Dhaka Bank rides on tech to make retail, SME banking vibrant

Dhaka Bank Ltd has embraced technologies to make its retail and SME banking vibrant instead of relying on the corporate segment as it looks to drive the next phase of growth.

The bank has set a target to disburse 30 per cent of its total outstanding loans to the small and medium enterprises sector and retail clients within the next year and 40 per cent by 2025, up from 20 per cent now.

The aim is to reduce the credit risk as banks usually face a major problem when a large borrower turns into a defaulter.

"Such risks can be reduced by adopting diversified loan disbursement models," Emranul Huq, managing director of the bank, told The Daily Star in an interview recently.

Dhaka Bank marks its 26th founding anniversary today.

Over the years, the private commercial lender has gained huge experience from running wholesale banking. It selects corporate borrowers based on their previous business records to avoid non-performing loans.

Now it plans to duplicate the success in the retail and SME banking segments. In order to become successful in the two areas, the bank has already embraced technologies to serve clients in the changing banking industry.

Many banks around the world have jumped on the bandwagon of digital banking in recent years, and the adoption of technologies has accelerated during the coronavirus pandemic.

Dhaka Bank introduced Robotic Process Automation (RPA) in 2019, becoming the first lender in Bangladesh to do so. The system helped it run operations efficiently when the country came under a lockdown during the first wave of the pandemic.

UiPath, a global software company based in New York, recognised Dhaka Bank with UiPath Automation Excellence Awards in December last year, also the first among the banks.   

RPA makes it easy to build, deploy, and manage software robots, which emulate human actions interacting with digital systems and software.

Software robots can complete the right keystrokes, navigate systems, identify and extract data, and perform a wide range of defined actions. It reduced the cost of disbursing financial aids and incentives to thousands of payroll clients and garment and other factory workers during the pandemic.

RPA is also helping clients open an account with Dhaka Bank straight from home and receive the account opening pack at their doorsteps. This means there will be no requirement for them to visit a branch to collect the debit card and cheque book.

"This has inspired us to automate our banking process more and more," said Huq, who was promoted to the pole position in February last year from the post of additional managing director.

The bank looks to introduce a nano digital loan product for payroll customers in the quickest possible time.

Clients who have a salary account with the bank will be able to avail themselves of the loan within two hours if they apply for the credit during banking hours.

Depending on the income, they will initially get loans ranging from Tk 16,000 to Tk 50,000. The amount will go up to Tk 300,000 gradually.  

The artificial intelligence technology will be used to make the new programme successful. "We will make the product available for all customers in the future," Huq said.

The bank is pinning its hopes on the expanding middle-class to widen the retail banking operation. It recently started financing SMEs under a digital platform.

It has focused on SME clients linked to the corporate entities financed by Dhaka Bank.   

Two categories of small businesses have been selected for the loans. One of the categories comprises the businesses that supply raw materials to large groups. The other group is traders who sell products manufactured by the groups.

Importers, too, are now allowed to open letters of credit online.

The bank has already secured a strong position in the foreign exchange business: it is one of the largest lenders in terms of earnings in the segment.

Dhaka Bank contributed around 3.50 per cent to the country's total trade volume last year, and it expects to lift it to 4 per cent this year.

Between January and May this year, total exports and imports through the bank stood at $1.54 billion, up 63 per cent year-on-year.

"We have been able to attract foreign exchange business through the digital platform," said Huq, who has been with Dhaka Bank for 24 years.

Huq hopes that the foreign trade volume of the bank would get a boost in the days to come.

The bank, which commenced its operation in 1995, does not attach much importance to opening full-fledged branches because of the banking industry's shift towards digitalisation globally.

"We only open sub-branches in the remotest parts of the country where people are yet to be brought under the formal financial umbrella. This will help expedite the financial inclusion agenda," said Huq, who started his banking career in 1986.

The success in corporate financing has helped the lender bag the prestigious "Best Corporate and Investment Bank 2021" under the Asia money Bangladesh Awards 2021.

"They have considered the quality of our loans given to large infrastructural projects implemented by corporate groups," Huq said.

Dhaka Bank accounts for 10 per cent of the financing in the power sector, which has increased electricity generation fourfold in the last decade.

Huq said the bank had never adopted any aggressive strategy to make quick bucks in its history.

"We have always concentrated on quality growth. We always try to provide financial services to clients in line with global standards. As a result, we have been able to avoid any major financial anomalies."

The noted banker also touched upon the macroeconomic situation of Bangladesh, saying the major indicators were now in good shape despite the pandemic.

Higher export earnings and robust growth in remittances have assisted the government in tackling the economic uncertainty comfortably. The ballooning of foreign exchange reserves has given a breathing space.

According to Huq, both Bangladesh Bank and the country's lenders should continue supporting SMEs as the economy would not return to its higher growth trajectory if the sector did not make a turnaround.

Excess liquidity has become a burden for banks owing to lower credit growth for the time being. But the private sector would absorb the additional funds in the coming months as many businesses plan to expand their footprint.

"On top of that, the global economy is gradually recovering from the slowdown, and the revival will have a positive impact on our economy," he said.