htt://www.researchersworld.com/ijms/ CONSUMER CREDIT SCHEME OF PRIVATE COMMERCIAL BANKS: CONSUMERS PREFERENCE AND FEEDBACK Rania Kabir, Lecturer, Primeasia University, Bangladesh. Ummul Wara Adrita, Lecturer, Primeasia University, Bangladesh. ABSTRACT In this article, the study is about the Consumer credit scheme of banks in Bangladesh: consumers reference and feedback. Four hyothesis have been develoed to identify the otential customer grou who contribute maximum in CCS rogram, to identify customer reference or more demandable roduct under Consumer Credit Scheme, to identify whether the services offered by the bank are convenient or not and finally to show how the customers view interest rate charged by the bank. For the study two samle rivate commercial banks have been chosen. Main focus of the study is given on the outcome that revealed from the hyothesis testing. The study also rovides valuable recommendations as to remove those roblems. Finally, the study also highlights a comarative analysis of CCS rogram of two samle banks. Keywords: Hyothesis testing, Potential customer grou, Customer reference, Comarative analysis. - 40 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Introduction: Banking sector is exanding its hand in different financial events everyday. Customers are also more knowledgeable, sohisticated, and assertive in recent years. In this consumer economy, for attracting and crucially keeing customers for the long banks are coming with different innovative ideas and roducts. Retail or consumer credit rogram is an imortant develoment scheme in the banking sector in most of the develoing economies including Bangladesh. In Bangladesh eole of limited monthly income are faced with the roblem of imroving their standard of living. Considering this, some commercial banks had started consumer credit rogramme esecially since the mid-1990s. The broad objectives of this scheme, among others, are to hel service holders by roviding consumer credit at a reasonable rate of interest encouraging saving habit, develoing the saving, facilitating increasing standard of living and finally to lay the active role in the socio-economic develoment of Bangladesh. Literature Review: Consumer credit may be defined as credit rovided to individuals or grous to urchase consumer durables. Vinod Kothari described Consumer Credit simly means granting a credit to the customer that is, letting him have the ossession of the goods without asking for ayment right away. Consumer credit is a loan offered to individuals for some given uroses and is to be reaid by equal monthly installments. This kind of loan is made without security. In this case the bank makes a lum sum ayment to the borrower which is given for a fixed eriod at an agreed rate of interest. Reayments may be made in installments or at the exiry of a certain eriod. One of the world renowned author on the subject, E.R.A. Seligman, defined it as, a transfer of the ayment of which is deferred in the whole or in art to future, and is liquidated iecemeal or in successive fractions under a lan agreed uon at the time of the transfer. In Bangladesh, Consumers Credit Scheme rogram of different rivate sector banks and foreign commercial banks has made a significant change in the middle class fixed income grou for roviding house hold durables. A number of research activities have done on this sector for its significant role. In 1997 Peter Kangis and Vassilis Voukelatos made a survey among customers of rivate and ublic sector banks in Greece on service quality ercetions and exectations. They find that quality exectations and evaluation of services received were marginally higher in the rivate than in the ublic sector in most of the dimensions measured; the relative imortance attached to each quality attribute was, however, of a similar rofile for the two sectors. In Bangladesh, Mohammad Shamsuddoha made a survey in 2008 for a comarative analysis of service on local and foreign bank.as a samle, he choose the customers of Standard Chartered Bank, HSBC Bank, Pubali Bank Limited and Arab Bangladesh Bank Limited. In this reort the study is made on to find out the mostly referred scheme by consumers among different CCS, which grou of consumers are mostly obtaining this service and also the feedback about the service. For ointing out the referred scheme, the mostly availed schemes are included in the questionnaire. The information is collected by the discussion with bank ersonnel. In case of grouing of consumers and factors for feedback analysis (convenience of service & interest rate) the reort by Mohammad Shamsuddoha is considered as the study was made in Bangladesh. - 41 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Methodology: It is an exloratory research based on rimary and secondary data. Throughout the article emhasize is given on hyothesis testing. For hyothesis testing, at the first hase, a ilot survey is undertaken to find out the consumers reference on secific CCS scheme and their feedback. During the ilot survey, 16 resondents are interviewed through survey questionnaire. Two rivate banks are considered for the survey on the ratio of 50%. For the Hyothesis testing t-test has been used as the samle size is less than 30. Resondents from each bank are also selected conveniently. Samle size is distributed according to the following manner: Bank No. of resondents Dhaka Bank Prime Bank 08 08 Total 16 Then at the second hase, a desk study is conducted by studying various ublications like eriodicals, Bangladesh Bank reort, and web site of Bangladesh bank, Prime Bank and Dhaka Bank. Results of Hyothesis Develoed: Hyothesis One: Data Collection: Data was collected through a survey. Here some clients are asked the question that whether they think CCS offered by the bank is convenient for them. Findings: Here resondent are less than 30 in number. So within 90% confidence level one tail t test is done to analyze this hyothesis. The data were collected by question to the articiant are resent in the tabular form below. Hyothesis: Table: Calculation table No of resondent Very Convenient Difficult 16 12 4 H 0 : More than or equal 60% consumers believe that CCS is very much convenient for them H A : Less than 60% consumers believe that CCS is very much convenient for them H 0 : P H0 60% H A : P A < 60% P H0 = 0.60 q H0 = 0.40 P= 12/16 =.75-42 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ q=4/16 =.25 Confidence Level = 90%, α = 0.10 n=16 Degree of Freedom = 16-1=15 t critical =1.341 Standard Error ( ) = =.12 t observe = =1.25 H 0 H 0 qh 0 n Interretation: Fig: Acceted or Rejected Region for Hyothesis The critical value of t is -1.341 and observed value is + 1.25 which is in the accetance region. So null hyothesis is acceted that means CCS is very much convenient for general eole. Hyothesis Two: Data Collection: Data was collected through a survey question. Here questionnaire is designed to find who the otential customer for CCS is, middle class fixed income grou or other grou of eole. Findings: -1.341.73 Here resondent are less than 30 in number. So within 90% confidence level one tail t test is done to analyze this secific objective. The data were collected by question to the articiant are resent in the tabular form below. - 43 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Hyothesis: Table: Calculation table Middle Class Service Holder 13 Other Grou 3 Total resondents 16 H 0 : More than or equal 70% of customer under CCS are middle class service holder. H A : Less than 70% of customer under CCS is middle class service holder. H 0 : P H0 70% H A : P A < 70% P H0 = 0.70 q H0 = 0.30 P = 13/16 =.8125 q =3/16 =.1875 Confidence Level = 90% α = 0.10 n = 16 Degree of Freedom = 16-1=15 t critical =1.341 Standard Error ( ) = 0 q n =.11 t observe = H 0 = 1.02 H H 0-1.341 1.02 Fig: Acceted or Rejected Region for Hyothesis - 44 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Interretation: The critical value of t is -1.341 and observed value is + 1.02 which is in the accetance region. So null hyothesis is acceted that means More than or equal 70% of customer under CCS are middle class service holder. Hyothesis Three: Data Collection: To satisfy this objective some clients are asked to mark the roduct under CCS they refer more. Findings: Here resondent are less than 30 in number. So within 90% confidence level one tail t test is done to analyze this secific objective. The data collected through question to the articiant are resented in the tabular form below. Hyothesis: Table: Calculation Table Scheme Resonse Household Durable 10 Car loan 1 Home loan 4 Other loan 1 Total 16 H 0 : More than or equal 50% of customer comes to the bank to take Household Durable Loan under CCS. H A : Less than 50% of customer comes to the bank to take Household Durable Loan under CCS. H 0 : P H0 50% H A : P A < 50% P H0 = 0.50 q H0 = 0.50 P =10/16 =.625 q =6/16 =.375 Confidence Level = 90% α = 0.10 n = 16 Degree of Freedom = 16-1 = 15 t critical = 1.341-45 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Standard Error ( ) = t observe = =1.00 H 0 H 0 qh 0 n =.1248 Interretation: -1.341 1.00 Fig: Acceted or Rejected Region for Hyothesis The critical value of t is -1.341 and observed value is + 1.00 which is in the accetance region. So null hyothesis is acceted that means More than or equal 50% of customer comes to the bank to take Household Durable Loan under CCS. Hyothesis four: Data Collection: Data was collected through a survey. Here some clients are asked the question that whether the interest rate charged by the bank for CCS is high for them. Findings: Here resondent are less than 30 in number. So within 90% confidence level one tail t test is done to analyze this hyothesis. The data collected through question to the articiant are resented in the tabular form below. Hyothesis: Table: Calculation Table No of resondent High Too High 16 11 5 H 0 : More than or equal 60% consumers believe that CCS interest rate is high for them H A : Less than 60% consumers believe that CCS interest rate is high for them - 46 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ H 0 : P H0 60% H A : P A < 60% P H0 = 0.60 q H0 = 0.40 P= 11/16 =.6875 q=5/16 =.3125 Confidence Level = 90% α = 0.10 n=16 Degree of Freedom = 16-1=15 t critical =1.341 Standard Error ( ) = =.12 t observe = =.7291 H 0 H 0 qh 0 n -1.341.73 Fig: Acceted or Rejected Region for Hyothesis - 47 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Interretation: The critical value of t is -1.341 and observed value is + 0.73 which is in the accetance region. So null hyothesis is acceted that means CCS interest rate is high for general eole. Discussion: Comarative analysis of Prime Bank and Dhaka Bank: Products under CCS: Bank Prime Bank Dhaka Bank Car Loan Doctors Loan Household Durable Loan Marriage Loan Any Purose Loan (Personal Loan) Personal Loan Car Loan Vacation Loan Home Loan Any Purose Loan Product Education Loan Hositalization Loan (Medical Loan) Swana Neer (Housing Loan) Advance against Salary Travel Loan CNG Conversion Loan Features of referred CCS: Bank Scheme Descrition Prime Bank Swana Neer Sanction loan u to Tk. 50 lac (Housing Loan) Age Limit is u to 60 years (Reayment age) Dhaka Bank Home Loan Maximum loan amount tk. 35 lac Maximum loan tenure is 5 year if loan amount is 5 lac to less than 10 lac &10-15 years if loan amount in between 10-35 lac Bank Scheme Descrition Loan limit is 1 lac to 5 lac Prime Household Durable Loan Loan is sanctioned for 2 to 3 years Bank As security ersonal guarantee is required Dhaka Bank Personal Loan Loan amount ranges from 25000 to 5 lac Number of installments varies from 12 to 48 months. Bank Scheme Descrition Prime Bank Car Loan In case of New Vehicle loan amount is 40 lac Tk. For 5-yrs, 15 lac tk. For Recondition Vehicle given for 4-yrs Maximum loan amount 50 lac Tk Dhaka Car Number of installments varies from 12 to 60 months. Bank Loan In case of brand new cars the loan tenure will be maximum 72 months. - 48 - Vol-I, Issue-1, June 2014
htt://www.researchersworld.com/ijms/ Findings and Recommendations: The study revealed that consumer credit scheme seems very much convenient to the consumers. In both the bank emloyees are very much consumer oriented. Documentation rocess is also quite easier. It is exhibited that CCS has been oularizing among the customers of medium income levels service holders. So it s the banks who can take initiative to encourage other income grou by increasing awareness among different income grou. It is observed that among the different tyes of CCS, consumers comes more for Household Durable Loan. Banks have to concentrate more on their marketing and romotional strategies to increase the scoe of CCS rogram. For CCS rogram interest rate is one of the rime concerns for customers. Most of the customers believe that the rate is high for the loan taken. So bank should lower general eoles cost of fund. Banks are roviding almost similar roducts, only difference comes in the scheme name. To face this cometitive situation bank should come u with innovative roducts with secial feature to attract customers. Conclusion: In recent years, CCS is one of the oular schemes in the banking industry. To maintain ones osition over long term in this cometitive banking industry banks should develo their marketing strategy and romotional activities. Differentiated roduct feature, lower rate of charges, shorter rocessing eriod, easy and fast service, rovision of risk fund etc may be considerable factors. CCS lay a vital role to create a distinctive image in consumer s mind because it deals with one to one consumer, so by CCS roducts, its very easy to come near to consumer and to know their ercetion about a bank. References: [1] Survey data (Primary) [2] Kothari Vinod. (1996).Lease financing and hire urchase, including consumer credit. 4th edition. India: Wadhwa & Comany [3] Seligman E.R.A.Economics of Installment Buying. 10th edition. [4] Cox, Reavis. (1948). The Economics of Installment Buying. New Work: Ronald Press [5] Rice David A. Consumer Transaction- 1984 Sulement. Little Brown and Comany. [6] Kangis Peter and Vassilis Voukelatos.(1997). Private and ublic banks: a comarison of customer exectations and ercetions, International Journal of Bank Marketing, Vol. 15, No. 7,.279 287, MCB University Press. [7] Mohammad Shamsuddoha.(2008). Comarative Analysis of Consumer Credit Scheme in Bangladesh. DOI:10.2139/ssrn.1319833. [8] htt://www.rime-bank.com/ [9] htt://www.rime-bank.com/consumer_credit.htm [10] htt://www.dhakabankltd.com ***** - 49 - Vol-I, Issue-1, June 2014