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Wednesday, September 24, 2008

The Hurdles of Credit and CEO

As the western countries try to grapple with consumer loans, Bangladesh is not immune especially our CEOs. As many are aware, the CEO of Standard Chartered, Osman Morad, (along with a StanChart exec) has an arrest warrant against them for hiring goons for loan recovery. Apart from the electronic media, no one reported it. How could they? This isn't considered news especially if it can endanger current and future patronage of many award shows, roundtables and exhibitions. But despite the self-censorship from the self-proclaimed stalwarts of freedom, the news spread like wildfire.

As for Osman Morad, he isn't going to lose his job anytime soon unlike Anders Jensen. Osman Morad is just too talented and experienced to step down or resign for 'family' reasons. But what inspired this daredevil attitude? He only had to look at Bangladesh's prosperous NGO sector (yes despite RMG, NGO is also a booming sector). NGOs are notorious for using goons and 'peer pressure' to force payments from clients and Morad went with the 'when in Rome' ideology. To his defense it was a Credit collection agency that did the actions but he was very much aware what tactics these agencies use. Worst is that he approved this use and no one knows the countless times they performed these atrocities before someone had the guts to sue them.

I am not an advocate of loan defaults, but there are proper and standardized ways of dealing with defaults instead of the widespread NGO tactics. Especially if it comes from a international banks. They wouldn't dare to harass anyone in the UK, so what makes Bangladesh different? In short it is the lack of clear and updated laws. The consumer credit laws leave both the creditor and client at risk from abuse. It does not define what is harassment and the process a client or creditor should take once a loan has been defaulted. There is no credit agency and the branch managers define credit-worthiness by looking at the way you dress.

A formalization of consumer credit procedures and rights should be passed as a new Act. This would ultimately get both NGOs and Standard Chartered to change their localized procedures. Then only can we get NGOs and Standard Chartered to treat us like humans.


Bangladesh Blogger said...

There's very few (to say the least!) Bangladeshi Blogs that make my day, Bangladesh Corporate Blogs is certainly unique in its perspective? This is good news in a way, shows us how so-called multi-nationals oppress their their clients! I hope you guys will write more about the big-NGOs that plague our society..

Thanks again guys and keep the good work up.

Sincerely appreciated.

Anonymous said...

"Treat us like Humans"??? Did any such multinational banks treat you like you were something else? Are you fully aware of all the incidents that really happened in the Stanchart Case, or did you just get all the news from the media? If you r fully based on the media, i'd suggest you dig down deep into it and then post articles. I'm sure you understand that Media modifies and exaggerates lot of info. Please do not post such articles / make such rash comments before knowing what the reality is. I'm pretty amazed to see that a loan defaulter becomes a hero all of a sudden...all people are now showing so much sympathy for the defaulter. I dont know who you are, or if you understand credit and collection cycles of banking, but being a bank in BD, if you have no strict credit recovery infrastructure, you cant expect to run a sustainable business. In general Auto Loan collection cases, vehicle repossession initiatives are not started before 5-6 missed loan installments. If the customer is unable to pay the installments for whatever reason that is, the lender is at every freedom to repossess the vehicle (legalized through agreement between customer and bank prior to loan sanction). Its not that the vehicle is seized and the customer loses all the installments he/she paid so far as well the car. Rather, the vehicle is repossessed, sold, and the sale proceeds are used to settle the loan outstanding, and the remaining funds (if any) are returned to the customer. Why such an issue over keping a car that you can't pay installments of? Is it the banks fault that it asked for the loaned money back? It is the depositors' money after all!

And one more thing...In the STanchart case, no goons were sent to collect the vehicle from the customer; rather it was the customer who came over and handed over the keys to bank's management. What you see in the media regardng these matters is 90% fabrication, 10% reality.

Ahmed Ali said...

@ anonymous
The intention for me writing this article is that a lot of companies treat Bangladeshi people like a different race. Different practices are applied and the differences are alarming if you consider the treatment you would get elsewhere. People think by going to a multi-national company they are getting world class service, but the sometimes they treat people worse because they are so accustomed to treat all Bangladeshis like low-wage laborers. They feel like they are doing us a favor. But this is not a direct attack on Standard Chartered or any particular company. But my perspective as I travel between places.

My second point is that because Standard Chartered offers so many free lunches, most traditional media outlets did not report this news. Which I think is very alarming scenario in its own merit. The sources to manipulate a court arrest order (defined on paper) are extremely limited.

The news is only available online and some liberal Bangaldeshi newspapers. Then Standard Chartered wanted to clear up the misunderstanding, but decided to only say that the news is "not factual" without clarifying what actually went on that led to the court orders. The big-news media did not elaborate, and Standard Chartered felt they shouldn't either.

I agree to a strict loan collection infrastructure, but the current laws in Bangladesh don't allow use-of-force or intimidation to be included in the process. As far as I know and what was sparingly reported Standard Chartered did use force (either that or Standard Chartered needs a new press secretary). Just by signing a piece of paper does not warrant all the actions. Common sense does prevail time to time. Case in point: Brac Bank's heist. All clients signed waivers that will not shift the blame on Brac Bank. However, applying common sense, Brac Bank is still liable.

I just wanted to point out that despite multi-national's stronghold on the press, news is news. If both sides decide not to clarify, people (and I ) will go on whatever is available. (Just so you know reported this news.)