Part: 01

Introduction

Literature review:
Non-Bank Financial Institutions (NBFIs) in Bangladesh are gaining increased popularity in recent times. Though the major business of most NBFIs is leasing some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing and venture capital financing. The purpose of this paper is to highlight different features of NBFIs, their contribution to the overall economy and the product base of NBFIs. The paper also describes the performance of NBFIs as measured by different financial indicators, along with the effects of banks entry into the non-bank financing area. Special emphasis has been given to identify the challenges faced by NBFIs in Bangladesh. And finally, development of NBFIs as well as their role in strengthening the financial system of Bangladesh has been discussed. It is found that despite several constraints, the industry as a whole is performing reasonably well. Given appropriate support, NBFIs will be able to play a more significant role in financial intermediation.

Emergence of Non-Bank Financial Institutions in Bangladesh:

Initially, NBFIs were incorporated in Bangladesh under the Companies Act, 1913 and were regulated by the provision relating to Non-Banking Institutions as contained in Chapter V of the Bangladesh Bank Order, 1972. But this regulatory framework was not adequate and NBFIs had the scope of carrying out their business in the line of banking. Later, Bangladesh Bank promulgated an order titled Non Banking Financial Institutions Order, 1989 to promote better regulation and also to remove the ambiguity relating to the permissible areas of operation of NBFIs. But the order did not cover the whole range of NBFI activities. It also did not mention anything about the statutory liquidity requirement to be maintained with the central bank. To remove the regulatory deficiency and also to define a wide range of activities to be covered by NBFIs, a new act titled Financial Institution Act, 1993 was enacted in 1993 (Barai et al. 1999). Industrial Promotion and Development Company (IPDC) was the first private sector NBFI in Bangladesh, which started its operation in 1981. Since then the number has been increasing and in December 2006 it reached 29.1 Of these, one is government owned, 15 are local (private) and the other 13 are established under joint venture with foreign participation.

Part: 02

About Company

Company profile:
Company at a glance
Fidelity Assets & Securities Company Limited was incorporated as a private limited company on March 4, 1997 under the name style Fidelity Securities Limited. Subsequently on June 15, 1997, the name was changed to Fidelity Assets & Securities Company Limited. It started business as a Merchant Banker after obtaining Merchant Banking License from the Securities and Exchange Commission (SEC) on January 22, 1998. The Company was converted into a Public Limited Company on August 18, 2001 and obtained license from Bangladesh Bank from September 17, 2001 to operate as a non-banking financial institution. Authorized Capital of the Company is Tk. 500 million divided into 5 million ordinary shares of Tk 100 each while Paid-up Capital as on December31, 2006 stands at Tk. 150 million 20 thousand subscribed by the sponsors. Our vision: Become a market leader by providing innovative, integrated financial services and to create the best value to our Shareholders. Our mission Our mission is to develop the company into an ideal and unique financial institution by providing excellent financial products and customer services to all our customers- corporate and individual not excluding the high paced pro-active participant of Corporate Social Responsibility (CSR). Our Objectives

    

Be one of the market leaders of the Industry Achieve excellence in customer service next to none. Be a high quality distributor of financial products and services Provide customized financial services to specific clients in both leasing and Merchant Banking services To build the company as multi-product non banking financial institution for different segment of the market

  

Maximize profitability and sustain steady growth Maximize benefits and satisfactions to the customers Maximize the welfare of the society through employment, training, grant etc. as Corporate Social Responsibility.

Why FAS Are Different ? * Up Front Disclosure * Personalized Services * Competitive Interest Rate * Easy & Simple Process * No Hidden Cost * Quick and Friendly Customer Service * Outstanding Customer Care

Nature of Business
Currently, FAS is offering the products like Lease Finance, Term Finance, Syndicated Finance, Work Order Finance, and Home Loan & Real Estate Finance. The Company extends lease finance of all types of Machinery, Equipment, Vehicles and Households Durables. It also accepts Term Deposits from the clients. FAS also operate merchant banking activities to contribute in the countrys capital market.

Associates, Subsidiary/Related Holding Company The Company has no associates or subsidiary or related holding company.

Distribution of Products/Services: The products/services of the Company are distributed /rendered from the Registered Office at Nitol Centre, 71, Mohakhali C/A, Dhaka, of the Company throughout the country.

Competitive Conditions in the Business: The Financial Sector comprises of large number of Financial Institutions (28 nos. now). All the Non-Banking Financial Institutions (NBFI) and banks having leasing windows are competitors. Despite of this stiff competition, the private sector FIs are also earning significantly. Among the 28 financial institutions operating in Bangladesh, major competitors other than banks are as under: IDLC of Bangladesh Limited. IPDC of Bangladesh Limited. United Leasing Company Limited Uttara Finance & Investment Limited International Leasing & Finance Limited Prime Finance & Investment Ltd

Sources and availability of raw materials and the names of the principal suppliers: Raw material for a Non-Banking Financial Institution is fund which is mainly mobilized/ procured from equity capital, term deposits and interest on loans.

Sources of, and requirement for, power, gas & water: The Company does not require such utilities except for ordinary use in office work.

Names of the Customers providing 10% or more revenues: Companys customers do not include any one providing 10% or more of revenues.

Contract with Principal Suppliers/Customers: The Company always enters into contracts with all the customers of the Company as normal course of business. Material Patents, Trade Marks, Licenses or Royalty Agreements: The Company has not entered into any such Agreements.

Products & services of FAS:

Fidelity Assets & Securities Company Limited offers both fund based and fee based services / products all over the country, which includes the followings:

 Lease Finance  Term Loan Finance  Transport financing  Project financing  Housing Finance  Working capital financing  Factoring  Industrial Finance  Trading of Securities  SME Financing  Deposit mobilization: o Term deposit schemes    Monthly benefit scheme Quarterly benefit scheme Yearly benefit scheme

Merchant Banking Activities y y Securities trading in secondary market Investors portfolio management

y y y y

Issue management Underwriting of issues Financial consultancy Project counseling

Lease Financing: Fidelity Assets & Securities Company Limited provides lease finance under Easy Terms & Conditions for acquisition of Capital Machineries of Industries, Industrial Equipments, office Equipments, Medical Equipments, and Constriction Equipments etc. Transport Financing: We are one of the financing companies whose investments in Transport financing are substantial. Besides the commercial vehicle, corporate clients may also apply to acquire vehicles for official purpose under the scheme. Term Financing: The loan period will vary depending on the nature of a product, profitability of the project and socio-economic factors. The range of finance can be between 01 year and 05 years or higher (negotiable). We also encourage financing in the processing industries of agriculture products. House Financing (Real Estate Finance): The Clients are equally treated in Fidelity Assets & Securities Company Limited regardless of their professions and occupations. We provide our clients with variable competitive interest rate in flat loan. At present, we are providing loan facility to the client maximum up to 10 years. FAS also provide financing of construction projects. Small & Medium Enterprise Financing: Fidelity Assets & Securities Company Limited always ready to finance in the SME sector after compliance with the terms and conditions

of the company. We also encourage women entrepreneurs by providing loan facilities under this scheme as per the rules & guidelines given by Bangladesh Bank. Working Capital Financing: Fidelity Assets & Securities Company Limited offers Working Capital Financing. Its essential to any growing business. It helps keep your business current and competitive in your market. If you have commercial real estate or equipment that produces an income for your business, you can obtain working capital financing that can help pay down credit lines or accounts payable, freeing up money for growth opportunities. Factoring: Its a new product of Fidelity Assets & Securities Company Limited. Factoring of Accounts Receivable is a mode of financing receivables arising out of supply of goods or delivery of services on credit. This helps you receive a significant portion of the invoice amount soon after the delivery of goods or services.
Deposit Mobilization:

Fidelity Assets & Securities Company Limited provides attractive interest rate to both corporate and individual clients. Fidelity Assets & Securities Company Limited is currently providing the following schemes for its valued clients: 1. Term Deposit Schemes a. Monthly benefit scheme b. Quarterly benefit scheme c. Yearly benefit scheme

Merchant Banking Activities:

Merchant banking wing of FAS still provides very limited activities in the market and reported continual loss from the beginning to 2005. Last year, merchant banking unit made profit for the first time.

The company last year recruited marketing associates for enhancing marketing function of the company although manpower is not at sufficient level to grab business capacity of the company.

Fidelity Assets & Securities Company Limited is operating as a Merchant Bank after obtaining license from Securities & Exchange Commission (SEC) since 1998 and recently it is expanding its activities in the following areas: 1. Securities trading in secondary market 2. Underwriting of issues 3. Portfolio management

4. Issue management 5. Financial Consultancy

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Management Style:

chairman
Mr. Abdul Matlub Ahmad

Directors
Mrs. selima Ahmad mr. syed Monwar ali Ms. shahnaz ahmed mr. nasim ali khan mr. asaduzzan chaudhury mr. md. sirajuk islam

In e en ent irector
Mr. arun-ur- ashid, A

Ex- Officio Directors Mr. Mohammed N.S. Kabir

Com any Secretary Mr. Md. Wahiduzzaman

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Part:03

Credit Management

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Credit Management
Credit

The word credit comes from the Latin word Credo meaning I believe. It is a lenders trust in a persons or firms or companys ability or potential ability and intention to repay. Credit is a contractual Agreement, in which a borrower receives something of value now, with the agreement to repay the lender at some date in the future. One of the basic functions of the bank is deposit extraction and credit extension. Managing credit operations is the crying need for any bank. The objective of the credit management is to maximize the performing asset and the minimization of the non-performing asset as well as ensuring the optimal point of loans and advances and their efficient management.

Factors Related with Credit

 Risk  Time  Interest Rate  Security or Collateral  Operating Expense  Legal Considerations  Inflation  Finance Charge

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Importance of Credit Credit plays a vital role in national economy in the following ways       It provides working capital for industrialization It helps to create employment opportunities Credit controls almost all kinds of production activities of the country It brings social equity Cash generation occurs for its successful performance Business cycle can run well only by the help of lending system Economic stabilization

Credit Management:

Credit Risk Management: The CRM (Credit risk management) tools in FAS are identified to be weak. Implementation of credit risk management system recommended by Bangladesh Bank is still under process. As per Bangladesh Bank guidelines on Managing Core Risks in Banking, FAS should has taken initiative to change the present credit management structure into the one prescribed by the Bangladesh bank. The company is up till now formulating separate credit policy with Sectoral, single client limits. From the very beginning and still at present, major portion of FASs credit portfolio exists in transport sector which is considered on of the riskier sector for leasing. However, for FAS, the asset quality in transport has been found satisfactory, because of financing mainly in TATA motors under the direct supervision of Nitol group. High growth in credit portfolio (224.64% in 2006, 55.64% in 2005, and 79.20% in 2004) without any credit policy/ guideline/framework may go down the asset quality of the company in future.

Lease/Credit Appraisal & Approval System:

FAS have no credit policy or manual where to specify about lease/ credit appraisal and approval process. The company maintains traditional process of appraisal and approval system. The credit and operation department prepares the lease and loan proposal after collecting all required

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information of the client. Security coverage and documentation level is more stringent in case of new clients. In case of old clients, essential security coverage is ensured and the key emphasis is given on terms and conditions of the facility. The appraisal process lays key emphasis on payment history, market reputation and repaying capacity of the client. The proposal is then submitted to the executive committee of the board for approval. The executive committee of the Board member by the Chairman, Mr. Nasim Ali Khan, director and the managing director. After approval of the EC, the lease/ loan proposal send to the BOD for final approval. The Board has the right to accept or reject the proposal.

Lease/Credit Monitoring and Recovery Process:

FAS have no separate department for lease/credit monitoring and recovery. The monitoring and recovery process is jointly done by Credit & operation and Accounting department of FAS. Those departments continuously check the clients status, their installment payment and incase of overdue of the any installment of lease/loan payment, take necessary steps for recovery of the amount. However, the companys nonperforming assets is very low because, most of the credit on transport sector is strictly observed by the Nitol group and most of the SME loans invested to the members of BWCCI where BWCCI act as the corporate guarantor.

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Part: 04

Financial Statement Analysis

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Financial statement analysis:

Ratio Calculation on fidelity assets & securities company 2009 ltd. Liquidity Ratios Current Ratio = Current Assets/Current Liabilities 1.63 1.65 2.28 1.51

2008

2007

2006

Activity Ratios Total Asset Turnover=Sales/Total Asset 0.65 0.75 0.24 0.23

Debt Debt to equity Ratio(in times)=Total debt/ shareholders equity Profitability Operating profit margin= operating profit/sales Net profit margin= earnings available to common stockholders / sales ROA =Earnings Available for Common Stock Holders/ Total Asset ROI=EACS/ investment 7.46 4.18 11.42 4.58

1.88

1.47

1.20

1.10

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ROE = Earnings Available for Common Stock Holders / Total stockholders equity

15.31%

9.16%

11.36%

5.29%

Earnings Per Share=Earnings Available for 21.91 Common Stock Holders/Number of Shares

12.20

13.75

9.82

Market Price/Earnings Ratio=Market Price Per Share/EPS

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Current Ratio:

current ratio
2.5 2 1.5 1 0.5 0 2009 2008 2007 2006

current ratio

Comment:

Total Asset Turnover:

total asset turnover

0.8 0.6 0.4 0.2 0 2009 2008 2007 2006 total asset turnover

Comment:

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Debt to equity ratio:

debt to equity ratio

2 1.5 1 0.5 0 2009 2008 2007 2006 debt to equity ratio

Comment:

Return on investment:

return on investment
12 10 8 6 4 2 0 2009 2008 2007 2006 return on investment

Comment:

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Return on equity:

return on equity
16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2009 2008 2007 2006

return on equity

Comment:

Earnings per share:

earning per share

25 20 15 earning per share 10 5 0 2009 2008 2007 2006

Comment:

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Part: 05

Findings & Recommendation

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Findings & Recommendation

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Part: 06

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Conclusion

Banks and Non-Bank Financial Institutions are both key elements of a sound and stable financial system. Banks usually dominate the financial system in most countries because businesses, households and the public sector all rely on the banking system for a wide range of financial products to meet their financial needs. However, by providing additional and alternative financial services, NBFIs have already gained considerable popularity both in developed and developing countries. In one hand these institutions help to facilitate long-term investment and financing, which is often a challenge to the banking sector and on the other; the growth of NBFIs widens the range of products available for individuals and institutions with resources to invest.

Through their operation NBFIs can mobilize long-term funds necessary for the development of equity and corporate debt markets, leasing, factoring and venture capital. Another important role which NBFIs play in an economy is to act as a buffer, especially in the moments of economic distress. An efficient NBFI sector also acts as a systemic risk mitigator and contributes to the overall goal of financial stability in the economy.

NBFIs of Bangladesh have already passed more than two and a half decades of operation. Despite several constraints, the industry has performed notably well and their role in the economy should be duly recognized. It is important to view NBFIs as a catalyst for economic growth and to provide necessary support for their development. A long term approach by all concerned for the development of NBFIs is necessary. Given appropriate support, NBFIs will be able to play a more significant role in the economic development of the country.

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