Risk Management
Project(Meezan Bank Ltd)
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Credit MonitoringA Technique For Risk
Management
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Credit Monitoring
Credit: Finance
Monitoring: To check
Credit Monitoring directly links with loan
Credit monitoring is considered as an important
integral part of a sound credit management system
in banks as it helps in keeping a watch on the health and conduct of borrowed accounts.
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Goals and Objectives of Monitoring
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One of the key objectives of the Bank is to have its footprint strategically placed throughout the country enabling the public to
avail the benefits of Shariah-compliant Banking in their neighborhood.
To detect signals and symptoms of sickness at
the incipient stage for initiating timely corrective
action.
To ensure that the funds released are
utilized for the purpose for which
the are sanctioned.
To see that the terms and
conditions as stipulated at the time of sanction
are complied with.
To keep a watch so that the project is implemented in time
to avoid time and cost over-runs.
To find out if the management is
effective and the staff is kept motivated.
MEEZAN BANKThe Premier Islamic Bank
Incorporated on 27th Feb
1995.
Largest Shariah complaint
assets management
company.
Al-Meezan is registered as a Non Banking
Finance Company.
With over 500 branches in 99 cities
across Pakistan, Meezan Bank
is the largest Islamic Bank and the 8th
largest Bank (in terms of Branch Network) in
Pakistan
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Main Stakeholders
• Shamil Bank Bahrain
• Saudi Kaaf committee
• Noor Financial Investment company Kuwait
Regions
The Bank is currently segmented into three major regions of Pakistan.
• Southern Region - 21 cities
• Central Region - 51 cities
• Northern Region - 27 cities
Branches
• Currently there are 500 branches.
• In B/W 29-30th Dec 12-14 branches were opened
• Recently there are 20 branches dealing in Faisalabad
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Achievements
Till 2013
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Two Stages of
Monitoring
2)Post-Operational
Stage
1)Pre-Operational
Stage
Pre-Operational Stage of Monitoring
•Procedure adopted before sanctioning the finance
•Time over run
•Cost over run
•Bank terms and conditions
•requirements
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Meezan Bank Procedure
Application Form
RequriedDocuments
Address Verificatio
n
Income Estimation
Legal Opinion
Collateral Valuation
Credit Approval
Signing The
Agreement
Transfer of Financing
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Meezan Procedure
• Application Form: Submit a filled & signed application form to Meezan Bank.
Submit the required cheque for Processing Fee & External Agency costs.
• Required Documents
attach all the required documents, as mentioned below, along with your Application Form:
Personal Information
Income Information
• Address Verification
Meezan Bank will verify residential & office addresses and the addresses of references submitted.
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Meezan Procedure
• Income Estimation: For Businessman / Self Employed professionals For Salaried Individuals Corporate and businesses• Legal opinion: legal opinion on the documents provided by applicant.• Collateral Valuation: appointed Valuation Agency evaluate the assets determine its market value
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Meezan Procedure
• Credit Approval & Sanction Letter:
credit requirements,
conditional sanction letter.
5 c’s
• Signing of Finance Agreement
signing of the Islamic Finance Agreement
other legal documents
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Meezan Procedure
• Transfer of finance and Disbursement
Approved and sign by the applicant
Give finance to the borrower.
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Time over-run
Cost over-run
Over-Run
Many new projects get into difficulties during pre-operational stage
because of over-run and this is generally due to
lack of project planning & effective monitoring. The term “over-run” is used in
two ways:
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Time over-run can be defined as delay in implementation of
projects and in starting commercial production within stipulated time schedule by the
borrower.
Cost over-run can be defined as delay in
implementation of projects and in starting commercial production, exceeding cost
estimate given by the borrower.
The highest time & cost over-run have been found to be in case of:
Projects located in Non-backward
areas
New class entrepreneurs
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Some important reasons for over-runs which can
lead any project to difficulties are as follows:
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Faulty projects planning and subsequent change in the initial plans during the implementation stage.
Delays involved in acquiring land and its development.
Post conventional stage
• Monitoring the credit
• Check and Control the risk factor
• Timely check the financial reports
• Timely pack back installment review
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Tools of monitoring
1. Recovery Letter
2. Telephone Call
3. Visits
4. Recovery Agency
5. Legal Action
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Monitoring/ Follow up
a) To watch physical progress of project.
b) To watch utilization of funds.
c) To initiate remedial measures
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List of Documents for Credit
Proposal which meezan requires
Letter of request describing the following particulars:
i. Business profile/ History
ii. Business strategy
iii. Management Structure
iv. Product Mix
v. Distribution & Selling terms
vi. Liabilities with other banks
vii.Prime securities22
List of directors partners along with
signatures
Certified copies of ID cards of
Directors/Owners of properties.
Audited balance sheet for the last three
years & projected balance sheets for next
five years.
Copy of income tax
Copy of import/export registration.
Membership certificate
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List of Machinery
Competitors, Suppliers/Buyers
Affiliated companies & their liabilities
Certified copy of memorandum & article of
association.
Certified copy of certificate of
commencement of business
Resolution of Board of Directors
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Difference b/w PERT & CPM
CPM is activity oriented but PERT is event
oriented.
The Main and basic difference b/w the CPM &
PERT techniques is attaching of a single
duration of completion time to each activity in
the former while in latter, the following three
time durations are allocated to each activity.
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Products of Meezan Bank
• Mudharabah
• Musharakah
• Murabahah
• Ijara
• Wadiah
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Situational cases in post operational stage
• If borrower doesn’t payback loan on time
• If the borrower increase the time period of remaining installments
• If the borrower pays some installments & is not able to pay the remaining installments
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