digit growth in income and operating profit in the first 2 yrs."
The bank also had double-digit growth in the first quarter of 2020. The next quarter affected the business enterprise because of the interest cap and depressed activity due to the coronavirus pandemic.
"Overall, the second-quarter had not been that bad given the existing circumstances in the home and abroad."
He said there have been green shoots in July and August. Volumes are almost 80 % back. "Year-on-year, we be prepared to remain ahead of this past year."
During his stint, the lender received more than 54 international awards in the last three years, in a testament to the contribution of the lender to the economy.
Due to deep uncertainty due to the pandemic, investors are planning twice before making any investment decisions. At the same time, a lot of people are considering alternative investment destinations from China.
"Investors would turn to move to countries that will not be affected by the geopolitical tension. But Bangladesh isn't the only potential destinations investors are looking at. There are India, Indonesia and Vietnam. We have to attract investment proactively," Bijoy said.
He's bullish about wooing foreign investment and international orders as the Bangladesh Investment Development Authority, the Bangladesh Economic Zones Authority, the Bangladesh Export Processing Zones Authority and the National Board of Revenue will work proactively.
The Prime Minister's Office has followed up whether a specific remittance of a foreign investor has been completed and if not, why it is being delayed.
"The Prime Minister's Office really wants to fast-track the procedure to attract foreign investment. The objective of this oversight is to make sure that this could be delivered timely. That is an enormous cultural change."
The bank has disbursed most of its quotas under the stimulus packages for the exporters and most the large borrowers. It really is facing challenges in distributing the stimulus packages linked to SMEs and microfinance institutions.
Term-loan to finance core working capital of the SME clients constitutes the main portfolio of the bank's SME lending. The lender gives loans for five years. But only the working capital loans with a tenure of less than one year qualify for the stimulus package.
The target for the bank on SME fund disbursement will be achieved next 4-8 weeks. The credit guarantee scheme with some modifications can be a potential game-changer.
