In an exclusive interview with the Fintech team, Managing Director and CEO of the recently approved Community Bank Bangladesh Ltd Masihul Huq Chowdhury, speaks about his career, the bank’s vision, cybersecurity, the difference between foreign and local banks and the challenges facing the banking sector in Bangladesh as a whole. Here is an excerpt of that conversation.
Can you tell us briefly how did you begin your career?
I started my career in 1992 after completing MBA from the Institute of Business Administration (IBA), Dhaka University. I joined as a management trainee at the American Express Bank. It was not by any design that I entered the banking sector; I actually wanted to go to the teaching profession. As a part-time teacher, I was an adjunct faculty at the Brac University and I also took classes at IBA. My journey into the banking sector began through American Express and then I went to Standard Chartered, followed by Citi NA and other local banks. I worked both at home and abroad. Coming from a humble background, my father was a lawyer of the Supreme Court of Bangladesh. He was the President of Supreme Court Bar Association for six times. While my paternal uncles were mainly involved in agriculture and maternal uncles were Government secretaries, except one exception, one of my cousin was in banking sector. So you can say it was not by any design that I became a banker and I didn’t have any plans whatsoever.
As far as we know, you have 26 years of experience in the banking and financial sectors. Can you talk about the challenges you had to overcome especially in the banking sector over this period of time?
During this journey of 26 years, not only had I worked in many renowned institutions but I also took up the challenge to work with Malaysians in ICB Islamic Bank which was set up under the TOBL structural scheme. While working there, I realized the fundamental challenges in the banking sector from top to bottom. The primary challenge is the lack of attention given to develop the human resource in an organization. You can see the gulf of difference between foreign and local banks due to this factor. Apart from human resource, I will say technology and corporate governance are also major challenges. If we can properly maintain these three factors then I don’t see any reason why the banking industry will be in jeopardy. Whenever there is any non-performing loan or when a loan becomes bad, there is this tendency among bankers across the banking sector to hide it under the carpet. The banking sector is currently going through a difficult period because of this tendency. No matter who is responsible for these non-performing loans, if you deal with this issue transparently, then the efficient banks will get the opportunity to stand out in banking sector.
Let me explain this with an example. As an employee of a Multinational Bank, I worked in Nigeria and when I went there, there were 85 banks. When I left Nigeria, there were only 25 banks in that country. The banking authority was issuing new licenses and at the same time was allowing the old banks to fail in Nigeria. I realized that ultimately those banks that managed to survive; their capital exceeded a billion dollars. As a result they could spread their wings to the other African markets. Similarly, you will notice in Vietnam where the NPL rate reached about 20 percent in 2013-14. But the authority allowed to surface it out and then addressed the issue. If we can identify the problems then there will be an opportunity to deal with NPLs in our country. Another thing I would like to mention is that everyone should head towards a special business plan. We talk about Bangladesh being a country of SMEs, Bangladesh being a country of micro-industry but bankers are not going in that direction. On the other hand we see that micro financing institutions (MFIs) are doing quite well. For example, BRAC, Grameen Bank, ASA, and TMSS they are doing well.
Community Bank is a relatively new bank. What are your plans with this new bank?
Our name, Community Bank is actually a signifier. The police force has a presence even in the remotest locations where the mobile phone network hasn’t reached yet. The police force has a good relationship with the community at large. If you notice the logo of our bank, there are three pillars: trust, security and progress. Police is recognized for providing security to people and property. We are moving ahead with the three pillars to provide the financial security to people. With this motto, we intend to work in the digital arena and with the micro and small enterprises across the country.
We want to take our service to those people who take loans at a high interest from local money lenders. Another thing that we want to work with is micro-savings. If we can press ahead with micro-savings and bundle with insurance or other products then we will be able to take the banking service to the marginal population of this country. Our products will be designed to support the marginal people. You will notice that the farmers and growers have not been benefitted to that extent even after the advent of superstores in major cities. If we can support them as financial intermediaries then they will be able to make more profit and trust us as their benefactor. So this is what we are focusing on: trust, security and progress.
How is Community Bank different from others? Can you tell us about your IT products?
The first thing is that the banking industry has become commoditized. All the banks are supporting more or less the same type of organizations, working with the same type of products. There is only a subtle difference in the benefits, the interest rate or the tenure as the products are launched in the market. We can break out of this commoditized mould due to our infrastructural support. I will not say the niche markets but in the mass markets where other banks have not ventured forth, we can explore those areas. Another thing is that we are targeting those who work in micro-finance institutions or NGOs for our booth banking; we will bring them into the banking industry. There are two reasons behind this move.
Firstly, no matter how much we say, we are not as skilled as them, they know the ground reality better than us due to their fieldwork. Their products are quite different compared to banking. Today if I talk about TMSS, their offerings are quite different. If we can bring those offerings under the fold of banking remaining compliant to rules and regulations of Bangladesh Bank then we can build a new customer base. Let me give you a rough calculation. Let’s say the pie is shared among 59 banks; everyone is sharing the same pie rather than increasing the size of the pie. What we are thinking is inorganic growth. We want to make the pie bigger by increasing the clientele base and include those who can be brought under banking service. That is our intention. We are working to increase the bankable population.
As far as we know, there are currently 59 banks in Bangladesh. Do you think we need so many banks? What is your personal opinion on this matter?
Actually you will see in any other country in the world that the banking license is issued continuously. You have to allow banks to fail; there is no point in keeping the weak banks alive. You have to go for merger or acquisition for such banks. Those who are saying what’s the use of having new banks; the banks that are not performing well, you should merge them, let investment come from abroad and acquire them. You should further open up the market. You may notice that the foreign banks, are doing well in terms of governance and profitability. The foreign investors need to be allowed in, let the market be more competitive. Recently Moody’s and Standard & Poor’s conducted the risk rating of Bangladesh and the results are stable outlook. Also as per World Bank and IMF predictions Bangladesh will grow at an annual GDP growth rate of eight percent, which is among the top four or five countries in that list. We are branding Bangladesh, calling ourselves the emerging tiger but we have been forced to slow down due to the challenges in the banking sector. Hence, the opening up of market for potential direct foreign investment in Banking and Financial Industry will help the required stability.
What initiatives have you taken for cybersecurity?
This is a very important question. Those who own this bank that is the Bangladesh Police Kallyan Trust (Bangladesh Police Welfare Trust), they are looking after the cybersecurity in this country to a large extent. We have employed the state-of-the-art CBS. Whether we talk about penetration test or ethical hacking, we have been alert about cybersecurity from our inception so we can win the trust of people. In terms of human resources, we are employing people who had worked in reputed banks.
Another thing is the phishing that takes place, it happens through malware. We will be stopping the malware that comes in messages as much as possible. We will ensure that we have the adequate firewall support. No matter how good firewall we have, the breach in security takes place through people. Therefore, we will train our employees; update them so there are no issues internally. Another thing you must remember is that, disgruntled and uneducated or untrained employee is the main cause of concern. So we will create an environment where the employees do not feel disgruntled. We will have well trained employees so they can remain vigilant about any threats. Password sharing is a common problem and we will look into it so we are not affected by it. Hence, cyber security is one of the key area of concern for our bank which we will embed in our culture.
Since you have worked in Standard Chartered bank, can you tell us the state of our local commercial banks in comparison with the foreign banks?
Whether I talk about Standard Chartered, Citi NA or American Express, I have had the experience of working in these three foreign banks, both at home and abroad. As I have mentioned earlier, these banks invest in human resources. Talking about this investment, I remember once the chief financial officer said, “Why should I spend so much for human resource, that person may leave in the future”. In reply the chief executive officer said that if we do not invest in our human resources, we will end up with an illiterate and semi-skilled workforce and the company will not be able to move forward, so ultimately what decision should we take? Some local banks are investing in human resources but majority of them are not doing so. Here lies the difference between foreign and local commercial banks.
The money you are investing to develop your employees, that investment will help the bottom-line of your bank. This is not expenditure but investment. Secondly, the foreign banks have an advantage as they enjoy a global network, they can easily replicate and migrate the best practices and bring it to Bangladesh. Some local banks have moved out of their comfort zone by investing in human resources and technology and they are reaping its benefits. The banks that are investing in human resources and the banks that are not, you can see the difference in their bottom-line. Another difference between foreign and local banks is the issue of governance. The more transparent you are in your governance, stop poor lending and decision, the more stable and robust your bank will become ultimately.
Where do you see Community Bank in the next five years?
In sha Allah we will be among the top five banks, and let me share the logic behind this expectation. Firstly, we give top priority to corporate governance and we have maintained complete transparency in all our recruitment till now. We do the same for the procurement as well. We uphold the highest level of transparency in whatever we do. Secondly, we have the advantage of an extensive network, as I mentioned earlier about police stations all across the country. We will be able to support grass-root level.
Thirdly, whatever we do, we employ the state-of-the-art technology, for example our core banking software. We have the stability in our CBS to support product innovation and network coverage across the entire country. We have invested in the latest data center. Wherever we invest, we ensure the state-of-the-art standard and hopefully in the next five years we will be among the top five banks.