internship report (prepared for aci agribusiness)

7/21/2019 Internship Report (Prepared for ACI Agribusiness)

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CREDIT PRACTICES OF

AGRIBUSINESS FIRMS

IN BANGLADESH

Empirical research states that the major controllable variables that

effect demand for a companys product are sales price, product quality,

advertising and the firms credit policy. In agribusiness sector, this can be

proved with more emphasis. As a result, all the firms in agribusiness

sector are involved in credit practice and focus to provide better service

maintaining better credit policy to uphold its own financial growth and

competitive edge.


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CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH

PREPARED FOR

Mr. BASHIR AHMED

BUSINESS MANAGER

ACI FERTILIZER, ACI LIMITED

PREPARED BY

SYED GOLAM REDWAN

STUDENT ID: 2010-1-10-204

DEPARTMENT OF BUSINESS ADMINISTRATION

EAST WEST UNIVERSITY

AND

INTERN

ACI FERTILIZER, ACI LIMITED

SUBMISSION DATE: 8thJuly 2014


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LETTER OF TRANSMITTAL

Date: July 8, 2014

To

Mr. Bashir Ahmed

Business Manager, ACI Fertilizer

ACI Limited

Subject: Submission of internship report.

Dear Sir

With great gratification I am submitting my internship report on Credit Practices of

Agribusiness Firms in Bangladesh that you have assigned me as an essential requirement

ofInternship program. It is really an enormous prospect for me to congregate vast information

and grasp the subject matter in an appropriate way. I have found the study is quite interesting,

beneficial & insightful and tried my level best to prepare an effective &creditable report.

I would like to thank you for your encouragement and support which inspired me to workenthusiastically. It would be my pleasure to clarify any discrepancy that may arise or any

clarification that you may require regarding my project and report.

Yours sincerely

______________________________

Syed GolamRedwan

Intern, ACI Fertilizer

ACI Limited


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Acknowledgement:

In the preparation of this internship Report, I would like to acknowledge the encouragement

and assistance given to me by a number of people. I am most grateful to my department

supervisor Mr. Leo Vashkor Dewri for providing detailed feedback and support all the time

on this report.

I would like to express my gratitude to Mr. Bashir Ahmed (Business Manager, ACI

Fertilizer), Mr. Yusuf Alam (Assistant Product Manager, ACI Fertilizer), Md. Arifur Rahman

(Sr. Executive, Institutional Sales, ACI Fertilizer), Omar Osman (Executive, Agribusiness

Credit Operation, ACI Ltd). Thanks to them for helping me with the relevant information

about the credit management of ACI Ltd and agribusiness firms in Bangladesh that I needed

to prepare this report. Moreover, I would like to thanks all the staff of agribusiness division,

Credit management and credit operation division for providing me necessary support

whenever required. Without their contribution, it would not have been possible for me to

conduct this project work.


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Table of Contents

TOPIC Page no.

Chapter 01: Introduction

1.1Background of the study:1.2Origin of the Report1.3Scope of the report1.4Objective of the study1.5Methodology1.6Limitations

01

0202

02

03

03

03

Chapter 02: Company Overview

2.1 Historical Background

2.2 Organizational Profile

2.3 Important dates and milestone of ACI Limited:2.4 Mission

2.5 Vision

2.6 Values:

2.7 Quality policy

2.8 Environmental policy:

2.9 Major Businesses of ACI LTD

2.10 SBUs OF ACI Agribusiness

2.11 ACI logistics

2.12 Subsidiaries of ACI Ltd

2.13 Joint ventures of ACI LTD

2.14 Global recognition of ACI ltd:2.15 Financial Data of Different Business Units:

2.16 2.16 Other Agribusiness Firms in Bangladesh

04

05

06

0708

08

08

09

09

10

13

16

17

18

1920

21

Chapter 03: Literature Review

3.1 Trade credit

3.2 Credit Management

3.3 Credit policy:

3.4 Setting the credit standards - The 5 Cs system:

3.5 Credit Realization-The Ultimate Objective

22

23

23

23

26

26

Chapter 04:Analysis and Findings4.1 Credit Policy in Agribusiness sector

4.2 Training for credit practice

4.3 Credit Management Process of ACI Agribusiness:

4.4 Credit Operations Process

3132

38

40

42

4.5 Recommendations

4.6 Conclusion

49

49


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Table of Charts and Figures

TOPIC Page no.

Figure 1: Major Business of ACI 10

Figure 2: ISO certificate 19

Figure 3: Skills needed for Credit realization 27

Figure 4: Credit selection & approval process 41

Figure 5: Credit operation process 42

Table 1: Organizational profile 6

Table 2: Milestones of ACI 7

Table 3: Subsidiaries of ACI 17

Table 4:Joint Ventures of ACI 18

Table 5: Relative Contribution to revenue 20

Table 6: Example of Aging Schedule 25

Table 7: Credit policy of Auto Equipment Ltd. 32Table 8: Credit Policy of Semco 33

Table 9: Credit Policy of Bayer Crop Science 34

Table 10: Credit Policy of Padma OIl Company 35

Table 11: Credit Policy of Syngenta 36

Table 12: Credit Policy of ACI LTD 37

Table 13: Credit policy of Shetu Corp. 37

Table 14: Credit policy of East West Crop Science 38

Table 15: Aging schedule format kept by ACI 47


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List of Abbreviation

Abbreviation Full term

ACI Ltd Advances Chemical industries Limited

KYC Know your Customer

ECO Executive Credit Operation

CFA Credit Facility Agreement

FF Field Force

SM Sales Manager

RSM Regional Sales Manager

ZSM Zonal Sales Manager

AM Area Manager

MO Marketing Officer

ECDIB Executive Customer Development and

Institutional Business


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Executive Summary

The report is originated in result of my internship program which I have done as

arequirement of BBA program .During the period of three months in Agribusiness division

(assigned from the organization), the organizational works and other relevant works and facts

of the division was worthy learning for me. With the help of my organizational supervisorand other employees within the organization, it was able to gather understanding on credit

management issues, operation procedure, terms and policies, consequently, the topic for

internship report.

Trade credit is the largest single category of short term debt, representing about 40 percent of

the current liabilities for the average non-financial corporations. The percentage is somewhat

large for smaller firms; because small companies often do not qualify for financing from

other sources, they rely especially heavily on trade credit. In agribusiness sector, Trade credit

plays a vital role as source of funding. Empirical research states that the major controllable

variables that effect demand for a companys product are sales price, product quality,advertising and the firms credit policy. In agribusiness sector, this can be proved with more

emphasis. As a result, all the firms in agribusiness sector are involved in credit practice and

concentrate to provide better service with maintaining a better credit policy to uphold its own

financial growth and competitive edge.

The main objective of this report is to figure out the situation of agribusiness sector with

credit policies and operations managed by different agribusiness firms in Bangladesh. To

prepare this report both primary and secondary sources of data have been used.

This report is constructed based on four specific chapters. First chapter consists ofintroductory part which has been included for the proper execution of the report; second

chapter includes the organizational overview of ACI and other agribusiness firms ; third

chapter includes literature review, theories needed for through understanding of overall credit

management issue and credit operation process. Rest of the sections includes findings and

analysis as well as recommendations and conclusion.

Generally agribusiness firms in Bangladesh operate within 5 different segments including

seed, fertilizer, motors, crop care products and animal health (livestock and fisheries).

However depending on potentiality of business credit limit has been set and credit days differ

in between 30 to 180 days from invoice date. After that period credit department of respective

firms give reminder and finally legal notice towards clients.

After analyzing the overall process it has been observed that proper information flow among

customers, business management. Credit department and field force has not been yet properly

constructed. Although ACI with their common database stored in SDMS (Sales Depot

Management System) is trying to reduce the miscommunication, but most of the firms is far

behind to reduce the miscommunication. Moreover, Field force and recovery team should

have access to the database through portable device which will make the overall recovery and

inspection process easier.


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CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 1 | Page

CHAPTER 1:

INTRODUCTION


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1.1 Background of the study:

Trade credit is the largest single category of short term debt, representing about 40 percent of

the current liabilities for the average non-financial corporations (Scott Besley & Eugene F.Brigham, 2010, pp. 593-597). The percentage is somewhat large for smaller firms; because

small companies often do not qualify for financing from other sources, they rely especially

heavily on trade credit. In agribusiness sector, Trade credit plays a vital role as source of

funding. Empirical research states that the major controllable variables that effect demand for

a companys product are sales price, product quality, advertising and the firms credit policy.

In agribusiness sector, this can be proved with more emphasis. As a result, all the firms in

agribusiness sector are involved in credit practice and concentrating more to provide better

service with maintaining a better credit policy to uphold its own financial growth and

competitive edge.

Bachelor of Business Administration (BBA) program requires usually a three months

attachment with an organization followed by a report assigned by the supervisor in the

organization and endorsed by the faculty advisor. As a mandatory requirement, opportunity

of doing the internship was derived from the organization ACI LIMITED.

During the period of three months in Agribusiness division (assigned from the organization),

the organizational works and other relevant works and facts of the division was worthy

learning for me. With the help of my organizational supervisor and other employees within

the organization, it was able to gather understanding on credit management issues, operation

procedure, terms and policies, consequently, the topic for internship report.

1.2 Origin of the Report

As a compulsory part of Internship program, this particular report is being prepared on the

proposed topic Credit practices of agribusiness firms in Bangladesh. The intention was to

give an opportunity to the students to gain some real world experience by working in a

practical environment. The internship supervisor was Yusuf Alam (Assistant ProductManager, ACI Fertilizer), ACI Limited and the faculty advisor was, Leo vashkor Dewri,

Lecturer, Department of Business Administration, East West University.

1.3 Scope of the report:

The scope of this report will be limited to the overall description of the company s

organizational structure, management policies and credit management and operation practice

in agribusiness sector. It will emphasis on what standards ACI Agribusinesses is maintaining

in recording and reporting its credit management and operations as ACI is pioneering in theregularization of credit operation process.


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1.4 Objective of the study:

The broad objective of this report is to figure out the situation of agribusiness sector with credit

policies and operations managed by different agribusiness firms in Bangladesh.

To get an organizational and operational overview of ACI Limited To provide theoretical Knowledge of Credit management and credit operations. To provide information about credit policy of major companies in agribusiness sector. To provide information about overall credit operation policy. To summarize the overall analysis.

1.5 Methodology

To form the report more informative and presentable, two kinds of sources were used to

collect the data and information .These sources are:

1.5.1 Primary Sources

Primary data were collected directly from the officials of agribusiness unit, Credit Operations

Department, credit management department of ACI and some other agribusiness firms

officials. . I have discussed some matter to them and use their responses as primary data

1.5.2 Secondary Sources

The secondary data were, companys yearly business review report, marketing report, annual

budget, company manual, text book and information from internet etc.

1.6 Limitations

Time frame for the report was limited. The adoption to the organization takes a lot oftime. Detailed research was not possible due to constraints and restrictions posed by the

organization.

Getting relevant papers and documents have been extremely difficult as credit policyis very sensitive and confidential.

To protect the organizational confidentiality, some parts of the report will be edited.


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CHAPTER 2:

COMPANY

OVERVIEW


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2.1 Historical Background:

ACI Limited was established as the subsidiary of Imperial Chemical Industries (ICI) then in

East Pakistan in 1968. After independence, the company was incorporated in Bangladesh in1973 as ICI Bangladesh Manufacturers limited as a Public Limited Company. In 1992, the

company was divested to local management and the name of the company changed to

Advanced Chemical Industries (ACI) Limited. ACI inherited the rich ICI culture of product

quality, customer service and social responsibility.

Initially in 1992, ACI started primarily with the pharmaceutical business with a turnover of

BDT 80 million only but later the new management brought about fundamental changes in

the policies and in the year 2008 turnover grew to over BDT 7,365 million. The Company

has diversified business interest in pharmaceuticals, agricultural including fishery & livestock

and consumer brands. At present, ACI has three Strategic business units along with 11Subsidiaries, 3 Joint ventures and 1 Associate.

ACI is a fast growing company that has a substantial contribution to the economy of

Bangladesh. In response to the growing demands of the consumers of Bangladesh, ACI has

diversified its business to include a wide range of products in its portfolio. ACI has started its

expansion policy by exploring and strengthening the pharmaceuticals wing further so that it

can continue giving reliable service to the consumers of Bangladesh.

ACI is the first company in Bangladesh to achieve ISO S001 in 1995 for quality management

and also the first company to achieve ISO 14000 in 2000 for environmental managementsystem. ACI is also the first company from Bangladesh to become the honorable member of

the United Nation Global Compact. It is the only Bangladeshi company which was declared

as a notable COP (Communication on Progress) recognized by the UNGC (United Nation

Global Compact). ACI has been accepted as a founding member of community of Global

Growth Companies by the World Economic Forum which is the most prestigious business

network organization in the world.


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2.2 Organizational Profile

In the below table the Organization profile is being given in short (ACI Limited, 2013)

:

Organizational Profile

Organization Name Advanced Chemical Industries Limited

Date of Incorporation 24 January, 1973 Incorporation of ICI

Bangladesh Manufacturers Limited

Legal Status Public Limited

Date of Commencement 24 January, 1973

Registered Head Office ACI Centre,245 Tejgaon Industrial Area,

Dhaka

Chairman Mr.M Anis-Ud- Dowla

Managing Director Dr.Arif-Ud- Dowla

No. of Directors 06

Listing with DSE 9 March, 1994

Listing with CSE 22 October, 1995

Website www.aci-bd.com

Table 1: Organizational profile
http://www.aci-bd.com/http://www.aci-bd.com/


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2.3 Important dates and milestone of

ACI Limited:

Date Event

1968 Imperial Chemical Industries Pakistan Manufactures Limited (ICI

Pakistan) was established in the then East Pakistan.

24 January, 1973 Incorporation of ICI Bangladesh Manufacturers Limited.

24 January, 1973 Commencement of Business.

5 May, 1992 Imperial Chemical Industries Pakistan Manufactures Limited divested

70% of its shareholding to local management.

5 May, 1992 The name of the company changed to Advanced Chemical

Industries Limited from ICI Bangladesh Manufactures Limited.

9 March, 1994 Listed with Dhaka Stock Exchange.

22 October, 1995 Listed with Chittagong Stock Exchange.

Table 2: Milestones of ACI


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2.4 Mission:

ACIs mission is to enrich the quality of life of people through responsible application of

knowledge, skills and technology. ACI is committed to the pursuit of excellence throughworld class products, innovative processes and empowered employees to provide the highest

level of satisfaction to its customers (ACI Limited,2013)

.

2.5 Vision:

Endeavor to attain a position leadership in each category of its business.

Provide products and services of high and consistent quality ensuring value for moneyto its customers.

Attain a high level of productivity in all its operations through effective utilization oftime and adoption of appropriate technology.

Contribute to the personal development, encourage empowerment and Recognizeinnovation of its employees.

Ensure superior return on investment through healthy and sustainable growth of thecompany.

Encourage and the support qualitative improvement of the services of its distributorsand suppliers.

Establish harmonious relationship with the community and promote greaterenvironmental responsibility within its sphere of influence.

2.6 Values:


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2.7 Quality policy:

ACI strictly maintains these values by following international standard current Good

Manufacturing Practice (CGMP) guidelines and standards recommended by WHO, StandardOperating procedure (SOP), Quality policy, Environmental policy, Global Compact,

Endorsement and by using Friendly Corporate Culture, Quality Management System (SQM)

Update Technology, Information Technology, Distribution Channel to fulfill company

mission and vision as an organization development.

ACI's mission is to achieve business excellence through quality by understanding, accepting,

meeting and exceeding customer expectations.

ACI follows International Standards on Quality Management System to ensure consistent

quality of products and services to achieve customer satisfaction. ACI also meets all nationalregulatory requirements relating to its current businesses and ensures that current Good

Manufacturing Practices (CGMP) as recommended by World Health Organization is

followed for its pharmaceutical operations.

The management of ACI commits itself to quality as the prime consideration in all its

business decisions. All employees of ACI must follow documented procedures to ensure

compliance with quality standards.

The pool of human resources of the company will be developed to their full potential and

harnessed through regular training and their participation in seeking continuous improvement

of work methods

2.8 Environmental policy:

ACI Limited is committed to formulate and conduct all operation in an environmentally

friendly manner ensuring continual improvement in the utilization of resources and

prevention of pollution or degradation of the environment.

To achieve the goal ACI is committed to execute the following criteria:

Comply fully with all local and national environmental regulations. Conserve natural resources like water and energy for sustainable development, and

adopt environmentally safe process.

Ensure appropriate treatment of all effluents prior to discharge, to prevent pollution ordegradation of environment.

Ensure appropriate communication and co-operation with internal and externalinterested parties on environmental issues.

Create awareness on environmental issues among employees and suppliers.


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Adopt modern waste management in an environmentally responsible manner throughcontinuous up gradation of technology.

2.9 Major Businesses of ACI LTD:

Figure 1: Major Business of ACI

2.9.1 Pharmaceuticals:

In 1973, the UK based multinational pharmaceutical company, ICI PLC, established a

subsidiary in Dhaka, known as ICI Bangladesh Manufacturers Limited.

In 1992, ICI PLC divested its share to local management, and the

company was renamed Advanced Chemical Industries (ACI) Limited.

ACI formulates and markets a comprehensive range of more than 387

products covering all major therapeutic areas, which come in tablet,

capsule, powder, liquid, cream, ointment, gel ,ophthalmic and injection

forms. ACI also markets world-renowned branded pharmaceuticalproducts like Arimidex, Casodex, Zoladex, Atarax etc. from world-

class multinational companies like ASTRAZENECA, UK and UCB,

BELGIUM in Bangladesh.

ACI is actively engaged in introducing newer molecules and Novel

Drug Delivery Systems (NDDS) to meet the needs of the future.

ACI introduced the concept of quality management system by being

the first company in Bangladesh to achieve ISO 9001 certification in 1995 and follows the

policy of continuous improvement in all its operations.

ACI Limited

PharmaceuticalsConsumer

Brands &

Commodity

Products

Agribusiness

Crop Care &

Public HealthSeed

FertilizerMotors

Animal

HealthCropex

Logistics

Shawpno


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Aligned with the concept that a pharmaceutical must ensure effective management of

environment, ACI complies with standard environment management policy, thus adorned

with EMS 14001 in 2000.

ACI maintains a congenial and supportive relationship with the healthcare community of

Bangladesh, with the belief that business excellence can only be achieved through pursuit of

quality by understanding, accepting, meeting and exceeding customer expectations.

The management of ACI, a competent team of professionals, thus operates with a progressive

attitude to provide effective solutions to satisfy the customers needs, through i ts products

and services of uncompromising quality.

2.9.2 Consumer brands:

ACI Consumer Brands was initiated in 1995 with

two major brands of the companyACI Aerosol

and Savlon. These are two of most prestigious

products which are enjoying the leadership

position in the market. The division started to

take new businesses through off shore trading as

well as local manufacturing. In this process ACI

Consumer Brands launched many new products

and also bonded with Joint Venture business

relationships with Dabur India and Tetley UK

and attained international alliances with world renowned companies.

The Consumer Brands Division boasts in having an unequivocal presence in consumers

heart with the market leading brands like ACI Aerosol, Savlon, ACI Mosquito Coil & ACI

Pure Spices and Flour. With close to 80% market share in own categories, ACI Aerosol and

Savlon are the persistent performers in keeping the household clean and free from germs and

harmful insects. The ACI mosquito coil has also emerged as a formidable opponent to boththe mosquito and the competition, by providing effective and affordable solution to the

conscious people of Bangladesh.

A sound mind goes with a sound body-ACI believes in this age old proverb and our young

generation needs to grow up with healthy physique and sound mind who will lead the nation

in future. With this belief, ACI has entered in to the commodity food business with ACI

Pure Brand. The aim is to provide purest of the food products to Bangladeshi consumers at

affordable price for which ACI has invested in very large scale in state of the art

manufacturing facilities for daily kitchen essentials like vacuum evaporated edible Salt,


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Spices and Flour. The products are delighting the consumers by providing 100% dirt free,

pure and natural food ingredients which can compete against any international products.

ACI Consumer Brands is successfully serving the consumer demand for foreign products in

household and personal care category with the world renowned product range of Colgate,

Nivea & Dabur. With the proper distribution and marketing by ACI consumer brands, the

worlds No. 1 tea brand Tetley is now available to the consumers of Bangladesh.


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2.9.3 Agribusiness:

ACI is significantly

contributing to NationalFood security through its

Agribusiness division.

ACI Agribusiness is the

largest integrator in

Agriculture and

Livestock and Fisheries.

Farmers depend a lot on

and have great

confidence in ACI. This

division has five separate

SBUs.

They are Seeds, Fertilizer, Motors, Crop Care & Public Health, and Animal Health. Farmers

have developed confidence in our products for quality and economics. These businesses have

glorified presence in Bangladesh. ACI Agribusinesses has a large, knowledgeable and highly

skilled Field Force provides training and technical advices to the farmers.

ACI has a complete range of cost effective products which can provide appropriate solutions

for the farmers through insecticides, herbicides, and fungicides.

ACI Agribusiness is having strong partnership with national and international R & D

companies, universities and research institutions. Before introducing any product, it is

elaborately tested in the laboratory and farmers field.

2.10 SBUs OF ACI Agribusiness:

2.10.1 Fertilizer

This unit is dealing mainly with micro continent and foliar fertilizer with a focus in basic

fertilizer. It launched micronutrient fertilizers like Zinc Sulphate, Magnesium Sulphate,

Ammonium Sulphate, Boron, Sulphur 90% and Sulphate of Potash. They are being imported

from China, U.S.A, Canada, Taiwan, Argentina, and Turkey etc. ACI Agribusiness strives for

providing one stop solution to farmers by providing all sorts of activities regarding

agriculture. ACI Agribusiness is having a strong partnership with national and international

R&D companies, Universities, and research institutions. Partnership with the farmer is the

main theme of ACI Agribusiness


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2.10.2 Seed

Division is dealing with hybrid rice, vegetable and maize seeds. It has partnership with

renowned HYV seed companies of the world. ACI started the seed business in 2006. It has its

own research and development stations in Gazipur and Bangladesh Agricultural University,Mymensingh.

2.10.3 Animal Health

This division is dealing with high quality nutritional, veterinary, poultry medicine and

vaccines including proposal forpisciculture, cattle rearing and cattle fattening. Integrated

fisheries and livestock project will be implemented soon.

2.10.4 Crop Care & Public Health

Crop care & Public health is dealing with all type of crop protection items. It is providing a

complete range of cost effective products which can provide appropriate solutions for the

farmers through insecticides, herbicides, and fungicides. This business has been transferred

to ACI Formulations Limited form 1st January of this year. ACI Formulation Limited has

been listed to Dhaka Stock Exchange and Chittagong Stock Exchange recently.

2.10.5 Cropex

Cropex is dealing with commodity buying, storing, preserving and selling. ACI Cropex is a

remarkable addition to the agricultural advancement in the country. The project assists the

farmers in various ways - exchanging their crops at the time of their necessity, providing

them with technological assistance and advisory services and so on.


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2.11 ACI logistics:

ACI Logistics Ltd. had launched with the dream tochange the life of Bangladeshi Consumers with the

Brand Name SHWAPNO in the form of retail

chain in 2008.

It opened the first outlet in Postogola Dhaka in 28

October 2008. Now, Shwapno has 59 outlets in 16

districts (Dhaka, Narayangonj, Mymensing,

Chittagong, Feni, Sylhet, Moulvi bazar, Bogra,

Nator, Rangpur, Khulna, Jessore, Jhinaidah,

Narshingdi, Barishal, and Pabna). More than 1300

people are working in this retail chain shop. They are

making varieties of products day by day that we call

it little Walmart in Bangladesh.

The consumers of Bangladesh have always been the victim of deception by the shoppers,

who invariably manipulate the price. Wholesaler and retailer are two intermediaries in this

value chain, where wholesaler often form cartel to manipulate the market by creating crisis in

the moment of high demand or low production, while retailer charge customer with high

price, sell inferior quality, practice inappropriate measurement, and so forth. Neither

producers nor consumers get the benefit of the value chain.

Today farmers, who are invariably deprived of having minimal scale of social rights to make

the livelihood through farming, are the most unfortunate community in Bangladesh despite

serving the nation with supplying basic need-food. In addition, hardly do they get any

assistance from government in terms of supplying fertilizer, diesel oil, seeds, and cultivation

equipment at rational price.

ACI has initiated to establish new businesses

namely ACI Agribusiness and ACI Logistics to

remove this gap, to uproot cartel, and to ensure

reasonable price for both farmers and consumers.

ACI Logistics has been established to devote itself

to benefit the end users of all products.


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2.12 Subsidiaries of ACI Ltd:

Company names Activities

1 ACI Formulations Limited Manufacturing & marketing of number of

agrochemical and consumer products

2 Apex Leather Crafts Limited Letting out property to ACI Ltd.

3 ACI Salt Limited Manufacturing & marketing of edible packed Salt

4 ACI Pure Flour Limited Processing ,Packing and Marketing of wheat flour

products

5 ACI Foods Limited Manufacturing & Marketing different types of spicesand other food products

6 Creative Communications

Limited

Managing Media solutions and similar services for

different clients including television commercials and

other advertisement and promotion related activities

7 Premiaflex Plastics Limited Manufacturing & Marketing of Plastic Products,

flexible printing and other ancillary business

associated with plastic and flexible printing

8 ACI Motors Limited Business of buying, selling, Importing, and assembling

of vehicles of both agricultural and nonagricultural use

including supplying spare part and providing service

facilities for vehicles

9 ACI Logistics Limited Operating retail chain stores across the country

10 Agro Chemicals Limited Manufacturing, formulating and packaging of

pesticides, fertilizers, plant nutrients, animal food and

other nutrients products

11 Flyban Insecticides Ltd. Manufacturing and selling of mosquito coil

Table 3: Subsidiaries of ACI


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2.13 Joint ventures of ACI LTD:

Company names Activities

1 ACI Godrej Agrovet Private Limited Manufacturing and marketing of qualityPoultry, Aqua, Cattle Feed and Day Old

Chicks

2 Tetley ACI (Bangladesh) Limited Processor, blender and marketer of tea

products

3 Asian Consumer Care (Pvt.) Limited Manufacturing and marketing of coconut

oil, hair, oil shampoo and other products

under the brand name Dabur.

Table 4:Joint Ventures of ACI


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2.15 Financial Data of Different

Business Units:

Relative contribution to revenue

As per audited accounts for the year ended 31.12.2012, relative position to total revenue of

the products are as follows:

Name of the Revenue Value

Products Taka (million) Contribution (%)

Pharmaceuticals 2451 33.28

Consumer Brands 1817 24.67

Agribusiness Crop Care & Public 1406 19.10

health

Animal Health 433 5.87

Fertilize 580 7.88

Seeds 346 4.70

Cropex 332 4.50

Total 7365 100.0

Table 5: Relative Contribution to revenue


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2.16 Other Agribusiness Firms in

Bangladesh:

1. Auto Equipment Ltd:

Founded in 1965 AUTO EQUIPMENT was transformed into a private limited company in

1976. At present this is the 2nd biggest pesticides company in the country having 11 branch

offices and strong dealersnetwork all-over. We import pesticides from the USA, Germany,

India and Singapore in bulk, repack them in small packing in our re-packing factory and

market them at the farmer level. Our present staff strength is about 300 and yearly turnover is

TK. 450.00 million.

2. Shetu Corporation Limited:

It is a leading Agrochemical (Crop care products) Company in Bangladesh, which was

established in 1969. Since its inception Shetu involved with Agro Chemical business

specializing in pesticides, micronutrients and fertilizers. Shetu has wide international

business alliances with reputed MNC's and leading local agro chemical Companies of

different countries of the world. Shetu has its own widespread marketing network throughout

the country by which Shetu distributes wide range of product line up to retailers level and

covers all the retail market of the country. At present Shetu has 12 regional offices and

warehouses in different places of the country with adequate logistic support for marketing

and distribution of Agrochemicals throughout the country. A professional and experience

Marketing team is engaged for implementing different marketing and sales strategies and

policies for achieving target and growth and providing marketing services to customers

(Agrochemical dealers and retailers). Its Product development and registration department

involves with developing environment friendly products, which are potential for the

Agriculture of Bangladesh. Currently above 200 personnel is working with Shetu.

3. Syngenta:

As part of integrated solutions, Syngenta offers its portfolio of safe, effective Crop Protection

products including herbicides, fungicides, insecticides and seed treatment. Their products are

designed to improve crop yields and health in all stages of plant development, improve plant

vigor and reduce yield losses during periods of drought or heat.


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CHAPTER 3:

REVIEW OF LITERATURE


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3.1 Trade credit:

The credit created when one firm buys on credit from another firm, firms generally makepurchases from another firm on credit, recording the debt as accounts payable. This type of

financing, which is called trade credit, is the largest single category of short term debt,

representing about 40 percent of the current liabilities for the average non-financial

corporations (Scott Besley & Eugene F. Brigham, 2010, pp. 593-597). The percentage is

somewhat large for smaller firms; because small companies often do not qualify for financing

from other sources, they rely especially heavily on trade credit.

3.2 Credit Management

Credit Management is the process for controlling and collecting payments from the

customers (Scott Besley & Eugene F. Brigham, 2010, pp. 593-597). A good credit

management system will lead to increased revenues and lower risk including increasing

collections, reducing credit costs, extending more credit to creditworthy customers, and

developing competitive terms. This will also help to reduce the amount of capital tied up with

debtors (people who owe you money) and minimize exposure to bad debts.

Good credit management is vital for cash flow. It is possible to be profitable on paper and but

lack the cash to continue operating your business.

It is best to minimize the likelihood of bad debts through good credit management practices.

Prepare your own policies and procedures for credit management e.g. terms and conditions,

invoicing promptly and monitoring your debts

3.3 Credit policy:

A set of decisions that includes a firms credit standards, credit terms, and methods used to

collect credit accounts and credit monitoring procedures (Scott Besley & Eugene F. Brigham,

2010, pp. 593-597) . The major controllable variables that effect demand for a companys

product sales price, product quality, advertising and the firms credit policy, the firms credit

policy , in turn includes the factors we discuss next:

3.3.1 Credit standards:

Standards that indicate the minimum financial strength a customer must have to be granted

credit (Scott Besley & Eugene F. Brigham, 2010, pp. 593-597). It refers to the strength and

creditworthiness a customer must exhibit in order to qualify for credit. The firms credit

standards are applied to determine which customers qualify for the regular credit terms andhow much credit each customers should receive. The major factors that are considered when
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setting credit standards relate to the likelihood that a given customer will pay slowly or

perhaps even end up a bad debt loss. Determining the credit quality or credit worthiness of a

customer probably is the most difficult part of credit management. But credit evaluation is a

well-established practice and a good credit manager can make reasonably accurate judgment

of the probability of default exhibited by different classes of customers by examining a firmscurrent financial position and evaluating factors that might affect the financial position in the

future.

3.3.2 Terms of credit:

The payment conditions offered to credit customers which include the length of credit period

and any cash discount offered. These are the conditions of the credit sale, especially with

regard to the payment arrangements. Firms need to determine when the credit period begins,

how long the customer has to pay for credit purchase before the account considered

delinquent and whether a cash discount for early payment should be offered. An examinationof credit terms offered by firms in Bangladesh would show great variety across industries-

credit terms range from cash before delivery (CBD) and cash on delivery (COD)

offering.(Scott Besley & Eugene F. Brigham, 2010, pp. 593-597).

a. Credit period: The length of time for which credit is granted; after that time thecredit accounts considered delinquent.

3.3.3 Cash discount:

Cash discount is a reduction in the invoice price of goods offered by the seller to encourage

early payment. For example a firm that offers terms of 2/10 net 30 gives its customers a 2

percent discount from the purchase if the bill is paid on or before day 10 of the billing cycle;

otherwise the entire bill (the net amount) is due to by day 30. Due to the competitive nature

of trade credit, most financial managers follow the norm of the industry in which they operate

when setting credit terms (Scott Besley & Eugene F. Brigham, 2010, pp. 593-597).

3.3.4 Collection policy:

The procedures followed by a firm to collect its account receivables are termed as collection

policy. The firm needs to determine when and how notification of the credit sale will be

conveyed to the buyer. The quicker a customer receives an invoice, the sooner the bill can be

paid. In todays world, firms have turned more to the use of electronics to send invoice to

customers. One of the most important collection policy decisions is how the past-due

accounts should be handled. For example, notification might be sent to customers when a bill

is 10 days past due ; a more severe notice followed by a telephone call , might be used if

payments is not received within 30 days; and the account might be turned over to collection

department after 90 days (Scott Besley & Eugene F. Brigham, 2010, pp. 593-597).


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.3.3.4 Receivables monitoring:

It refers the process of evaluating the credit policy to determine if a shift in the customers

payment pattern occurs. Once a firm sets credit policy, it wants to operate within thepolicys

limits. Thus it is important that a firm examine its receivable periodically to determine

whether customers payment pattern have changed such that credit operations are outside thecredit policy limits (Scott Besley & Eugene F. Brigham, 2010, pp. 593-597).

Traditionally, firms have monitored accounts receivables by using methods that measure the

amount of time credit remains outstanding. Two such methods are the days sales outstanding

(DSO) and aging schedule.

.

a. Days sales outstanding: It represents average length of time required to collectaccount receivables.

Equation 1: DSO

b.Aging schedule: It is report showing how long accounts receivables have beenoutstanding ; the report divides receivables in to specific periods, which provide

information about the proportion of receivables that is current and the proportion that

is past due for given length of time (Scott Besley & Eugene F. Brigham, 2010, pp.

593-597)..

The following is a sample accounts receivable aging schedule from Roth Office Supply:

Table 6: Example of Aging Schedule


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3.4 Setting the credit standards -The 5

Cs system:

Credit standards of a company have been set up based on 5Cs system (Lawrence J. Gittman,

2011-2012,pp. 652-655). Those are

a. Character: This point verifies whether the customer will make an honest effort topay or is it likely to try to get away with something. Credit reports and credit

reputation report collected from secondary sources are the main basis of this point.

b. Capacity: Subjective judgment of customers ability to pay has been verified in thisparadigm. The evaluation primarily based on cash income of the customers business,

customers past records and business methods and physical observation of the

customers plants and stores.

c. Capital:The general condition of the customer as indicated by and analysis of itsfinancial statements. Special emphasis is given to such ratios as the debt asset ratios,

liquidity ratios, and time interest ratio and so one.

d. Collateral: Collateral is the assets the customer might offer as security in order toobtain credit which is particularly important if the customer is expected to make large

volume of purchases on credit.

e. Conditions: General economic trends and special developments in certaingeographic regions or sectors of economy are considered as another basis point as it

can affect the customers ability to meet its obligations.

.

3.5 Credit Realization-The Ultimate

Objective

To understand the Credit Management Process/System the term Credit Realization must be

understood very well. Credit realization is the ultimate objective of the whole Credit

management process of business. Credit Realization is the combination of employees

Persuasion, Negotiation and Problem Solving Skills. Credit Realization is a skill of

recovering outstanding dues by keeping customers always happy, which is a combination of

Art & Science of Persuasion by playing win-win Negotiation tactics and Problem Solving

attitude (ACI HR, 2013 pp. 32-39).


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Figure 3: Skills needed for Credit realization

3.5.1 Persuasion

This is an act of inducing attitude changes and influencing a target market to action, by

appealing to reason or emotion. Persuasion is a primary objective of modern advertising and

can be achieved by creating advertisements with some combination of the following

elements: effective attention-getting devices, a strong appeal to self-interest, a stimulation of

desire for a product or service, and a powerful call-to-action response (Barrons Educational

Series Inc. 2007).

To induce to undertake a course of action or embrace a point of view by means of argument,

reasoning, entreaty.

Principles of Persuasion

Principle of Reciprocation: Reciprocity means, "A mutual exchange." As aprinciple of influence it could be described in laymans terms as the good old

"give and take" principle or you scratch my back and Ill scratch yours. When

someone does something for us we typically feel obligated to do something for

them in return, to return the favor, so to speak.

Principle of Scarcity: although products are available in the stock but thecustomers are to be influenced to buy showing the scarcity of products.

Skill

Persuation

Problem

SolvingcapacityNegotiation


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Principle of Authority: The FF must have expertise knowledge persuasion. Onewill depend on experts rather than non-expert.

Principle of Consistency: the business is a continuous process and throughbusiness both the parties will be benefited with this statement persuasion may go

on. Principle of Consensus: The Principle of Consensustells us, when people are

unsure how to act in certain situations, they tend to look to others to see how they

should respond. It makes me think about the old saying, "There's safety in

numbers."

Principle of Liking: the likings and disliking of customers are needed to beconsidered as they are the reason why business is going on.

Persuasion Approach

Deliver successful message that convince Customer and then support you withdata. To get the competitive advantage among the competitors persuasion is

effective to get good and potential customers. Many unnecessary chatting you will

need to do with the customer but to have to deliver the message that works as

persuasion.

Desirable message should be delivered first. Out of two or more, good news first.People expect good things; even worst incidents can be wiped by delivering good

news. The customer should be convinced with a smiling face in case of any

troublesome situation. Both sides issue should be discussed. Show generosity toward clients interest.

The approach will be like a good friend/well-wisher. You need to conquer the

confusions around customers mind.

Avoid different topic does not match with persuasion course of action. Someirrelevant topic may come on the way but tactfully avoid those and be centralized.

Conclusion should be stated explicitly. Let the customers have a clear knowledgeabout the products and features. Too much explanation the clause of business may

harm the course of action.

3.5.2 Negotiation

Negotiation refers to confer with another or others in order to come to terms or reach an

agreement. Negotiating is a part of everyday life, but in business it's absolutely critical to

your success. Poor negotiation can cripple a company just as quickly as losing key customers.

While most negotiating strategies seem like common sense, it's not uncommon for people to

get caught up in the emotion of the moment and ignore their basic instincts. Emotion, luck

and magic have no place in a successful negotiation. It takes an iron gut, homework, street


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smarts and unblinking discipline. These keys will unlock your ability to get the best deal

possible under any circumstances (Michael Sanibel 2009, April 24).

3.5.3 Problem Solving

Problem solving is the art of finding ways to get from where you are to where you want to be.

The approach referred to is generally designed for problem solving in an organization or

group context, but can also be easily adapted to work at an individual level (Research

Initiatives, n.d.). Trying to solve a complex problem alone however can be a mistake, the old

adage: "A problem shared is a problem halved" is sound advice. Talking to others about

problems is not only therapeutic but can help you see things from a different point of view,

opening up more potential solutions (Research Initiatives, n.d.).

Eight Disciplines in Problem Solving

Describe the problems: Problems are to be described clearly at first. It must bedescribed in such a manner that nature and possible causes can be clearly understood

(Research Initiatives, n.d.).

Develop team approach: business is a process that can be successful only by teameffort. To solve a problem in an effective way team approach should be taken.

Develop & verify short term corrective action: some of the problems cant besolved within a short time but if that problem is harmful for business then shot

term corrective actions is to be taken.

Define and verify root causes: identification is not the remedy. Before developingand implementation of the corrective actions the root causes behind the problem is

to be found for the smooth future of business.

Verify corrective action to be done: the selected solution to solve the problemneeded to be verified accordingly with the real scenario.

Develop & implement permanent action: after sorting and filtering the correctiveactions it is to be executed according to the plan.

Prevent recurrence: necessary steps should be taken so that recurrences of thesame problem do not rise again.

Congratulate to your team: accept the teams contribution to solve the problemand reward them at least with congratulation.


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Five Steps in Problem Solving

Identify problem: there may be more than one problem and they may be differentfrom one another. Whatever or however the problem is/are to solve them make

one sentence description thus the problem solving becomes easier (Research

Initiatives, n.d.).

Analyze the problem: after the identification of the problem the next task is to findout all the possible causes and threats those identified problems can make.

Develop multiple solutions: alternative solutions can provide the scope to judgethe solution based on problem. Changes or modifications can be possible if there

are alternatives.

Choose optimal solution: after getting the multiple possible solutions for theproblems best possible realistic solution needs to be considered.

Create implement/Plan: execution of the realistic solution is the last step ofproblem solving. There might be some situations while implementation of the

solution that is needed to be solved.


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CHAPTER 4:

ANALYSIS &FINDINGS


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4.1 Credit Policy in Agribusiness sector:

It has been seen that credit policy of different agribusiness firms varies in different regions of

the country based on crop production patterns, business condition in respective regions and

common practice of competitors. To avoid extensive data, this report will emphasize on set

credit policy of different agribusiness firms in Manikgonj and Chandpur.

4.1.1 Auto Equipment Limited:

Manikgonj Chandpur

Credit Limit As per potentiality of

business

As per potentiality of

business

Credit Days

Minimum: 30 days

Maximum: 90 days

Minimum: 30 days

Maximum: 90 days

Bonus Offer

Payment within -

30 days: 5%

90 days: 4%

Payment within 90 days: 3%

Punishment Bonus reduction

Bonus reduction,

After 180 daysLegal action

Agreement Procedure

Cheque of bank

Credit days start from the

invoice date.

Some specific products, like -

Fungicide are given through

invoice before 3 or 4 months

of season time, but credit

days start in season time.

Cheque of bank


invoice date.

Some specific products, like -

Fungicide are given through

invoice before 3 or 4 months

of season time, but credit

days start in season time.

Table 7: Credit policy of Auto Equipment Ltd.


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4.1.2 Semco:

]

Manikgonj Chandpur


business


business

Credit Days

Minimum: 90 days

Maximum: 180 days

Minimum: 30 days

Maximum: 90 days

Bonus Offer Payment within 90 days: 3% Payment within 90 days: 3%


Bonus reduction,


Agreement Procedure

Cheque of bank


invoice date.

They dont manage the credit

policy properly.

Cheque of bank


invoice date.

They dont manage the credit

policy properly.

Table 8: Credit Policy of Semco


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4.1.3 Bayer Crop Science:

Manikgonj Chandpur


business


business

Credit Days

Minimum: 30 days

Maximum: 90 days

Minimum: 30 days

Maximum: 90 days

Bonus Offer

30 days: 7%

60 days: 5%

90 days: 3%

30 days: 10%

60 days: 8%

75 days: 4%

Punishment

Bonus reduction

120 days: 3% interests

150 days: 5% interests

Interests -

91-105 days: 10%

106-120 days: 15%

121-150 days: 25%

Agreement Procedure

Cheque of bank

1,00,000 TK. Deposit


invoice date.

Cheque of bank


invoice date.

Table 9: Credit Policy of Bayer Crop Science


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4.1.4 Padma Oil Company:

Manikgonj Chandpur

Types of Credit

Normal

Special

Credit Limit Maximum: 2,20,000 As per potentiality of

business

Credit Days

Minimum: 45 days

Maximum: 60 days

Minimum: 45 days

Maximum: 60 days

Bonus Offer

45 days: 3%

60 days: 2.5%

45 days: 3%

60 days: 2.5%

PunishmentBonus reduction

More than 120 days: Legal

action

Bonus reduction,


Agreement Procedure

1,00,000 TK. Cash deposit


invoice date.

Cheque of bank, Land

mortgage


invoice date.

Table 10: Credit Policy of Padma OIl Company


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4.1.5 Syngenta:

Manikgonj Chandpur

Type of Credit PC & RC PC & RC

Credit Limit As per business potentiality

of customer

As per business potentiality

of customer

Credit Days

Minimum: 30 days

Maximum: 90 days

PC: 45-60 days

RC: Pushing in October &

Invoicing in January

Bonus Offer 3% -12% Payment within 45 days: 3%

Punishment Bonus reduction Bonus reduction

Agreement Procedure

Cheque of bank


invoice date.

Some specific products are

given through chalan before

3 or 4 months of season time,

but credit days start in season

time

Cash deposit: 50,000.00 Tk.

Credit days start from theinvoice date.

Some specific products are

given through chalan before

3 or 4 months of season time,

but credit days start in season

time.

Table 11: Credit Policy of Syngenta


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4.1.6 ACI Limited:

4.1.7 Shetu Corporation Limited:

Manikgonj Chandpur

Type of Credit Normal

Special

Credit Limit Maximum:

Normal8,00,000 Tk.

Special10,00,000 Tk.


business

Credit Days

Minimum: 60 days

Maximum: 90 days

Minimum: 60 days

Maximum: 90 days

Bonus Offer 60 days: 4%

90 days: 3%

60 days: 4%

90 days: 3%


More than 120 days: Legal

action

Bonus reduction,


Agreement Procedure Cheque of bank


invoice date.

Cheque of bank


invoice date.

Table 12: Credit Policy of ACI LTD

Chandpur


business

Credit Days Minimum: 30 days

Maximum: 180 daysBonus Offer Payment within 180 days:

3%

Punishment Bonus reduction,

Agreement Procedure

Cheque of bank


invoice date.

Table 13: Credit policy of Shetu Corp.


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4.1.8 East West Crop Science:

4.2 Training for credit practice:

It has been seen that credit operation process of ACI agribusiness set a high industry standard

through an innovative process. In order to maintain a good Credit Operations Management

ACI train employees according to the following steps:

4.2.1 Realizing Credit as per Policy/System

ACI Limited has its common credit policy for all the segments of business but due to

different nature of different segment of business credit policies are decided by the Credit

Operations and respective SBU itself. Realizing credit is the combination of persuasion,

negotiation and problem solving skills that guides the whole process of Credit Management.

The employees both assigned in HQ and Field are briefed about the credit policy. That is how

to make credit facilities available, motivating customers to utilize the given credit facility etc

Manikgonj

Type of Credit Normal

Special

Credit Limit

Maximum:

Normal7,00,000 TK.

Special10,00,000 TK.

Credit Days Minimum: 30 days

Maximum: 90 days

Bonus Offer

30 days: 5%

90 days: 3%


Agreement Procedure Cheque of bank


invoice date.

Table 14: Credit policy of East West Crop Science


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4.2.2 The Vetting of Customers

Vetting the credit worthy customer is the first stage of managing credit operations. FF by

market survey, frequent visit, motivation vets the customers. On the other hand the

responsible personnel at HQ justify the customers according to their compliance and analysis.

4.2.3 The Resolution of Any Invoice Queries

Invoice is basically the opening of business with a customer. While making invoice the duty

of FF is to make sure that there would not be a sales return. Understanding the customers

selling capability and the knowledge about products specification here works as the key

point.

4.2.4Allocations of Payments

Considering the reality it is always difficult to collect the money of invoiced amount from thecustomers within 90 days. In this regard the FF must engage them to influence the customers

in making regular payment. Sales promotion and customer incentive programs can be used as

tools for solving this problem.

4.2.5 Internal Fund Movements

In business employees can be influenced by negative instinct. As there are customers and

employees all over the country the money and equivalent instruments are needed to be

transferred, collected and received with tracking system. Payment made by the customer is

ensured by different manners.

4.2.6 Reconciliations

Credit business is always risky and time to time it is necessary to have the proper knowledge

about the credit status that includes total credit limit given, total outstanding/due, total

overdue, list of default customers etc. at the end of a financial period the reconciliation is

made in the HQ. If there are any differences then Credit Operations take necessary actions to

make them right.

4.2.7 Maintaining Relationships with Customers

At present ACI Limited is not in the condition of enjoying monopoly market. The only way

to make good business is to be one step ahead from the competitors in market by delivering

quality product in competitive price. To get the control over market a good relationship with

the customers is really important. There are several ways to make a good relationship with

the customers- visit by the high officials, arrange rewarding programs, giving incentives, etc.


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4.3 Credit Management Process of ACI

Agribusiness:

Credit management process of ACI Ltd consists of several steps which are managed by

efficient set of employees from credit management department, credit operation department

along with field force of respective employees. The overall process starts with credit

customer selection and end up with liaison or final settlement of credit customer.

4.3.1 Customer Selection Process

Customer is the key to business. Customers are the reason of business. Customer selection is

one of the most sensitive and critical case for the business. Credit customer selection is not an

easy task to do. To approve a credit limit to its customers, proper field works are necessaryconsidering the default risk The ACI management wants to select such customer with whom

smooth business is possible. The customer selection is very important to achieve the ultimate

goal in business. ACI Fertilizer follows the credit customers very carefully so that the smooth

business can be done. Customer selection process is one of the prime responsibilities of FF. it

is a continuous process because business always look forward to have business with new and

potential customers. FF search for the customers in following manner:

1. Customers selling seed, fertilizer, pesticides, etc. of other organizations or subsidiaryof ACI Limited.

2. Customer having good financial support.3. Customer with good selling capability and payment record.

4.3.2 Approval Process:

The approval process of one potential customer identified and justified by the FF starts with

the submission of CFA (Credit Facility Agreement) file to the ACI HQ. The FF needs to fill

up the CFA with all the required information and documents signed by the customer and MO,

AM, ZSM/RSM, SM. The approval process is under the authority of respective SBU, Credit

Operations and Finance (Credit). The above three department work on credit approvalindependently but for the job nature they maintain a good coordination among them. The

whole process is basically relied upon the Credit Operations and respective SBUs.

The credit operation process is described in details below:


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Figure 4: Credit selection & approval process


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4.4 Credit Operations Process

Credit Operations process is done in 6 steps. These five steps are known as

Applicant/Customer Justification. This process justifies the information customer putted inthe CFA and basing on that approves the credit limit to make business. 6 steps to make this a

successful process are:

Figure 5: Credit operation process

4.4.1 Proposal Assessment

Proposal assessment is first stage of credit operation process. Under this stage identified

potential customers along with their necessary information submit CFA (Credit Facility

Agreement) book to the respective business unit e.g. ACI Fertilizer for Credit Approval

through FF (Field Force). Inter business responsible personnel ECDIB (Executive, Customer

Development & Institution Business) and ECO (Executive, Credit Operations) from Credit

Operations justify and verify the information with the credit policy of the business.

To assess one CFA book following Security Documents/ Financial Instruments are

considered:

Security Documents: Agreement for Supply on Credit under Credit Scheme. Irrevocable Letter of Authority.

Proposal Assessment

Finding CustomersCredit Worthiness

Opinion about the applicant as Credit Customer for final approval

Credit Monitoring

Overdue Customer Follow Up

Liaison for The Case


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Confirmation of guarantee by the Guarantor. Letter of Guarantee. Cheque for BDT with signature verification.

Other Documents: Application Form. Bio-Data of the applicant. Two copies of recent Passport size photograph of the applicant. Copy of up-to-date Trade License. Copy of up-to-date Business License. TIN & VAT certificate.

Photocopy of national ID card/ drivers license/ first seven (7) pages ofPassport.

Bank Statement for last 6 months. Two copies of recent Passport size photograph of the Guarantor. Customer contact point verification report. Guarantor contact point verification report.

4.4.2 Action taken to assess proposal

When there is a filled CFA book in the desk of Credit Operations for Credit Approval they

take following necessary actions:

Go through the Security Documents very carefully so that there is no suchinformation gap that can negatively affect the business.

Contact the applicant whether he/she is acknowledged to the credit policy andrules for doing business. The applicant is also informed about the legal actions

would be taken if he/she becomes default customer.

By contacting each and every single reference, witness and the guarantor it isassured whether they had certified the applicant with proper acknowledgement

of terms and conditions.

In case of justification of Bank Cheque submitted by the applicant, it isverified by contacting Branch Manager of applicants bank account whether

the account is valid and solvent or not.

If the applicant wants to have Credit limit BDT Four Lac (400,000/-) or moresometimes physical verification to the reference, the guarantor and the

business place of applicant is made.


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4.4.3 Finding Customers Credit Worthiness

Business is always risky and the risk increases when the business is based on credit. It is

important to know about the financial capability of credit customers because default credit is

not very unusual.

The next step after the Proposal Assessment is Finding The Customers Credit Worthiness. Insimple term the applicants payment capability being a Sales Agent of ACI Limited.

It is an assessment of the likelihood that a borrower will default on their debt obligations. It is

based upon factors, such as their history of repayment and their credit score. Lending

institutions also consider the availability of assets and extent of liabilities to determine the

probability of default.

To judge and verify the applicants credit worthiness as Sales Agent, CreditOperations cross

matches the applicants profile with their credit policy. Credit worthiness is judged with the

help of following questions:

The cheque submitted by the applicant is verified with his bank account fromthe bank manager.

If he/she is/was Sales Agent of ACI Limited then the previous paymenthistory is reviewed from SDMS (Sales & Depot Management System) and to

have more clear idea responsible persons of that particular business unit are

interviewed.

Phone calls have been made to the applicants to know about his previous andcurrent business status. To have a more clear view a questionnaire is used.

The Format of the questionnaire is given below:


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4.4.5 Opinion about the applicant as Credit Customer for final

approval

After the necessary desk and field work of respective business unit and credit operations

department it is time to gather all the data and primary observations about the applicant and

his/her business status. ECO and ECDIB set a meeting to cross match with the business credit

policy and compliance. The KYC (Know Your Client) which is a Good Customer

4.4.4 Primary Questionnaire for Credit Customer

selection:

Code: Customer Name:

1. How many years he is in this business?

Ans:

2. How much turnover he expects yearly?

Ans:

3. What are the companies involved with his business?

Ans:

4. Business status with other company?

Ans:

5. Is he aware of the products of ACI Fertilizer?

Ans:

6. Is he aware of the ACI credit policy (Credit days, payment, Overdue, Legal action) of

ACI Fertilizer?

Ans:

7. What is the current business volume of ACI Fertilizer (Cash)?Ans:

8. How much business he expect from ACI Fertilizer?

Ans:

9. Have any Stockiest of ACI Fertilizer in his surrounding area/ Territory?

Ans:

10. How much Credit Limit expect from ACI Fertilizer?

Ans:


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Assessment Grid is taken into account as evidence. KYC provides information about the

followings:

Family Background (Family, Kinship including in-laws, friends, PoliticalAffiliations)

Education (Academic/Professional qualifications)

Business Condition (Nature of Business, Core products, Related products,Periodic revenue)

Personal life & lifestyle (Quality of life, Interest, Marriage history, Children) Credit Worthiness (Credit standing/status with other suppliers/organizations) Net Assets of the Customer (Cash/Cash equivalents, Shop ownership, House

ownership)

Credit Record (Police record, Social standing)After finishing the process of Good Customer Assessment Grid, the CFA is ready to be

submitted to the top level management that includes head of respective SBU and HOCO

(Head of Credit Operations). In this stage the ECDIB and ECO needs to convince the

management for the credit proposal basing on their findings about the possible customer.

While the authorization from head of respective SBU and HOCO is taken the CFA is

forwarded to ED, AB (Executive Director, Agribusiness) for the final approval of credit

proposal.

Finance (Credit) section rechecks the CFA and Credit Operations analysis and

recommendations. They reserve the right to approve one credit proposal. If all the parties

regarding credit approval inside ACI Limited are convinced then a unique sales

agent/customer code is provide to the applicant. Thus he/she turns to a sales agent/customer

of ACI Limited. The updated business summary between these two parties can be observer

with the help of ACI SDMS any time anywhere over internet for the authorized persons only.

4.4.6 Credit Monitoring

Credit Monitoring starts just after the final approval of one CFA of sales agent of ACI

Limited. Generally the credit limit remains lower than the expected credit limit of the sales

agent. It is done to reduce the risk of business. 90 days credit limit are approved for most of

the sales agent. In this stage the Credit Operations department does the followings:

Regularity of payment: the first thing to be considered in case of credit limitincrease, decrease and closing of any customer, their payment pattern. How

regularity they maintain to make payments.

Credit time: ECO needs to monitor continuously the current status(Outstanding) of approved sales agent/customers against their credit limit.

Utilization of credit: as the credit limit is given for 90 days (3 months), thegeneral perception is that the approved amount of money will be cycled 04

times in a year.


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Actions taken for Credit Monitoring

When the outstanding (overdue) is increasing or about to exceed the limit thenECO make contact with the respective SBUs for taking initiatives through the

FF and to have the report.

Always try to motivate the customer to make regular payments to makesmooth business. When a customers total utilization comes below the standard level then by

calling them and reminding them about the credit policy of the company.

4.4.7 Aging schedule maintenance:

To get overall picture of credit position of business, credit operation department, credit

management department and respective business keep period wise breakdown of credit in

different region and every monthly meeting of business focuses significant time on that issue.

Region Credit Status Days Recovery Plan

Below

90

Over

90

Over

120

Over

180

Total

over.

Below

90

Over

90

Over

120

Over

180

Total

Dhaka

Jessore

Rajshahi

Rangpur

Bulk

National

Table 15: Aging schedule format kept by ACI

4.4.7 Overdue Customer Follow Up

Overdue hampers the business as because it always hits the growth of business. ACI

Agribusinesses consider overdue customers whose payment did not come within 90 days.

Overdue is divided into two parts 90 days and 120 days. Credit Operations play roles to

control the overdue growth by doing following activities:


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At first overdue analysis is needed to be prepared which shows the customerstotal utilization against the approved credit limit and the overdue days and

percentage.

After preparing the report the overdue customers are found. ECO tries to makecontact with the customer over phone calls with a view to gather possiblereasons for overdue.

The first thing ECO wants to know from the customer that if there were anyproblems from the FFs side as like, reminding about the payment and

necessary sales support. If there were objections from the customer about the

FF then the basing on the objections a report is generated and submitted to the

ECDIB or the responsible persons for corrective actions.

If there are no complaints about the FF then the ECO gives reminder about thecredit policy again to the customer and insist him/her to make the payments as

soon as possible.

If SBUs initiative to recover the payment of overdue customer is not up to thestandard or satisfactory level to the Credit Operations, they arrange a visit to

the overdue customer. In this stage customer is asked about the delay payment

reasons and warned about the consequence in case of default. Moreover they

try to get a commitment in written form on their business pad about specific

date of payment.

120 days exceeding customer are considered risky customer as per thebusiness credit policy and in this case after completing the previous actions

against overdue Credit Operations issue a Reminder Letter to the customer.

Issuance of this letter is taken into account as the document to file a caseagainst the customer if it is necessary.

4.4.8 Liaison for the Case

This is the last stage of Credit Operations Process. Maximum time, by following the previous

stages customers make the payment but in case of default customers there is no alternative

left except filing a case against the customer under NI (The Negotiable Instruments) Act of

1881. At this stage all the steps taken to recover the due from credit customers are formally

introduced to the Credit Finance Department for further disposal. Credit Finance Department

sends the bank cheque to the bank and if bank bounce the cheque due to insufficient balance

then Legal department takes action. When the case is filed the duty of Estate and Legal

Affairs begins. They send a legal notice to the default customer. This legal notice must be

sent within thirty (30) days from cheque bouncing.


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4.5 Recommendations

1. The Credit Policy of Agribusinesses is very strict in some aspects. Sometimes it also

hampers the business with the customers. Credit Policy should be customer friendly in somespecial cases.

2. Officials related with Credit Operations and Management from SBUs need to give extra

concern as because Credit Operations and Credit Finance Department come to them for

customer profile verification. So introducing One Stop Service can be helpful.

3. The FF needs to have proper working knowledge about the Credit Operations and

Management system as they have lacking of information. So on job training/workshop is

necessary for them.

4. Customers are not aware of Credit Policy very clearly as a result they provide wrong

information unintentionally. For this issue they need to have the training on filling the CFA

as per credit policy.

5. To facilitate the proper communication among credit (finance) department, credit operation

department, respective business, field force should use a common database which will be

accessible through portable device and credit related queries will be solved through this

system.

4.6 Conclusion

The economy of Bangladesh is primarily dependent on agriculture. About 84 percent of the

total population live in rural areas and are directly or indirectly engaged in a wide range of

agricultural activities. Agriculture contributes about 32 percent to the country's GDP, about

23 percent of which is contributed by the crop sector alone. About 63 percent of the labor

forces are employed in agriculture with about 57 percent being employed in the crop. It has

been observed that credit facility given by financial institutions is not easily and timely

available. In these circumstance trade credit facilities given by agribusiness firms directly

towards stockiest, retailers and model farmers and indirectly towards individual farmers play

vital role in overall farming process. Dhaka Bank Ltd. is the preferred choice in banking for

friendly and personalized services. In this arena ACI Ltd has proven them as industry pioneer

.Credit Division of ACI Ltd has a very qualified and dedicated group of officers and staffs

who are always trying to provide the best service to the clients. They always monitor the

credit indifferent sectors and their position. Before providing the loan they analyze whether

the loan will be profitable and wheth