eLAP emerges as big enabler of small, medium businesses

Electronic Loan Application Proposal (eLAP) emerges as a high-yielding digital intervention that helps BRAC Bank expand its SME (small and medium enterprises) business faster in a sluggish business climate.

The digitised loan processing system is not only assisting the country's largest SME-concentrated commercial lender to save time but also cutting operatiing costs through efficiency of field-level loan officers to risk managers.

As a matter of fact, the capacity of successfully handling SME loan proposals has shot up significantly. On the other hand, entrepreneurs' wait to get loans approved has been shortened remarkably.

Syed Abdul Momen, head of SME at BRAC Bank PLC, has shared outcomes of eLAP in an exclusive interview with The Financial Express recently.

He said business entrepreneurs face a time-consuming journey to secure financing, extensive paperwork and multiple visits from loan officers for loan processing.

To ease the process, he said, BRAC Bank decided to take a more innovative approach riding on digital transformation three years ago. In early 2024, the bank launched eLAP with technical assistance from an international FinTech company.

Under the digital platform, the bank has given electronic tablets to all loan officers and credit or risk managers.

Loan officers take basic information, such as NID (National Identity), TIN (tax identification number) and PSR (proof of submission of returns) of eligible clients and instantly gives input in the electronic loan application, which is integrated into risk management and core banking services.

Later, the risk officer goes to the client's home and verifies the documents and approves the loan.

The client can withdraw cash from the nearest branch of the bank.

In the traditional SME loan application, he said, loan approval in best cases took at least 15-20 days primarily due to too many document handling and lengthy approval process.

"Now, it (loan approval) takes only eight days to complete a loan proposal, which is remarkable," said Mr Momen, also a deputy managing director of the bank.

The system also enhanced SME loan handling capacity as the monthly loan-handling numbers soared to 12,000-15,000 from 10,000-11,000, according to the bank's SME head.

The number of days in terms of loan processing can further be curtailed if the regulator allows digital signature and access to eKYC (Electronic Know Your Customer), he said.

Now, officers print out loan proposals for taking signature of clients and take pictures of the signed documents before preserving those in the eLAP system, he said.

Mr Momen, who has 19 years of multifaceted experience in the banking sector, terms eLAP system a 'goldmine' for the bank as it has preserved many key information of customers. A good number of clients take loans repeatedly and they do not face complicated formalities that they experienced while proceeding loans for the first time.

Regarding the future plan, he said, they planned to create an AI-driven credit engine through which clients will be able to get access to the system and submit loan applications on their own. And the engine will be able to approve loans without any visit to applicants.

"Our initial planning is to launch such engine possibly from in the middle of next year because it requires data through which the system will automatically analyse clients' loan-related behaviour before taking any decision," he said.

About challenge of NPL (non-performing loan) buildup, he said controlling the risk of bad loans in SMEs becomes an extremely difficult task but the bank gained efficiency in this regard over the years through innovative and digital tools.

As a result, he said, the burden of NPLs has remarkably decreased, falling from 22 per cent in 2015 to 2.20 per cent now.

BRAC Bank's SME portfolio had kept increasing significantly over the years to reach over Tk 305 billion by the end of December last year.

Small businesses, which takes loan ranging from Tk 0.5 million to Tk 20 million, account for a major portion of the entire SME loan portfolio. The portfolio of SME loans rose to more than Tk 224 billion until 2024 from Tk 190 billion in 2023.

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