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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: 8
th
July 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 work
enthusiastically. 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
1.1 Background of the study:
1.2 Origin of the Report
1.3 Scope of the report
1.4 Objective of the study
1.5 Methodology
1.6 Limitations

01
02
02
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
07
08
08
08
09
09
10
13
16
17
18
19
20
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 Findings
4.1 Credit Policy in Agribusiness sector
4.2 Training for credit practice
4.3 Credit Management Process of ACI Agribusiness:
4.4 Credit Operations Process

31
32
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. 32
Table 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 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.
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 of
introductory 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.

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 1 | Page













































CHAPTER 1:
INTRODUCTION


CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 2 | Page

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 Product
Manager, 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 companys
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 the
regularization 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 of
time.
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 policy
is very sensitive and confidential.
To protect the organizational confidentiality, some parts of the report will be edited.







CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 4 | Page


































CHAPTER 2:
COMPANY
OVERVIEW

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 5 | Page

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 in
1973 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 11
Subsidiaries, 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 management
system. 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







CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 7 | Page

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 through
world 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 money
to its customers.
Attain a high level of productivity in all its operations through effective utilization of
time and adoption of appropriate technology.
Contribute to the personal development, encourage empowerment and Recognize
innovation of its employees.
Ensure superior return on investment through healthy and sustainable growth of the
company.
Encourage and the support qualitative improvement of the services of its distributors
and suppliers.
Establish harmonious relationship with the community and promote greater
environmental 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, Standard
Operating 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 national
regulatory 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 or
degradation of environment.
Ensure appropriate communication and co-operation with internal and external
interested 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 through
continuous 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 pharmaceutical
products 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
Pharmaceuticals
Consumer
Brands &
Commodity
Products
Agribusiness
Crop Care &
Public Health
Seed
Fertilizer
Motors
Animal
Health
Cropex
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 its products
and services of uncompromising quality.


2.9.2 Consumer brands:
ACI Consumer Brands was initiated in 1995 with
two major brands of the company ACI 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 both
the 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 National
Food 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 for pisciculture, 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 to
change 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.





CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 17 | Page

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 spices
and 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 quality
Poultry, 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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2.14 Global Recognition of ACI ltd:
A. I SO 9001: B. I SO 14001 :































Figure 2: ISO certificate




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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

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 21 | Page

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 dealers network 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


CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 23 | Page


3.1 Trade credit:
The credit created when one firm buys on credit from another firm, firms generally make
purchases 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 and
how much credit each customers should receive. The major factors that are considered when

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 24 | Page

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 firms
current 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 examination
of 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 the
credit 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 the policys
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 the
credit 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 collect
account receivables.




Equation 1: DSO
b. Aging schedule: It is report showing how long accounts receivables have been
outstanding ; 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 to
pay 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 this
paradigm. 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 its
financial 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 to
obtain 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 certain
geographic 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).


CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 27 | Page


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 a
principle 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 the
customers are to be influenced to buy showing the scarcity of products.
Skill
Persuation
Problem
Solving
capacity
Negotiation

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 28 | Page

Principle of Authority: The FF must have expertise knowledge persuasion. One
will depend on experts rather than non-expert.
Principle of Consistency: the business is a continuous process and through
business both the parties will be benefited with this statement persuasion may go
on.
Principle of Consensus: The Principle of Consensus tells 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 be
considered as they are the reason why business is going on.
Persuasion Approach
Deliver successful message that convince Customer and then support you with
data. 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. Some
irrelevant topic may come on the way but tactfully avoid those and be centralized.
Conclusion should be stated explicitly. Let the customers have a clear knowledge
about 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

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 29 | Page

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 be
described 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 team
effort. To solve a problem in an effective way team approach should be taken.
Develop & verify short term corrective action: some of the problems cant be
solved 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 developing
and 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 problem
needed to be verified accordingly with the real scenario.
Develop & implement permanent action: after sorting and filtering the corrective
actions it is to be executed according to the plan.
Prevent recurrence: necessary steps should be taken so that recurrences of the
same problem do not rise again.
Congratulate to your team: accept the teams contribution to solve the problem
and reward them at least with congratulation.

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 30 | Page


Five Steps in Problem Solving
Identify problem: there may be more than one problem and they may be different
from 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 find
out all the possible causes and threats those identified problems can make.
Develop multiple solutions: alternative solutions can provide the scope to judge
the solution based on problem. Changes or modifications can be possible if there
are alternatives.
Choose optimal solution: after getting the multiple possible solutions for the
problems best possible realistic solution needs to be considered.
Create implement/Plan: execution of the realistic solution is the last step of
problem 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

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 32 | Page


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 days Legal 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

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.
Table 7: Credit policy of Auto Equipment Ltd.

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 33 | Page


4.1.2 Semco:

]











Manikgonj Chandpur

Credit Limit

As per potentiality of
business


As per potentiality of
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%

Punishment

Bonus reduction
Bonus reduction,

After 180 days Legal action

Agreement Procedure
Cheque of bank

Credit days start from the
invoice date.

They dont manage the credit
policy properly.
Cheque of bank

Credit days start from the
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

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

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

Credit days start from the
invoice date.
Cheque of bank

Credit days start from the
invoice date.
Table 9: Credit Policy of Bayer Crop Science

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 35 | Page

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%

Punishment
Bonus reduction

More than 120 days: Legal
action
Bonus reduction,

After 180 days Legal action




Agreement Procedure


1,00,000 TK. Cash deposit

Credit days start from the
invoice date.


Cheque of bank, Land
mortgage

Credit days start from the
invoice date.
Table 10: Credit Policy of Padma OIl Company

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 36 | Page

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

Credit days start from the
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 the
invoice 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

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 37 | Page

4.1.6 ACI Limited:

4.1.7 Shetu Corporation Limited:







Manikgonj Chandpur
Type of Credit

Normal

Special

Credit Limit Maximum:
Normal 8,00,000 Tk.

Special 10,00,000 Tk.
As per potentiality of
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%
Punishment Bonus reduction

More than 120 days: Legal
action
Bonus reduction,

After 120 days Legal action
Agreement Procedure Cheque of bank

Credit days start from the
invoice date.
Cheque of bank

Credit days start from the
invoice date.
Table 12: Credit Policy of ACI LTD
Chandpur
Credit Limit As per potentiality of
business
Credit Days Minimum: 30 days


Maximum: 180 days
Bonus Offer Payment within 180 days:
3%
Punishment Bonus reduction,


Agreement Procedure
Cheque of bank

Credit days start from the
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:
Normal 7,00,000 TK.

Special 10,00,000 TK.
Credit Days Minimum: 30 days


Maximum: 90 days

Bonus Offer
30 days: 5%

90 days: 3%
Punishment Bonus reduction
Agreement Procedure Cheque of bank

Credit days start from the
invoice date.
Table 14: Credit policy of East West Crop Science

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 39 | Page

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 the
customers 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.


CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 40 | Page

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 necessary
considering 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 subsidiary
of 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 approval
independently 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:

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 41 | Page












Figure 4: Credit selection & approval process

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 42 | Page

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 in
the 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 Customers Credit Worthiness
Opinion about the applicant as Credit Customer for final approval
Credit Monitoring
Overdue Customer Follow Up
Liaison for The Case

CREDIT PRACTICES OF AGRIBUSINESS FIRMS IN BANGLADESH 43 | Page

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 of
Passport.
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 such
information gap that can negatively affect the business.
Contact the applicant whether he/she is acknowledged to the credit policy and
rules 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 is
assured 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 is
verified 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 more
sometimes 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. In
simple 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, Credit Operations 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 from
the bank manager.
If he/she is/was Sales Agent of ACI Limited then the previous payment
history 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 and
current 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, Political
Affiliations)
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 limit
increase, 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), the
general 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 then
ECO 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 make
smooth 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 customers
total utilization against the approved credit limit and the overdue days and
percentage.
After preparing the report the overdue customers are found. ECO tries to make
contact with the customer over phone calls with a view to gather possible
reasons for overdue.
The first thing ECO wants to know from the customer that if there were any
problems 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 the
credit 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 the
standard 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 the
business 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 case
against 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 some
special 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 whether the client is good enough to repay the loan within the
given period of time. Finally It can say that agribusiness firm in Bangladesh stood out for its
strength, operational craftsmanship, marketing themselves as potential market leader and
more importantly for overall credit management process. That is why all the existing firms
should rethink about the gravity of the issue and bring possible reengineering and
modification in this process.

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