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IDLC's dreams of growth

The chief of the non-bank financial institute sets his target higher

Sarwar A Chowdhury
1DLC Finance aspires to be the best financial brand in Bangladesh with innovations, talents, diversified products and services, says its managing director, Selim RF Hussain.
The non-banking financial market in Bangladesh is still a small one. There are major opportunities for companies with the right vision, energy, creativity and most of all, right talents, he says.
Seeing the opportunity, IDLC Finance has been working hard especially over the last two years to tap the potential in the non-banking financial market.
“We have, over the past two years, built up our skills and capacity. We have recruited more than 350 new staff members, opened 16 new branches and added to our customer deposits and loans by 72 percent and 60 percent respectively,” Hussain says.
As an opportune next step, IDLC has recendy re-branded itself by changing its logo. “The re-branding is aimed at reemphasising our traditional strengths of corporate governance,” Hussain says.
The performance of IDLC in the past few years shows signs of growth and what it may achieve in the coming days.
Customer deposits rose to Tk 1,682 crore in 2011 fromTk 825 crore in 2008. Customer loans and advances, excluding margin loans or share credit, were Tk 1,249 crore in 2008, which soared to Tk 2,187 crore in 2011.
The trend of non-performing loans shows that the loan recovery rate of the company is in good shape. The non-performing loans in 2008 were 3.97 percent, which came down to 2.32 percent at the end of 2011. It stood at 1.6 percent in March.
“We are extremely bullish about the future because we are confident about our strategy and policies, our skills and capabilities and the way we do business,” Hussain says. “We are continuing to invest heavily in people, our processes, premises, technology and brand.”
"We are very confident that the traditional 'banking' business will continue to grow very strongly. We plan to become aTk 5,000 crore asset company by 2014 and there is no reason we should not be able to double that amount by 2017,” he says.
“We will be very aggressive and are determined to achieve quality growth.”
Established in 1985 as a lease financing company, IDLC now equally focuses on corporate, retail and small and medium enterprises as well as capital market through its merchant banking and brokerage subsidiaries.
“The IDLC will continue to be a role model for transparency, corporate governance, statutory compliance and ethical standards in the capital market. We do business the right way and others can and should learn from us,”
Hussain says.
The company's diversified product portfolio includes corporate and structured finance solutions to local and multinational corporate houses, personal financing products such as deposits, personal loans, home loans and car loans, financing facilities for SMEs, merchant banking solutions such as portfolio management and issue management, and brokerage services through.
Listed on the stockmarket in 1992, IDLC is a blue-chip security that pays out healthy dividends to shareholders every year. In 2010, it disbursed 35 percent cash 65 percent bonus dividends and announced 25 percent stock dividends in 2011.
Talking about the country's non-banking financial institution (NBFI) sector, Hussain says after many years of relative lethargy, the sector grew satisfactorily in the recent years with customer assets growing by approx 25 percent a year. “In recent years, we have seen a major thrust into the capital market arena,” he says.
While 2010 was a bumper year for most NBFIs because of the huge returns from the capital markets, it also signalled a loss of focus on traditional and more sustainable financing business which should really be the core focus of all NBFIs. “2011 was a difficult year for everybody because of both the liquidity squeeze and stockmarket crash which really began in end-2010,” he observes.
He identifies finance sourcing as a major challenge for the NBFIs. "Almost all NBFIs depend mainly on corporate and inter-bank borrowings to fund their customer assets. As a result, when liquidity becomes scarce, these sources dry up or become very expensive. This is a severe threat to the NBFI sector's profitability,” he says.
The solution lies really in the sector's attaining self-sufficiency in funding by shifting their funding focus to customer deposits -- something that the IDLC has done since the start of 2011. "Today 75 percent of the IDLC's funding is from retail, institutional and corporate customer deposits,” he says.
The NBFI sector has lagged in the banking sector in attracting qualified professionals into its ranks over the years. The NBFI sector has lacked sustained leadership from management and vision from sponsors and has therefore never really grown with vigour or momentum, he says.
It has marginalised the sector and made it less attractive to the best talents in the country — which has, in turn, continued the marginalisation of this sector via-a-vis banking. “If the NBFI sector is to grow much more rapidly, it must find ways to recruit, develop and retain the best young professionals in the country,” he says.
The IDLC boss says the Bangladesh stockmarket reached incredible heights in 2010 and then crashed. "We are still suffering from the after-effects of the crash even after 14-15 months. There is still a lack of confidence in the market although stock prices are now very attractive," he says.
The stockmarket must find ways to discourage trading and encourage long-term investors to come to the market. "What we need for the mentality of our stockmarket players to change from being 'trading-focused' to 'investment-focused',” he says.
One should not come to the stockmarket if he does not have surplus savings to invest or is not willing to invest funds for three to five years, he says.
IDLC was the biggest gainer yesterday as it closed 9.75 percent higher atTk 100.