An Innovative Growth Model for Competitive Development of Private Commercial Banks of Bangladesh

Abstract

There is an ample amount of opportunity for the competitive growth of private commercial banks (PCBs) of Bangladesh. There are gaps in growth of PCBs of Bangladesh. PCBs are in general lagging behind from the competitive growth level. However, certain factors have constrained the growth of PCBs. Inadequate research has been done in Bangladesh to address the issue of competitive growth. Therefore, the problem statement related to the study is to develop an innovative growth model for competitive development of PCBs of Bangladesh. The broad objective of the study was to develop an innovative growth model for competitive development of private commercial banks of Bangladesh. The specific objectives of the study were 1. To identify and analyze the important components of competitiveness of PCBs in Bangladesh, 2. To identify and analyze the major determinants for competitive growth of PCBs, 3. To identify and analyze the significant constraints to competitive growth for the PCBs, and 4. To develop an innovative growth model for competitive development for the growth of PCBs at national, regional and global level. Based on the investigate queries and objectives, this study used both quantitative and qualitative aspects in its way to deal with look at the connection between innovative growth components of PCBs and their effect on accomplishing competitive development. The study focused on answering the research question of what the innovative growth model for competitive development of private commercial banks in Bangladesh is. The research designs used for the study primarily included exploratory and descriptive. The exploratory research design used In-depth interviews of fifteen experienced bankers of both local and foreign banks by using a semi-structured questionnaire and also nine focus group discussions (FGDs) took place on a checklist on mid to top level bankers of all generations of local PCBs and foreign banks under the exploratory research to know and promote the critical opinions insights for competitive growth. For descriptive design a structured questionnaire survey of 357 mid to top level bankers covering four generations of local commercial banks and foreign banks used as research method. The stratified sampling technique was used in the study. The structured closed ended questionnaire consisted of 40 statements regarding the PCBs of Bangladesh. A 5-point Likert Scale was used to collect their responses. 357 respondents from 17 different banks participated in the survey. This allowed the amalgamation of richer quality information necessary given the nascent status of the research issue in the country. To categorize and address the components of growth of PCBs of Bangladesh, a non-probability, multi-stage sampling method was used. Various statistical tests like Mean, Standard Deviation, t-test and regression analysis were further conducted. As a positivist, the author epistemologically tried to obtain measurable data from the chosen sample to draw. Causal relationships which can be further extrapolated to build generalized observations (Gill and Johnson, 2010) for the whole sector of banking in Bangladesh. In line up with the positivist stand of the study, the study started with a theory and developed new hypotheses which were confirmed or rejected using objective primary data findings. From previous practices in the banking industry and based on a thorough literature review and empirical exploration, the conceptual framework for the study was developed and it was tested based on the study findings. The concept map of this study started with the current position and practices of the local banking industry and highlights the existing gaps needed to be addressed for local, regional, and international growth. A thorough and extensive literature review has been done, and discussions took place with the top bankers locally and internationally which successfully helped to develop the components that can play a significant act in the competitive development scenario of Private Commercial Banks (PCBs) of Bangladesh and to develop the conceptual framework for the study. There were eight components (Product/ Services, Process, Organization Restructuring, HRM, Brand Management, Value Chain, IT & ICT Automation, Service Quality) in the framework, for which the factors are elaborated. The numerous processes that make a banking organization have to be efficient and innovative as well to remain competitive. Banks need to transfer and acquire new banking technologies and knowledge from the successful, world-class banks. To sustain in the competitive market, they must attach importance to their quality of service. Attempts to innovate in building faster, cost-saving and customer friendly processing give an edge. They must update and restructure their organization to meet the demand of changing environment. Furthermore, innovation in distribution channel plays a salient role in the competitive market as the value chain activities make the services of the bank available to the customers. This research demonstrated that certain factors play a significant act to ensure the competitive growth of commercial banks. Internet banking, Product innovation, and other relevant concepts have emerged to provide insights on changing the banking system. With an extensive review of existing literature and later parts synthesizing the existing knowledge and identified research gaps, an attempt has been taken to develop the modified Innovative Growth Model. The respondents result analysis regarding practices of the mentioned components were presented through statistical analysis. The statements regarding the components and their mean and standard deviation were presented details way. Finally, the study findings were used to build up a modified conceptual framework, i.e., the innovative growth model for the competitive development of PCBs of Bangladesh. After completion of a successful questionnaire survey on 357 samples who are mainly mid to top management level bankers of the country, various FGDs and in-depth (detailed) interviews with the renowned bankers from both home and abroad, the data analysis and findings section has complimented to develop the modified conceptual framework which is actually the research outcome. The study added two new elements to the model. These two are ‘Good Governance’ and ‘Health and Robust Corporate Culture’. So, the following 10 variables are addressed in the modified model: Competitive Product/ Service, Innovative & Efficient Process, IT & ICT Automation, Strong & Healthy Corporate Culture, Organization Restructuring, Good Governance, Competitive HRM, Brand Management, Value Chain, Competitive Service Quality. Good governance affects the financial soundness indicators like asset quality and capital adequacy ratio of every institution. The smooth functioning of the monetary intermediation process can be distorted by the regulative measures or the corporate management ambiguity. If one or more banks lack in transparency, accountability or oversight of their own administrative practices, corporate governance failure can happen. Thus, good governance is of utmost importance for increasing the efficiency and effectiveness of the services of the banks. The other element added to the model is Healthy and Robust Corporate Culture. Growth and company culture go hand in hand. However, the definition of company culture is up to the management as it is very ambiguous. The opinions and feedbacks of employees at all levels of one company by surveys or focus group discussions not only shape the culture of the company, but also help identify areas of strength, improvement, and growth. The areas of focus for this element are the deep-rooted ethical behavior and practices, deeply ingrained positive attitude and mind-set and the effective maintenance of high standard ethical principles and norms. The study was conducted to identify the components of growth of PCBs, and human resource is the key component for applying all the identified factors for the competitive development of PCBs. It has also been found during the study that skilled human resource with humankind and a positive mindset can bring a real change in the banking industry. In the study, it has been clearly shown that the components related to human resource is Competitive HRM and the factors inherent to it are sourcing, recruiting and re-training a pool of highly talented, experienced and committed bankers, updating and revising the core competencies, knowledge skill sets of the banking professionals, training and retraining of talented HR, enhancing employee well-being, attractive incentive and remuneration package, target-based performance, effective leadership. The research shed lights on how the marketing volatility and new technologies and benchmarked practices have changed customer demands and expectations. The dynamics of customer relationship has changed over years and now more important than ever before. The customer experience plays the most important role for maintaining profitable business relationships. Training current employees through training hubs and hiring more skilled vendors can ease the way to reach the targets. However, the most important part is new products and processes considering the changing dynamics. This will affect from credit policy to deposits. An extensive knowledge about of the employees about the holistic scenario can help better the situation. At the end of the day, innovation is at the root of all. Innovation has been a fundamental component for competitive development of any organization and the PCBs; innovation and application of new technology must be taken into consideration for the competitive development of PCBs. With global regulatory atmosphere becoming tighter, resources getting scarcer and the global economic atmosphere becoming more volatile, innovative ideas are needed to conduct business in Bangladesh for the banks. Today, innovation has become the question of survival and growth for the PCBS of Bangladesh. Advanced technologies are coming up to take up the jobs of bank officials. The distributed ledger technology e.g., blockchain, will remove the paperwork, and real-time domestic or cross-border payments will lead the market. Big data analytics and the use of artificial intelligence will present the right product at the right time to the right customer. In addition, the global presence of banks in the digital landscape will enable the banks to create a wider banking ecosystem. Private Commercial Banks (PCBs) must be ready to take up the new challenge.