Case Study on Successful Borrower ?
Case Study on Successful Borrower ?
JMI Syringes and Medical Devices Ltd. as a joint venture with South Korea was established as a Private Limited Company in April, 1999. But at present it is a Public Limited Company. The project is situated at Noapara, Choddogram in the district of Comilla. The project is a pioneer manufacturer of Auto Disable (AD) Syringe, Blood Transfusion Set, Intravenous Canula (IV Canula), Intrauterine Contraceptive Device (Copper T380A) in the country. Almost all main hospitals and major pharmacy of the country are the purchaser of the syringe and other products of the company. It is the only company accredited by WHO and GVI (Global Alliance for Vaccination and Immunization) to supply syringe for the EPI (Expanded Program for Immunization). It is also a member of International Association of Safe Injection Technology (IASIT), Geneva, Switzerland. It exports its products to Singapore, Thailand, Myanmar, Spain, Portugal and other different countries of Asia and Latin America. The total cost of the project now stands at BDT 500 million including BDT 125 million term loan from a state- owned commercial bank and BDT 50 million from the public issue. The project has a yearly capacity of producing Auto-disposable Syringe (228,171 pieces), Insulin Syringe (31,428 pieces), Infusion Set (39,286 pieces), Bud Set (39286 pieces), Urine Bag (31,249 pieces), IV Cannula (23,571 pieces), Needle (Blister Pack (39,286 pieces) and Auto Disable (AD) Syringe (480,571 Pieces)]. As regards loan repayments, there is no default. Payment is made without any delay. Till date BDT 135 million has been repaid.
Other details of the entrepreneur and the project are given below.
- Abdur Razzaque, M.A. in Economics from the University of Chittagong, is the main sponsor of this project.
- Technical know-how, practical experience in machine installation, process flow, etc. of Mr. Abdur Razzaque.
- Twelve (12) years working experience at Japan in a Disposable Syringe Factory.
- Fluency in Japanese, Korean and English languages of Mr. Abdur Razzaque.
- Maintaining good relationship with public and government and other agencies.
- Giving due importance to perseverance and value of time.
- Extensive demand for the products of the project at home and abroad.
- Simple life style and no extravagancy.
- Personal commitment.
- Timely sanction of required working capital by the Bank.
Critically analyze the case and identify the success factors.
Case Study on Unsuccessful Project/ Borrower:
In 1992 an amount of TK. 41.795 million was sanctioned in favor of Rahman Knitting and Yarn Processing Ltd. by a state owned commercial bank. The first installment of the loan was due for payment on 27.08.1994. The loan was scheduled to be repaid in eleven half yearly installments. Each installment amounted to Tk.6.288 million. The entire amount of loan was scheduled to be repaid within 27.08.1999. Afterwards an amount of TK. 45.118 million BMRE loan was disbursed on 09.02.2004 for proper balancing the project. But the borrower failed to repay the loan installments in due time and because of this, the loan account was rescheduled around thirteen times starting from December, 2001. Under these circumstances, the BB has already directed the bank to classify the loan, and take appropriate actions against the officers who are involved with re-scheduling the loan again and again. BB has also asked the bank to take immediate action to recover the overdue loans and report to them the progress thereof. The project comprises of dyeing, knitting and sweater unit. At present the sweater unit is not running. But the rest are in operation. The borrower has informed the bank that they are running the project on sub-contract basis and as such they are not in a position to repay the loan installment due to insufficient cash generation. They are not also receiving direct export L/C because they are not getting the opportunity to open Back-to Back L/C from the bank as the banks are not allowing them to open the same (Back-to-Back L/C) due to failure of payment of overdue loans. The project failed due to the following bad personal traits of the borrower and other factors:
- Ill motive and ill behavior
- No expenditure control and lavish life
- Always looking for excuse whatever be the
- Tendency for over borrowing by exaggerating project
- Lack of professionalism and practical knowledge
- Connectivity with political/ influential
- Never seeing root of
- Always trying to manage things for short period and in temporary
- The project is being run on sub-contract
- Insufficient cash
Requirement: 1. Critically analyze the case and identify the reasons for failure.
- What the banker should do to prevent this type of borrower at pre-sanction stage and post sanction stage?