Chairman Message

Dear Valued Shareholders,


Assalamu Alaikum


On behalf of  the Board of Directors, I welcome you all to the 9th Annual General Meeting of Agrani SME Financing Company Limited. It my privilege to have the opportunity to present before you the Annual Report of our beloved Company along with the audited financial statements for the year ended 31 December 2019. It has been another successful year with significant achievements. We have been relentlessly trying to become a safer, more agile and customer focused whilst making steady profits. Despite some global and national challenges, we have been able to achieve almost all of our targets in the business areas, alongside delivering improved services and thereby solidifying our position in the country's financial sector. On behalf of the Board of Directors, I would like to express my heartfelt gratitude to you all for your continuous support and guidance to run our beloved institution overcoming all the obstacles and challenges.


It’s a great pleasure that the nation is observing the year- long celebration throughout the country marking the 100th birth anniversary of Father of the Nation, Bangabandhu Sheikh Mujibur Rahman, the architect of independent Bangladesh. At this very fortunate moment, I feel a great happiness and delightfulness to pay my especial honor to the heroic leader of all time. The iconic, visionary and legendary leadership of Bangabandhu still paved the path towards development and his relevancy in the country will never be worn out. Bangabandhu Sheikh Mujibur Rahman wanted to create a society free from hunger and inequality through his people-oriented politics. I bow down my head to honor the Great leader of all times on his birth centenary. I furthermore would like to quote Fidel Castro, Former Prime Minister of the Republic of Cuba who illustrates Bangabandhu as “I have not seen the Himalayas. But I have seen Sheikh Mujib. In personality and in courage, this man is the Himalayas.”


Valued shareholders, Before focusing on Company’s activities and performances, I would like to give you a glimpse of the world, Regional Economy, Bangladesh economy and industry outlooks in recent times.

World Economy:


Economic prospects have diverged further across countries since the April 2021 World Economic Outlook (WEO) forecast. Vaccine access has emerged as the principal fault line along which the global recovery splits into two blocs: those that can look forward to further normalization of activity later this year (almost all advanced economies) and those that will still face resurgent infections and rising COVID death tolls. The recovery, however, is not assured even in countries where infections are currently very low so long as the virus circulates elsewhere.


The global economy is projected to grow 6.0 percent in 2021 and 4.9 percent in 2022.The 2021 global forecast is unchanged from the April 2021 WEO, but with offsetting revisions. Prospects for emerging market and developing economies have been marked down for 2021, especially for Emerging Asia. By contrast, the forecast for advanced economies is revised up. These revisions reflect pandemic developments and changes in policy support. The 0.5 percentage-point upgrade for 2022 derives largely from the forecast upgrade for advanced economies, particularly the United States, reflecting the anticipated legislation of additional fiscal support in the second half of 2021 and improved health metrics more broadly across the group.


Recent price pressures for the most part reflect unusual pandemic-related developments and transitory supply-demand mismatches. Inflation is expected to return to its pre-pandemic ranges in most countries in 2022 once these disturbances work their way through prices, though uncertainty remains high. Elevated inflation is also expected in some emerging market and developing economies, related in part to high food prices. Central banks should generally look through transitory inflation pressures and avoid tightening until there is more clarity on underlying price dynamics. Clear communication from central banks on the outlook for monetary policy will be key to shaping inflation expectations and safeguarding against premature tightening of financial conditions. There is, however, a risk that transitory pressures could become more persistent and central banks may need to take preemptive action.


Risks around the global baseline are to the downside. Slower-than-anticipated vaccine rollout would allow the virus to mutate further. Financial conditions could tighten rapidly, for instance from a reassessment of the monetary policy outlook in advanced economies if inflation expectations increase more rapidly than anticipated. A double hit to emerging market and developing economies from worsening pandemic dynamics and tighter external financial conditions would severely set back their recovery and drag global growth below this outlook’s baseline.


Multilateral action has a vital role to play in diminishing divergences and strengthening global prospects. The immediate priority is to deploy vaccines equitably worldwide. A $50 billion IMF staff proposal, jointly endorsed by the World Health Organization, World Trade Organization, and World Bank, provides clear targets and pragmatic actions at a feasible cost to end the pandemic. Financially constrained economies also need unimpeded access to international liquidity. The proposed $650 billion General Allocation of Special Drawing Rights at the IMF is set to boost reserve assets of all economies and help ease liquidity constraints. Countries also need to redouble collective efforts to reduce greenhouse gas emissions. These multilateral actions can be reinforced by national-level policies tailored to the stage of the crisis that help catalyze a sustainable, inclusive recovery. Concerted, well-directed policies can make the difference between a future of durable recoveries for all economies or one with widening fault lines—as many struggle with the health crisis while a handful see conditions normalize, albeit with the constant threat of renewed flare-ups.




Global Economic Outlook


1.1 Global economic growth decelerated in 2019 compared to that of 2018 due mainly to weak demand and trade disputes between the USA and China. The outbreak of COVID-19 pandemic and its massive adverse effects have pushed the global economic growth into negative zone in 2020. Governments worldwide have imposed widespread closures, lock-down, isolation and restrictions of movement of domestic and international transports in order to contain the spread of the virus. As a result, the COVID-19 pandemic has triggered the deepest global recession since World War II and global economic activity is projected to contract sharply by 4.4 percent in 2020. However, growth is anticipated to pick up to 5.2 percent in 2021 subject to effective implementation of monetary and fiscal stimulus packages, restoration of normal economic activities and fading of the pandemic. In advanced economies, growth declined to 1.7 percent in 2019 from 2.2 percent in 2018 and it is projected to decline to -5.8 percent in 2020 and increase to 3.9 percent in 2021. In emerging market and developing economies, growth is forecasted to decline to -3.3 percent in 2020 and then pick up to 6.0 percent in 2021.


1.2 In the United States, growth declined to 2.2 percent in 2019 from 3.0 percent in 2018. It is projected to further decrease to -4.3 percent in 2020 and rebound to 3.1 percent in 2021. In the euro area, growth decreased to 1.3 percent in 2019 from 1.8 percent in 2018 and is projected to drop further to -8.3 percent in 2020 and bounce back to 5.2 percent in 2021. However, growth in the United Kingdom increased to 1.5 percent in 2019 from 1.3 percent in 2018 and is projected to decline to -9.8 percent in 2020. Japan’s economy is set to shrink by 5.3 percent in 2020.


1.3 In China, growth decreased to 6.1 percent in 2019 from 6.7 percent in 2018. China's growth is projected to slow down further to 1.9 percent in 2020 and then pick up to 8.2 percent in 2021. India's economic growth also decelerated from 6.1 percent in 2018 to 4.2 percent in 2019 and is projected to decrease further to -10.3 percent in 2020 and then pick up to 8.8 percent in 2021.


1.4 In advanced economies, inflation declined to 1.4 percent in 2019 from 2.0 percent in 2018 mainly due to lower commodity prices. Following weaker economic activity, inflation is expected to dip further to 0.8 percent in 2020.It is projected to pick up to 1.6 percent in 2021, thanks to forecasted economic activity. Inflation in emerging market and developing economies, excluding Venezuela and including Argentina, slightly increased to 5.1 percent in 2019 from 4.9 percent in 2018; while it is projected to decline to 5.0 percent in 2020 and 4.7 percent in 2021.


1.5 World trade volume growth declined considerably to just 1.0 percent in 2019 from 3.9 percent in 2018. It is projected at -10.4 percent in 2020 reflecting weaker demand for goods and services and at 8.3 percent in 2021. The growth rate of imports for advanced economies declined from 3.6 percent in 2018 to 1.7 percent in 2019. Projections suggest that imports will suffer a deep contraction of 11.5 percent in 2020 and will experience a rise of 7.3 percent in 2021. In emerging markets and developing economies, growth rate of imports decreased significantly from 5.0 percent in 2018 to -0.6 percent in 2019. It is projected to be -9.4 percent in 2020 and at 11.0 percent in 2021. Exports growth of advanced economies decreased to 1.3 percent in 2019 from 3.5 percent in 2018. It is projected to be -11.6 percent in 2020 and at 7.0 percent in 2021. Exports growth of emerging markets and developing economies declined to 0.9 percent in 2019 from 4.1 percent in 2018. It is expected that exports of emerging markets and developing economies will experience growth of -7.7 percent in 2020 and 9.5 percent in 2021.


1.6 According to IMF's WEO of October 2020, there remains pervasive uncertainty about the forecast of global economic output in 2021. The forecast depends on public health and economic factors that are inherently difficult to predict. The first source of uncertainty is related to the path of the pandemic, the needed public health response, and the associated domestic activity disruptions, most notably for contact-intensive sectors. The second source of uncertainty lies in the extent of global spillovers from soft demand, weaker tourism, and lower remittances. The third source of uncertainty rests on a set of factors comprising financial market sentiment and its implications for global capital flows. Moreover, there remains uncertainty surrounding the damage to supply potential—which will depend on the persistence of the pandemic shock, the size and effectiveness of the policy response, and the extent of sectored resource mismatches. Following severe fallouts of the pandemic, all economic regions are projected to experience negative growth in 2020 for the first time.


1.7 According to Global Financial Stability Report of October 2020, a sharp easing financial condition since late March 2020 helped prevent a financial crisis and cushion the impact of COVID-19 on the economy. Following unprecedented and timely policy response, near-term global financial stability risks have been addressed. Necessary policy supports have helped maintain the flow of credit to the economy and avoid adverse macro financial feedback loops, creating a bridge to recovery. However, vulnerabilities are rising, intensifying financial stability concerns in some countries. Vulnerabilities have increased in the nonfinancial corporate sector, as firms have taken on more debt to cope with cash shortages, and in the sovereign sector, as fiscal deficits have widened to support the economy. As the crisis unfolds, corporate liquidity pressures may create insolvency crisis due to the delay of recovery. The disconnection between rising market valuations and the evolution of the economy still persists. If policy supports are maintained, current asset valuations could be sustained for some time. However, if policy supports are reassessed or the recovery is delayed, the odds of a sharp adjustment may rise.


(Source: World Economic Outlook, July 2021, IMF) & (BBS)


Regional Economy:


Prospects of an economic rebound in South Asia are firming up as growth is set to increase by 7.2 percent in 2021 and 4.4 percent in 2022, climbing from historic lows in 2020 and putting the region on a path to recovery.

But growth is uneven and economic activity well below pre-COVID-19 estimates, as many businesses need to make up for lost revenue and millions of workers, most of them in the informal sector, still reel from job losses, falling incomes, worsening inequalities, and human capital deficits.

According to the latest South Asia Economic Focus South Asia Vaccinatesthe region is set to regain its historical growth rate by 2022. India, which comprises the bulk of the region’s economy, is expected to grow more than 10 percent in the fiscal year 2021-22 a substantial upward revision of 4.7 percentage points from January 2021 forecasts.

The outlook for Bangladesh, Nepal, and Pakistan has also been revised upward, supported by better than expected remittance inflows.

The improved economic outlook reflects South Asian countries’ efforts to keep their COVID-19 caseload under control and swiftly roll out vaccine campaigns. Governments’ decisions to transition from widespread lockdowns to more targeted interventions, accommodating monetary policies and fiscal stimuli through targeted cash transfers and employment compensation programs have also propped up recovery.

A year into the corona virus (COVID-19) pandemic, the race between vaccine and virus entered a new phase in the Middle East and Central Asia, and the path to recovery in 2021 is expected to be long and divergent. The outlook will vary significantly across countries, depending on the pandemic’s path, vaccine rollouts, underlying fragilities, exposure to tourism and contact-intensive sectors, and policy space and actions. 2021 will be the year of policies that continue saving lives and livelihoods and promote recovery, while balancing the need for debt sustainability and financial resilience. At the same time, policymakers must not lose sight of the transformational challenges to build forward better and accelerate the creation of more inclusive, resilient, sustainable, and green economies. Regional and international cooperation will be key complements to strong domestic policies.


 (Source: South Asia Overview & Regional Economic Outlook Update, April 2021)


Bangladesh Economy:


Bangladesh has made remarkable progress in poverty reduction, supported by sustained economic growth. It has been among the fastest growing economies in the world over the past decade, thanks to a demographic dividend, strong ready-made garment (RMG) exports, and stable macroeconomic conditions. 

As a result, Bangladesh reached lower-middle-income status in 2015 and is on track to graduate from the UN’s Least Developed Countries (LDC) list in 2026. Poverty declined from 44 percent in 1991 to 15 percent in 2016, based on the international poverty line of $1.90 a day (using 2011 Purchasing Power Parity exchange rate). Moreover, human development outcomes improved along many dimensions.

The COVID-19 pandemic impacted Bangladesh profoundly. In addition to the impact on health, GDP growth decelerated, and poverty increased. The pandemic may also have long term economic implications as a result of reduced female labor force participation, learning losses, and heightened financial sector vulnerabilities. 


Resolving longer term structural challenges could accelerate the post-COVID-19 recovery. Reform priorities include a diversification of exports beyond the RMG sector, deepening the financial sector, improving urbanization, and strengthening public governance. Addressing infrastructure gaps would accelerate growth and reduce spatial disparities in opportunities across regions and within cities. Human capital development remains a priority as well. While Bangladesh’s ranking on the Human Capital Index is higher than the South Asian average, it is below the levels observed in comparator countries.

Addressing vulnerability to climate risks would support the resilience of economic development to future shocks. Pivoting towards green growth could support the sustainability of development outcomes for the next generation.   

With the right policies and timely action, Bangladesh can accelerate its recovery from the economic downturn and continue to progress towards upper-middle income status.

(Sources: The World Bank Overview: Mar 30, 2021)


Industry Outlook :


In the year 2020, Non-Bank Financial Institutions (NBFIs) experienced slow growth in loans & advances, deposit collections and huge fall in operating earnings. All these affected overall business performances of NBFIs. Above half of the listed NBFIs (out of 34 NBFIs) have reported lower earnings per share (EPS) for the first nine months (January-September) of the year 2020, compared to the same period of last year. Irregularities in loan disbursement, fund crisis, scams & public distrust in financial institutions resulted distress in business performances. At present there are 34 NBFIs and more are getting permission to open their business. As per BB stress test report, 13 were in the red zone, 17 in the yellow zone and four, including Agrani SME Financing Company Limited, in the green zone. Bangladesh Bank has already issued number policies to support NBFIs for strengthening their position in the market. FIs in Bangladesh should take some serious initiatives to deliver short term results as well as long term vision while preparing for the coming changes. It is important to build detection, assessment and mitigation of risk. New instrument may be introduced which will be emerged as an important tool and added a new dimension in the financial market.





Agrani SME Financing Company Limited : A Journey towards excellence


Distinguished shareholders, during the year 2020, Agrani SME Financing Company Limited continued perform better than that of the previous years. The Company made revenue of BDT 28.81 Crore, achieved Profit after Tax of BDT 6.34 Crore, an EPS of 6.34 compared to that of 7.21 in the previous year. With more effective processes, stringent procedures, capable people, Agrani SME Financing Company Limited was able to have better financial footing in a more sustainable manner.


The most fundamental driver of our business is our sense of supporting the spirit of entrepreneurship among our talented countrymen in niche section of the economy. Providing timely and judiciously priced capital, offering advice on economic and market trends and maintaining strong communication channels with them ensures that we remain the preferred financial gateway in the operational areas. Moreover, in addition to loan disbursement, our Company provides comprehensive sets of advisory and capacity building services to the existing and probable new and potential borrowers.


In addition to performing the backward linkage function for graduating the entrepreneurs through providing smaller loans comparing with the loans that are being provided by the holding company i.e. Agrani Bank Limited, strengthening financial inclusion remained one of the core objectives of Agrani SME Financing Company Limited. The company always tries to bring the unbanked group of people into mainstream financial sectors' to involve them towards socio-economic development. The worth of investing on individual or any business with more authority and control over its path is a vitally important process that helps to explore every day as a life transformation. I believe that our capital has humbly helped in the improvement of businesses and the quality of life of the entrepreneurs as a whole.


The activities of the Company are currently being operated in total 53 branches including a Principal branch situated at the premises of the Head office of the Company.


With your support, our company attaches utmost priority in investing into sectors that concerns peoples' basic needs, social welfare, poverty alleviation, and overall socio-economic development of the country. With this end in view during the year under review, we have raised our loans and advances outstanding to 225.70 Crore from 200.10 Crore. However, you will agree that an NBFI with this less or meager loans and advances outstanding will not be viable or will not sustain in future. Thus for the year 2021, we have placed a firm target of increasing our total loans and advances to Tk. 360 Crore. In addition, we have also set a target of recovering 100% of our classified and written-off loans. However, as we endure through the unprecedented health catastrophe during the COVID-19 pandemic the target would have been a little bit ambitious.


As our company continues to grow, we are firmly focused on adhering to the regulatory compliance. The annual financial statements are prepared following regulatory ambits. We are also trying to maintain good corporate governance with limited human resources, trying to put sound internal control system and risk management framework in place, promoting ethical practices and complying with laws and regulations. We maintain highest standard of transparency and provide public disclosures to keep our stakeholders informed of our activities.


I must mention that all along the way, we have kept a strict eye and a judicious control on the quality of our credit portfolio. Having maintained close contact with customers and effective monitoring of the investment portfolio, the company has been able to keep the non-performing investment lower than the industry average. Though our NPL levels were pressured (6.36 Crore NPL in 2020 against 7.72 in 2019), this was largely on account of our exposure to some accounts turning bad largely in the  investment made during the SEDP project period where development goal was the prime priority rather than profit making objective. We have initiated all legal and regulatory processes to recover our funds.


We have focused extensively on the collection monitoring so that the classified loan could be kept within the tolerable limit. We put our best efforts in bringing down the NPL by engaging our entire human resources throughout the year which will continue in the coming days too.


The Company has always endeavored to implement and maintain high standard of Corporate Governance norms and has been practicing the principles of good to corporate governance. Strong supervising role of Bangladesh Bank (BB) over the Company were continued in the year 2020.


As an enterprise that is focused on long term sustainability, we would constantly adjust our sails according to wind speeds. To grow sustainably and profitably, we will continue our focus on further strengthening our capital position and financing the emerging business sectors as well as continue our support to the unbanked and under privileged along with missing middle people to the targeted areas of the Company.


As the chairman, I am proud of the Agrani SME model of loan financing and greatly thankful to our sponsor and independent directors for their prudent board oversight and guidance in making what we are today. I am also indebted to the management and employees of the Company for their dedication, managerial leadership and unwavering commitment to make Agrani SME such an excellent place to work. I reiterate that our capital, competency, intellectual rigor and operational fundamentals remain strong in building our capacity to lend and invest; unfolding a future that all the stakeholders can depend on. We will continue to innovate, adopt appropriate strategies to protect our capital, owner’s trust to keep ourselves strongly relevant in this competitive and changing business scenario.


I would like to express our deep appreciation to our august Board for their support and unstinted cooperation and judicious guidance for consistent growth and development of the company. I would like to thank our external Auditors for carrying out the audit professionally and advising us for compliance as per IFRS and BFRS and with accounting principles. I would like to thank all our Management and staff, for their dedication and contribution to the success of this Financial Institution. We believe that so far progress, we have made in the recent years attest to the fact that we have equipped our people to anticipate and embrace constant change. We also thank our shareholders, customers, Bangladesh Bank, Bank and Financial Institutions Division, Ministry of Finance, GOB, Regulatory authorities, Parent Bank and other stakeholders for their continuing support in fostering growth and development of the Company and shall strive to scale new heights of excellence.


Mohammad Shams-Ul Islam


The Board of Directors

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