Sme Banking

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CHAPTER ONE: INTRODUCTION

1.1 INTRODUCTION
Small and medium enterprises (SMEs) are increasingly seen as playing an important role in the economies of many countries. Thus, governments throughout the world focus on the development of the SME sector to promote economic growth. In most countries in Asia, international trade represents a significant share of GDP. For example, in 2002, China’s trade share in GDP was 55%. While international trade has been present throughout much of history, albeit on a different scope and scale, its economic, social, and political importance has been on the ascent in recent years. Increasing international trade is the primary meaning of globalization. With globalization, the international trade scene has already changed, particularly that of services, to the extent that large corporations such as IBM are focusing on innovation. As globalization and advances in information technology and telecommunications enable manufacturing and services to be virtual and located at the most optimal sites, they also enable the creation of innovative solutions leveraging cost, economies of scale and scope, and, more importantly, speed to market (measured by meeting customer urgency).In South Africa, SMEs contribute 56% of private sector employment and 36% of the gross domestic product (Ntsika, 2002).One of the best ways to address unemployment is to leverage the employment creation potential of small businesses and to promote small business development (FinMark Trust, 2006). Mercantile Bank Ltd. is committed to provide high quality services to its constituents through different financial products and profitable utilization of fund and contribute to the growth of GDP of the country by financing trade and commerce, helping industrialization, boosting export, creating employment opportunities for the educated youth and encouraging micro-credit leading to poverty alleviation and improving the quality of life of the people and thereby contributing to the overall socio-economic development of the country. With a view to achieving the aforesaid objectives of the bank, SME Loan is of paramount importance as the greatest share of the total revenue of the bank is generated from it. The success of a bank, therefore, depends on how efficiently and judiciously it makes use of its available resources. In other words, prudent and efficient management of its credit portfolio is very essential for the success of a bank. The accepted standards relate to safety, liquidity and profitability of the advance whereas the dynamic factors relates to aspects such as the nature and extent of risk, interest or margin, SME loan spread and SME loan dispersal. In all business dealings, officers and employees must be guided by the principles of honesty, integrity and safe-guard the interest of the depositors and shareholders of the bank. They should strictly adhere to the Banking Laws, Rules and Regulations of the Govt. of Bangladesh / the instructions and guidelines issued by the Bangladesh Bank / Head Office from time to time which affect the business practices of the Bank. However, the key to safe, liquid, healthy and profitable credit operations lies in the quality of judgment used by the Executive’s / Officers making lending decisions and their knowledge of the borrower and the market place. In formulating a SME loan judgment and making quality in SME Loan, the lending officer must be equipped with all information needed to evaluate a borrower’s character, management competence, capacity, ability to provide collaterals and external conditions which may affect his ability in meeting financial obligations.

1.2 FEASIBILITY OF THE STUDY
Education system will be more rich & helpful when there is a combination of theoretical & practical relationship with a student. Form education the theoretical knowledge is obtained from courses of study, which is only the half way of the subject matter. Practical knowledge has no...
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