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Borrowers’ repayment behaviour poses a major challenge to the banks and non-bank financial institutions in Bangladesh in maintaining growth and quality portfolio, said Mominul Islam, managing director of IPDC Finance.
He made the remarks while presenting the first quarter performance of the non-bank financial institution at an event at the Westin Dhaka hotel in the city on Thursday.
There is an increasing tendency among many borrowers not to pay back loans in time, pushing default loans to a record level.
Despite various challenges, IPDC pulled off 120.5 percent year-on-year increase in net profit to Tk 15.9 crore in the January-March quarter, Islam said.
Non-performing loans came down to 1.2 percent in March from 2.14 percent in December last year. IPDC’s bad loan is the lowest among all the publicly listed NBFIs in Bangladesh thanks to its quality portfolio, Islam said.
Though the financial market has been under a liquidity pressure, IPDC has not faced any such problem due to a strong deposit base.
Large corporate and multinational companies are interested to park funds with the NBFI for its good governance, according to Islam.
“We do not see the liquidity pressure as a major challenge unless it is a systemic failure because our economy is strong.”
The main sources of fund for IPDC are public deposit and bank borrowing. Some 47 percent deposits come from the public and 30 percent from bank borrowing.
“We are discussing with the central bank to simplify the issuance of bonds so that NBFIs can raise funds,” said Islam.
The revenue growth of IPDC was mostly driven by the corporate sector. And Islam said the strategic focus would be on small and medium enterprises, women and retail banking in the future.
Currently, women make up 13 percent of the total loan portfolio of IPDC and it plans to raise it to 30 percent by 2020.
“We want to focus on women financing because their repayment behaviour is much better than men’s,” Islam said.
He said consumerism is booming in Bangladesh but the credit penetration is still very low. Banks face regulatory constraint in the consumer banking segment but the NBFIs do not face such constraint.
“So, the NBFIs have opportunity to broaden their consumer financing by developing diversified products. IPDC is working on consumer financing,” he said.
IPDC has set a target to increase the number of its branches to 16 by this year from 12 in 2018.
The NBFI closed at Tk 34.20 on the Dhaka bourse on Thursday, the last session of the week.