Covid-19 challenge is both a marathon and a sprint

Naser Ezaz Bijoy

All stakeholders must work together to enable long-term economic recovery of Bangladesh while addressing the immediate need to save and sustain lives, said a top banker.

"The Covid-19 challenge is both a marathon and a sprint," said Naser Ezaz Bijoy, chief executive officer 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 is the time that will test the characters of all stakeholders such as buyers, manufacturers, exporters, workers, bankers and insurers.

"The government alone can't solve all the problems and the honourable prime minister has already done a lot. Now, everyone has to have skin in the game."

Now the main challenge is to ward off the emergence of the second wave of infections.

A renewed spread of the virus will create significant stress on the domestic healthcare system, the capacity of which was low to start with, and further impact consumer and investor sentiment, and this may affect the momentum that was regained over the last few months.

According to Bijoy, Bangladesh entered the turbulent time on a much stronger footing compared to many of its peers, due to low external debt to GDP, low overall public debt and comfortable debt service capability given its healthy foreign exchange reserve.

"If the government had to finance the entire $12 billion stimulus packages through foreign currency borrowing, Bangladesh's external debt-to-GDP ratio would have been 18 per cent from 15 per cent now. But it is not required as a large 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 country should prioritise projects, which will generate employment and curtail investments in discretionary projects.

"In an encouraging sign, the finance ministry has identified areas of efficiencies that can be redeployed towards the immediate priority of stimulating growth, generating employment and ensuring public health."

Bijoy has been serving the bank 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 respond to the elevated needs of the communities.    

The bank had decided to extend payment holiday to customers in March after seeing a slump in business activities. It accrued the interests for the quarter ending March, but it did not realise the amount from clients, allowing additional time to settle the interest obligation.

Instead, the bank decided to look at the needs of all clients to find out who needs what kind of support. The activities led the bank to give needs-based payment holiday and loan extension to customers, even before the regulatory payment holiday was implemented. Now, it is working in line with the guidelines of the banking sector.

The bank ramped up its community engagement. It arranged 3.6 million meals for 120,000 individuals in association 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 working with the Underprivileged Children's Educational Programmes (UCEP) to re-skill people who have lost jobs.

The bank is planning to take an initiative to train up returnee migrants under an entrepreneurship development plan.

"If we can't employ them gainfully, they might go off the rails," said Bijoy, who holds an MBA from the Institute of Business Administration under the Dhaka University.

The banking sector was struggling to contain non-performing loans even before the pandemic, and much needs to 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 complete manifestation of the asset quality of the banking sector.

"Because of the interest rate cap, revenue potential has been subdued. So, the banking sector will not have the luxury of operating in the same way. Banks need to make a paradigm shift in addressing the cost to serve and to scale up."

He said the adoption rate of digital services accelerated after the pandemic hit the country.

Half of Standard Chartered Bangladesh's retail customers are already transacting online. The percentage is even higher in the case of the corporate banking segment. 

After the pandemic is over, the world, as well as the banking, would be different, according to Bijoy. Banks have to be nimble, accelerate digitalisation and bring in innovations so that clients can avail services on their own.

There are already 60 banks in the country. "The more you innovate, the more you will be able to retain your position and expand footprint."

As banks are becoming more digitalised, it has to focus on cybersecurity and enhance protection, the career banker said. 

The pandemic has induced a change in behaviour among all categories of end-users, be it individuals and corporates, in terms of how digital channels are viewed. While greater 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.

There is a significant scope of digitalisation in the trade ecosystem in the country, starting from 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 has to ramp up the number of customers. And Bijoy said it is not possible to acquire customers one by one. It has to be done digitally.

In 2018, Standard Chartered was one of the five banks and the only foreign bank that integrated with bKash. As a result, 3.5 crore wallets of bKash became clients of the bank instantly. The bank is also exploring the possibilities of agent banking.

He said the need for brick and mortar branches would be there but it would reduce gradually.

"Rather, it would be good if the bank can meet all the requirements of customers from bills and house rent payments to paying fees to schools and making payment to other banks through the app."

He said if the country wants to include all the population under the financial system, whether through banks or MFS, it can't do without digital options.

 In November, Bijoy would complete three years as the CEO.

"I am extremely delighted with the achievements in the last three years. The bank had double-digit growth in revenue and operating profit in the first two years."

The bank also had double-digit growth in the first quarter of 2020. The second quarter affected the business because of the interest rate cap and depressed activity owing to the coronavirus pandemic.

"Overall, the second-quarter was not that bad given the current circumstances at home and abroad."

He said there were green shoots in July and August. Volumes are almost 80 per cent back. "Year-on-year, we expect to remain ahead of last year."

During his stint, the bank received more than 54 international awards in the last three years, in a testament to the contribution of the bank to the economy.

Because of the deep uncertainty caused by the pandemic, investors are thinking twice before making any investment decisions. At the same time, a lot of people are thinking about alternative investment destinations away from China.

"Investors would look to move to countries which will not be affected by the geopolitical tension. But Bangladesh is not the only potential destinations investors are looking at. There are India, Indonesia and Vietnam. We have to attract investment proactively," Bijoy said.

He is bullish about wooing foreign investment and international orders because the Bangladesh Investment Development Authority, the Bangladesh Economic Zones Authority, the Bangladesh Export Processing Zones Authority and the National Board of Revenue are working proactively.

The Prime Minister's Office has followed up whether a particular remittance of a foreign investor has been carried out and if not, why it is being delayed.

"The Prime Minister's Office wants to fast-track the process to attract foreign investment. The purpose of this oversight is to ensure that this can be delivered timely. This is a huge cultural change."

The bank has disbursed all of its quotas under the stimulus packages for the exporters and a majority of the large borrowers. It is facing challenges in distributing the stimulus packages related 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 bank 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 would be achieved within the next 4-8 weeks. The credit guarantee scheme with some modifications can be a potential game-changer.