Nominal imports against huge loans sanctioned

The Islami Bank has provided a total of Tk 68.35 billion in loans to eight companies, including Nabil Group, to ensure adequate imports of essential food items.

The loans now stand at Tk 72.46 billion with the interest.

Meanwhile, another Tk 5 billion was released in favour of the eight companies from the Social Islami Bank and the First Security Islami Bank, which took the total amount of loans secured by them to Tk 77.46 billion.

All this money was borrowed to import food commodities, but only two companies imported maize, soybean seeds, mustard seeds and capital machineries worth Tk 8.64 billion. On average, the eight companies spent only 11 per cent of their total borrowings to import food items.

The scenario, which was obtained through an analysis on the reports of imported goods at the customs houses across the country, has raised a question – where did all the loans go?

Money laundering through export-import and hundi has recently been a hot topic in Bangladesh. The quick sanction of a stupendous sum of loan by Islami Bank and two others in favour of several completely new companies has called the usage of the loans into question.

A report, styled “Nasty November at Islami Bank'', was published by Prothom Alo on Thursday. It shed light on a Tk 90 billion loan cleared by the three Islami banks to the eight companies.

The companies took Tk 72.46 billion from the Islami Bank this year. Surprisingly, a whooping Tk 24.60 billion was cleared in only the first 17 days of November. It was found in a scrutiny that the amount was lifted using fake addresses and shell companies that only exist in paper.

The bank, in a rejoinder over the report, claimed that they have recently widened their loan facility against the imports of food commodities, in a bid to ensure adequate inflow of essential foods. It also claimed to have sanctioned the loans in compliance with the bank rules and collateral, following a proper assessment.

In a study on imports of the eight companies, it was found that they mostly did not import any remarkable products.

Monirul Moula, managing director of the Islami Bank, said the lion’s share of the financing was made for imports, in addition to processing local foods.

“We expect the loans to be repaid timely,” he said, adding that his bank finances anyone who works as a food distributor across the country.

The borrowing companies were not found in the list of entities that import food commodities after taking loans as per the price chart of the Trading Corporation of Bangladesh (TCB). Two of them were found to have imported some commodities, but these were machineries and raw materials of animal food.

The Islami Bank’s Rajshahi branch provided Tk 1.7 billion to Nabil Feed Mills on 27 October. The company also secured loans from the Social Islami Bank and First Security Islami Bank and imported maize, mustard seeds, animal feed, and machineries worth Tk 8.57 billion throughout the year.

The same branch financed Tk 4.89 billion to Naba Farm Limited through five installments between 19 and 27 October. The farm has so far imported machineries worth Tk 3 million after securing the fund, while its total imports throughout the year stood at Tk 67.1 million.

The two companies imported products worth a total of Tk 8.64 billion.

The managing director of Nabil Group, Aminul Islam, could not be reached over the phone despite repeated attempt. Also, they could not be found at their addresses.

The Islami Bank financed Nabil Grain Crops with Tk 10.11 billion, but the company did not take the hassle of importing any products.

Apart from that, the bank provided Tk 5.45 billion to the International Product Palace, Tk 9.81 billion to the Marts Business Limited, Tk 12.24 billion to Naba Agro Trade International, Tk 10.90 billion to the Anwara Trade International, and Tk 16.93 billion to the Shimul Enterprise. But, the companies did not import any products against the loan they received.

All these loans have been provided for a one-year period and will be defaulted in deviation. It requires a one-year wait to fathom the fate of the loans.

In the context of import loans, a bank does not hand over the total amount to the importers, rather the bank itself deposits the bill to the exporting entity’s account after the importer opens an LC (letter of credit).

It takes one or two weeks to open LCs and import goods from neighboring India, while the period varies in cases of imports from other countries. The bank releases the amount in favour of the exporter’s account once the products enter the country.

Among the eight companies, the names of International Product Palace, Nabil Grain Crops, and Marts Business Limited were not mentioned on the website of Nabil Group. But there is a dubious similarity among businesses of the three companies, Nabil Group, and owners of the three banks.

Officials of the three banks said the borrowers purchased commodities from a giant importer in Chattogram, instead of importing by themselves. It eventually showed a low imports against the loans.

When many businesses are struggling to import daily necessities amid the dollar-crisis, the three banks turned benevolent to finance the companies to buy commodities from an importer. Also, there were incidents of non-compliance in the process of loan approval.

Former central bank governor Salehuddin Ahmed said the release of money by a bank, in the case of import financing, denotes that the products entered home. If the products do not reach home, it should be taken for granted that the money has gone abroad.

He slammed the revamp of the Islami Bank board, saying that the changes into its board of directors were not carried out with a good intention. The results are now evident. The economy will suffer if the biggest bank falls in trouble.

He called for concerted actions in no time.