Premier Bank plans doubling its CMSME financing in 3-5 years

The Premier Bank has planned to double its financing in the cottage, micro, small and medium enterprises (CMSMEs) to bring more unbanked people in the banking network in the next three to five years, the bank's top executive has said.

Under the plan, the bank's investment in the CMSMEs will reach 50 per cent of its total loans and advances during the period from existing 25 per cent.

"We're working on a clear plan to increase the share of CMSME loans," said Mohammad Abu Jafar, Managing Director (MD) and Chief Executive Officer (CEO) of the Premier Bank.

He made the remarks in an exclusive interview with the Financial Express (FE) recently, sharing his future business plans ahead of the bank's 25th anniversary.

The Premier Bank began its journey in 1999 under the leadership of Dr. H. B. M Iqbal and a group of entrepreneurs, aiming to facilitate sustainable development of Bangladesh.

The bank was set to celebrate the anniversary on Saturday, with the theme 'Silver Jubilee: 25 Years of Legacy.'

Mr Jafar also said the contribution of the CMSMEs sector to help achieve sustainable economic development of any country is undeniable, and Bangladesh is no exception.

With the slogan 'Service First,' the Premier Bank has been offering various services and loans tailored to the business needs of entrepreneurs in the CMSMEs sector since its inception.

"A significant portion of our investment is also allocated to women entrepreneurs and various pocket markets outside Dhaka, which is crucial for overall economic development," the bank's top executive explained.

The Premier Bank's core strengths lie in its strong brand value, an experienced board of directors, and a capable workforce with a wide range of branches, sub-branches, agent banking outlets, alternate delivery channels and a competitive product portfolio.

"We remain well-positioned to lead the market," the CEO noted.

Besides, the Premier Bank is focusing on digital transformation, operational efficiency, and customer service excellence as the bank moves towards its goal of becoming the top bank in Bangladesh, he added.

"We plan to double our business and market share over the next few years, building on our strong foundation," the CEO said while replying to a query.

He also said the bank has a clear vision for the next five years, focusing on expanding our client base and significantly increasing its loan portfolio to reach Tk 600-800 billion.

"Our key investment areas include digital transformation, infrastructure development, and workforce enhancement," the CEO continued.

He also said: "We're also focused on growing our presence in underserved regions through sub-branches and agent outlets and diversifying our loan portfolio to support sectors such as agriculture, SMEs, and housing. Innovation in financial products and services will continue to be a priority as we adapt to a changing market."

The Premier Bank lending strategy is centered on resilience and diversification, according to the CEO.

"To manage risk more effectively, we focus on stringent loan approval processes and pre-loan due diligence. We also monitor our loan portfolio closely to identify early signs of distress and provide restructuring options for viable businesses in need. This approach helps ensure sustainable economic development while maintaining a healthy loan portfolio," he noted.

Regarding financial inclusion, the top executive said the Premier Bank has expanded its network to rural and underserved areas through agent banking and sub-branches, ensuring inclusion of more people into the formal financial system.

The third generation private commercial bank is now working with various FinTech companies to strengthen digital banking with enhancing customer convenience and security.

FinTech is a new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services using smartphones or Internet Banking.

"Our plan is to introduce more innovative services, such as advanced AI-driven customer service, improved digital payments, and expanding our reach through mobile and internet banking," Mr Abu Jafar said while replying to another query.

Regarding corporate governance, the CEO said ensuring corporate governance is our top priority.

"Our Board of Directors focuses on policy-making and strategic direction, while management is given the freedom to handle day-to-day operations. This ensures a balance between oversight and operational autonomy, allowing management to make decisions efficiently while adhering to the board's ethical standards and regulatory guidelines," he added.

The experienced banker also spoke on different issues like rising trend of classified loans, corporate social responsibility, Islamic banking and the future liquidity situation in the country's banking system.

The CEO said non-performing loans (NPLs) are a critical concern for the sustainability of banks.

The banks will have to strengthen risk management practices, particularly pre-loan due diligence and feasibility studies along with enhancing loan monitoring systems to identify early warning signals and take corrective actions in time to curb the rising trend of the NPLs in the banking system, according to the CEO.

Meanwhile, classified loans in Bangladesh's banking sector hit an all-time high at Tk 2.11 trillion in the first half of the current calendar year.

The volume of NPLs in the first half (H1) jumped by more than 45 per cent or Tk 657.58 billion to Tk 2113.91 billion as on June 30 from Tk 1456.33 billion six months before, according to Bangladesh Bank's latest statistics.

On the other hand, the share of classified loans also rose to 12.57 per cent of the total outstanding loans in the H1 of 2024 from 9.00 per cent as on December 31, 2023 as per the consolidated statement of classified loans covering both domestic and offshore banking units. It was 11.10 per cent as on March 31, 2024.

Currently, the Premier Bank is running businesses with 136 branches, 67 sub-branches, nearly 200 agent banking outlets and ATMs (Automated Teller Machines) located at both urban and rural areas across the country.

"We proudly serve a customer base of 02 million valued clients and entrepreneurs. Overall, we have more than 350 service touch-points nationwide, ensuring comprehensive banking services to our clients," the CEO said.

The Premier Bank has been providing Islamic banking services since 2003 through two branches, one located at Mohakhali, Dhaka and other at Laldighir Par, Sylhet.

"Besides, we have Islamic banking windows in 25 branches for providing all sorts of deposit, investment and trade business under the brand name 'Premier Islamic' complying with Shariah," the MD added.

Mr Jafar is a veteran banker with 34 years of professional experience in the banking industry in diverse capacities for business development spanning mainly over readymade garment (RMG) financing, offshore banking, corporate banking, treasury business & operations, credit management, foreign trade financing, international business and branch banking.

Prior to joining the Premier Bank, he served at Dhaka Bank in the capacity of Additional Managing Director & Chief Business Officer (CBO). He also served at Dhaka Bank Investment Limited in the capacity of the Managing Director from 2021.

He started his banking career at Uttara Bank as a Probationary Officer in 1990. Later, he served the National Bank and Dhaka Bank. In both Uttara Bank and National Bank, he worked as a Manager of AD branches for more than 15 years.

Mr Jafar enjoyed his graduation and post-graduation in Economics from the University of Chittagong with distinction. He has also obtained a diploma from the Diploma Associate of the Institute of Bankers, Bangladesh (DAIBB).

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