Once a man came to the office of this scribe for seeking loan. This scribe asked him how much loan is required. The man replied with a big smile: "That is up to you. You have checked all the papers related to my asset."
This scribe is sure that no banker will feel pleased with this plain statement. Nobody will feel interested in a borrower who has no plan of his own. However, one may find an interesting truth here; that is, it is the banker, not the borrower, who is entrusted with an important responsibility of determining the right amount of credit needed to create value in society. The naive man might have set a guideline for the modern banker through his statement without knowing its profound implication.
It is often seen that a banker is denying a business saying that they can't waste depositors' money. In a country crippled with nonperforming loans, it is a good news indeed. However, one might question the orientation of the banker which is solely based on deposit function. The investment function is equally important if the objective of a bank's formation is considered. A banker can't sit idle with his or her barn filled with depositors' money. He or she is like the manager of an inn located in a desert, who can't shut his door for fear of robbers. He needs to arrange food and shelter for the exhausted tourists without delay. If a banker doesn't have enough time or will power to find worthy investment, he had better switch to other business.
In the end of 2020, the country's banks sat idle with a monstrous pile of Tk.2.31 trillion. It reminded the verses of Coleridge, 'water, water, everywhere, not any drop to drink.' People have knocked many doors for money, however, they have returned empty handed. The private sector credit witnessed a growth of 8.4 per cent in 2020 and 11 per cent in 2021 against the target of 14.8 per cent set in monetary policy. Though big businessmen have received Tk.283.38 billion out of the stimulus fund of Tk.400.00 billion meant for them, the small and medium businessmen are yet to find a breathing space since only Tk.108.25 billion out the stimulus fund of Tk300.00 billion allocated for them have been disbursed. The non performing loan has risen to the record level amid the unprecedented grace period for payment. As such, bankers are expected to be cautious.
A banker has a responsibility to counsel his customer to attain a healthy business life. It is good if the borrower plans well and can fix his or her requirement of working capital or project finance. However, a banker can't open his vault in line with borrower's demand. A banker needs to listen to the heart of the business through stethoscopic relationship. The prescription of the doctor coming in the form of sanction letter after going through all the testing procedures is likely to disappoint the borrower quarreling with the terms, conditions and amount of the loan he expected. However, the banker who has treated numerous businesses, needs to make the borrower agree to take the pill.
Can a banker love the business of a customer? It is often seen that a banker takes a defensive position and opts for a safe distance from the customer. While the case of bribery or corruption is sometimes heard, it is also true that some bankers consider the act of borrowing a profit making machine. They charge extra bill taking chance of the ignorance of the borrower. They do whatever is required to get the money back, even if it means further deterioration of the business.
Let's see an example. It was April, 1971. Sufi Mohammed Mizanur Rahman, the legendary businessman of Bangladesh, was then working in the Eastern Mercantile Bank (Now Pubali Bank). The then government had already issued a circular instructing the bankers to sell imported goods even at a lower price in order to recover money of the banks. Mr. Mizan was in charge of foreign exchange division. His manager ordered him to sell the imported goods lying at the Chittagong port for long since the concerned importers were not on the scene-- perhaps because of the war. He argued with his manager saying that the war might come to an end soon and the businessmen were likely to resume business. The branch was a big contributor to the import business of whole country. So, Mr Mizan dared suggest that the bank hire godowns or warehouses at its own cost and preserve the imported goods until the importers came back. Later, they rented 50 godowns and released the goods paying duty and tax from the bank's own coffer. There was a wait for coming back of the businessmen before the coming back of their money. Here is a lesson for the bankers.
Some borrowers who have seen the withering of cash flow due to corona driven disruption in business, turned to the informal lenders charging 30-50 per cent as against 9 per cent of banks. There are some evidences that some businessmen can not utilise their loan which was either short of the requirement or chained by charges, terms and conditions too hard to comply with. The Global Competition Reports of both 2020 and 2021 showed 'Limited Access to Finance' as one of the most problematic factors for doing business in Bangladesh.
Steven e Landsburg in his book titled 'The armchair economist' opined: "It is easy to be fooled when you observe some things and not others. You and your doctor probably have different opinions about the average size of his waiting room crowd." Sometimes some business prospects comes to the fore with different looks for borrowers and bankers. A borrower may think it very promising while the banker may think the same very risky. So, there remains a gap which needs to be addressed. If a business carries a dying symptom, there is no need to inject additional medicine. The banker had better let the business die and motivate the businessman to plan for a new one. However, the worst action on the part of a banker is to overlook a borrower's need for life saving prescription and let the business die while it had chances to recover.
A customer once asked this scribe: 'Is the business yours or mine?' This happened when the scribe was exerting pressure for all the licences and certificates required by the regulators to do the business. A banker has a responsibility to make the businessman understand that the business of the complying forces is not to stop him in the midway, rather it aims at saving him. A banker shouldn't be puzzled by borrower's initial dissatisfaction or anger; he should wait for the day when the businessman will thank him for warning or disagreeing with the demand for a business which was most likely to create havoc.
Mohamamd Kazi Mamun is a banker. [email protected]