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September 09, 2013
'I want to take SME to a different level'

Zahid Ibne Hai, a witness of the topsy-turvies of ‘conception to implementation’ and an enthusiast fuelled with vision about the future of SME in Bangladesh shares his thoughts on optimism with Mehrab Al Islam

Please tell us about your career background:
After my internship at ANZ Grindlays Bank in 1999, I joined BRAC as Management Trainee. Later in the year, I moved to BRAC Bank. I was among the first employees of the bank and was privileged to experience the formation of a bank, with a unique vision and concept of serving the Small and Medium Enterprises (SME). Later, I worked in various roles including Corporate Relationship Manager, Head of Marketing and Product Development and Head of Cards before joining IDLC Finance Limited as the Head of SME in 2008.

Can you share IDLC’s 2012/2013 objective – ‘aggressively grow SME portfolio’?
When I joined IDLC in 2008, we had a SME asset portfolio of Tk700mn. This figure now stands at Tk14bn. For the last 3 years, the compound annual growth rate (CAGR) has been 57%. Currently, we are growing at approximately 45% with SME loan disbursement of Tk12bn a year. We have around 6,500 customers at present with an average acquisition of 350 customers a month, and planing on getting to around 1,000 a month by 2015. Right now, IDLC has the best SME assets in terms of quality among all banks & financial institutions.

Your perception on SME growth in Bangladesh:
SME market is the most potential of all with approximately 90% of the Bangladeshi enterprises falling in this category. The market is the most underserved and have ample ‘white spaces’ to be filled. Being creative, growth hungry and adaptable, SMEs of Bangladesh are sure to do well.

Tell us about the issues/problems that SME face.
The biggest problem of SMEs in Bangladesh is access to finance. Inadequate infrastructure and energy crisis comes next. Bureaucracy and lack of political stability aggravate the situation further.

Access to finance for SME business:
Being small has certain disadvantages in terms of capacity, resources, infrastructure and managerial capability. Many bankers are yet to find SMEs as bankable while others are not equiped with right people, process and technology to serve them. Thus, a gap remains resulting in demand-supply mismatch. A unique and SME-friendly financing model is required to identify the financing needs for serving them effectively to reach equilibrium.

Role of financial institutions/banks in helping SMEs’ growth flourish:
Financial institutions are concentrating on this market as corporate financing opportunities are getting limited due to severe competition. Many banks are spreading their network to distant areas in catering the needs of the SMEs. If banks are more proactive in understanding, identifying and delivering the diverse financial requirements of SMEs, then growth of SMEs will flourish.

Any difference in the marketing approach of financial institutions and regular products/ service organisations?
This is an era marked by the power of “customers”. Today, customers are more empowered and connected to decide the fate of a product or an organisation. For any business to succeed, it is imperative to design and deliver their products or services in a way that caters the needs of the customers in the most convenient and cost-effective way. This holds valid irrespective of the industry you operate in.

Any advice or preparations SMEs should take before applying for loan?
Have a business plan, even if it’s an informal one. Maintain books of accounts in an orderly manner. Keep all legal and other relevant business documents up-to-date. All these increase the probability of getting the SME loan sanctioned.

Tell us about your interests and hobbies, family:
Taking photographs, and reading books and magazines are my passions. Everyday, I try to read something new. I am quite a gourmet and my wife’s amazing cooking ability complements that! I love spending time with my family.

Something that your friends do not know about you:
I have a keen interest in angling (a method of fishing). One of my dreams is when I retire, I will spend more time angling. I also love to play console games and often play cricket with neighbouring youngsters!

What is your favourite qoute?
“If the internal rate of change in an organisation is slower than the external rate of change, the end is at sight. The only question remains is – when?”

What’s next in your career?
I would like to see IDLC’s SME business reach a different level altogether, so that it is globally recognised, followed and practised. As a professional, my ultimate aim would remain to lead an exciting and dynamic organisation that would carry the dreams and aspirations of its stakeholders in the most befitting manner.

I’m sure whatever I do it will have social context.
July 01, 2013
June 22, 2013
April 18, 2013
Financial sector set for rough ride
Chief executive of IDLC vows to take the company to an asset base of Tk 10,000cr by 2018

Selim RF Hussain

The entire financial sector is likely to make underwhelming earnings for 2013 if the political situation does not improve sooner, said the chief executive of a top non-bank financial institution.
“The impact of strikes and political disturbance has been disastrous on the first quarter’s performance,” Selim RF Hussain, chief executive officer of IDLC Finance, told The Daily Star in a recent interview.
The financial sector, both banks and non-bank financial institutions (NBFIs), has been experiencing a slowdown in loan repayments, as business houses struggle to operate normally.
The small- and medium-sized enterprises were impacted first, but larger companies are progressively being put under severe stress by the political turbulence, he said.
“The biggest challenge this year will not so much be the liquidity issue, but the political scenario. If it does not improve, the whole financial sector and, in turn, the overall economy will be dragged down.”
The political volatility, coupled with the recent spate of scams and operational losses, has made the banking industry conservative in its marketing and lending efforts.
“The net result is that lending is slowing down and as a result, liquidity is certainly much better than in the first half of last year,” he said, while crediting Bangladesh Bank’s “more accommodative” monetary policy.
IDLC, which started in 1985 with collaboration from international development agencies such as the International Finance Corporation, Aga Khan Fund for Economic Development and German Investment and Development Company, have become the leading NBFI of the country.
“NBFIs have been guilty of taking the short-cut strategy and focusing on immediate gains rather than formulating long-term plans. But our success has been built on a combination of quality planning and quality execution, and definitely not on short-sightedness.”
By 2018, the company wants to achieve an asset base of Tk 10,000 crore and be completely self-sufficient in terms of funding, said Hussain, who joined IDLC in 2010.
Speaking of self-sufficiency, Hussain would like the NBFI sector to move away from the bank borrowing model and initiate their own deposit making efforts.
“Almost all NBFIs depend on the money market and corporate borrowings to generate their funding. As a result when liquidity becomes tight, NBFIs suffer because their borrowing rates go up and funds become scarce.”
Moreover, Hussain deems the cost of funding for NBFIs in Bangladesh to be excessive.
“Banks are still charging NBFIs 17-18 percent — despite NBFIs being far better risk than most corporate houses. That is why, at IDLC, I decided three years ago to move away from this bank borrowing model and initiated our own deposit marketing efforts.”
About the current state of the stock market, he said a long-term vision has to be adopted.
“If we have peace and discipline, if there is law and order and political stability, if there is good governance and there are good government policies for development — our stock market will also grow. There is no short-cut or simple solution to improving the situation.”
For sustained development of the stock market, he said “every aspect” of the market has to be developed, starting from the regulatory policy framework and the regulatory agencies to the demutualisation of the exchange, complete automation of the exchanges and so on.
Business houses, too, have to be incentivised much more than is being done to bring them to the market, Hussain added.
“However, the market will only really grow if the overall economy grows and business houses become more professional and transparent and corporatised. That is when the market will attract millions of real investors — the people who want to invest their surplus savings.”
The IDLC CEO said the BB needs more support from other government agencies such as the National Board of Revenue (NBR) to inject dynamism to the bond market, which is an important part of the financial sector in most countries other than Bangladesh.
“The bond market needs good tax incentives to kick-start its momentum. But all our requests in this area have fallen on deaf ears as the NBR doesn’t appear to care about anything but trying to grow its revenues — and are completely indifferent to any initiatives that would strengthen the bond market.”
He said the tax benefits on the zero coupon bond for banks, NBFIs and insurance companies which were withdrawn by the NBR in 2008 impacted the market “very negatively”.
Hussain went on commend the BB’s “market-oriented” approach of the past 4-5 years, while seeking more cooperation from the Bangladesh Securities and Exchange Commission (BSEC).
“The governor and deputy governors now meet the top management of all financial institutions on a quarterly basis now, and there is much greater interaction than was the case in earlier years. The level of supervision, too, has significantly increased in the last two years, and this will only help the sector develop and expand.”
About IDLC’s future plans, Hussain said: “Obviously, our NBFI licence restricts us from doing certain kinds of business that commercial banks do. But we are looking at other channels to boost our revenues.”
“We are focusing on blending our capital market businesses with our loans and deposit business so that we can offer certain clients an integrated offering. This is looking good and we are confident that this approach will generate much greater cross-selling in the future.”
The company will provide a host of new products on the capital market area as soon as the stock market stabilises.
December, 2012
CEO's Interview on Market Pulse
December 17, 2012
November 17, 2012
Interview of CEO & Managing Director on NTV
October 14, 2012
May 22, 2012
IDLC Finance running on Flexcube core banking system
May 06, 2012
March 29, 2012
IDLC Finance vows to ignite business ethics
Only NBFI to have moved completely away from inter-bank, corporate borrowing

The recent re-branding of IDLC Finance has paved the way for the leading company in country's corporate arena for doing business in a more structured and sophisticated way.

"This re-branding is aimed at re-emphasizing our traditional strengths of corporate governance, statutory compliance, consistency and stability and reflecting a sense of our renewed energy, innovation and the focus on quality growth as well," the managing director & CEO of IDLC Finance Selim RF Hossain told The FE in an interview recently.

He said improving IDLC Group visibility amongst stakeholders and clearly differentiating IDLC from competition is also one of the reasons for the recent re-branding.

"At the IDLC Group, our vision is to become the best financial brand in the country. In line with this vision, we have, over the past two years, built up our capabilities and capacity - we have recruited 350+ new staff members, opened 16 new branches and grown our customer deposits and loans by 72 per cent and 60 per cent respectively. Very recently we implemented a world class core banking platform in IDLC Finance Ltd. - Flexcube, from Oracle Financial Services,"

"We are very confident that the traditional 'banking' business will continue to grow very strongly. We plan to become a Tk 50 billion (5,000 crore) asset company by 2014 and there is no reason why we cannot grow our loan book to double that amount by 2018. We have done the right things over the past two years having invested in our infra-structure & capacity. We have just re-branded the company

Replying to a question on the 'distinctive areas' of businesses of IDLC Finance, Mr Selim said IDLC is the only NBFI to have moved completely away from inter-bank and corporate borrowing as primary sources of funding. It now generates 85 per cent of its funding from retail & institutional customer deposits.

IDLC's product range is far broader than any other NBFI. IDLC'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, car loans etc.; financing facilities for Small and Medium Enterprises; Merchant Banking solutions such as Portfolio Management and Issue Management (IPO, RPO, Bond Issuance, Rights Shares Offering etc.); and Brokerage services through its fully-owned subsidiary, IDLC Securities Limited.

IDLC has been and continues to be a standard bearer of Corporate Governance, Statutory Compliance & Ethical Standards in the entire Bangladesh financial industry.

2010 was an incredible year for the capital markets business - almost sure a one-off. Trading volumes that year were huge and we made an enormous of commissions as wells as capital gains. Unfortunately, the 'bubble' burst in end 2010 and in 2011 the market crashed and our earnings also suffered very significantly.

"In terms of the overall market, we feel that the newly re-vamped Securities and Exchange Commission (SEC) is generally moving in the right direction. The government must invest heavily and quickly in the SEC, in terms of people & infrastructure, if it wants to reap the benefit of the vast resources that the capital market can generate for the overall economy," the IDLC Finance CEO said.

"IDLC will continue to be a role model for transparency, corporate governance, statutory compliance & ethical standards in the capital market."

"The Bangladesh stock market must find ways to discourage 'day trading' and encourage long term investors to come to the market. The regulators must enforce very strict compliance and strong technologically-supported monitoring capabilities. The regulators must move quickly and must involve all stakeholders in their decision-making. IDLC is well placed to support any stock market reform and developmental agenda and we are committed to this effort," the IDLC Finance chief executive added.

March 26, 2012
IDLC's dreams of growth
The chief of the non-bank financial institute sets his target higher

IDLC 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 recently re-branded itself by changing its logo. “The re-branding is aimed at re-emphasising 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 from Tk 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 a Tk 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 at Tk 100.