IPDC gearing up for exponential growth
For more than three decades, Industrial Promotion and Development Company of Bangladesh or IPDC has devoted itself to serving the country's major companies with many becoming household names.
The company is now realigning its focus on small and medium enterprises, rural entrepreneurs, women entrepreneurs and home loans to steer its next phase of growth.
IPDC is set to rebrand itself this year and take an aggressive path, and may even go a step further by embracing a new name that gives clear messages to customers.
“We are doing well. But our dream is bigger and really ambitious,” said Managing Director Mominul Islam.
The company plans to become the No.1 brand in Bangladesh in the consumer finance segment in five years.
Established in 1981, IPDC is the first private sector financial institution in the country.
“IPDC has always been at the forefront of innovation in the financial sector -- many sectors have developed because of IPDC.
Now, the company is working on new financial products targeted at middle- and low-income groups with a particular focus on women.
The company has special plans about the housing sector, as the construction of housing is inefficient because of the lack of adequate funds.
Individual builders have to finish their projects over a lengthy period, which increases their expenditure, Islam said.
So far, real estate companies, developers and lenders have run after the rich. But now, many of them have realised that the next growth opportunity will come from the middle- and lower-middle income groups.
The lenders are now talking about providing loans to people with monthly income as low as Tk 30,000, he said.
“The economic value creation of this model is much higher than giving loans to people who are buying their second, third or fourth homes. This will give us a wider market.”
Professionals such as teachers and physicians in the tier-2 or tier-3 cities, government employees and small businesses do not want to take loans, as they are scared about who will repay the cost of the loans if something bad happens to them.
The company's home loan will have inbuilt features of insurance coverage, giving protection to borrowers or their families in case of any untoward accident.
IPDC is working with an insurance company to bring in the inbuilt features.
“We are confident. There is a huge latent demand and we are sure we will be able to make the model a success.”
In the next two months, the company will pilot the idea of decent housing in 10 areas around Dhaka city such as Ashulia, Gazipur, Tongi, Savar and Narayanganj.
IPDC plans to cover 30 districts by this year to make home loans affordable.
Once the company goes for the housing finance project, many people across the country will know about the company. “I think this will be a good case for innovation in the financial sector.”
IPDC has had initial discussion with top steelmakers, cement-makers and insurance companies.
He said BSRM, which has more than 750 dealers across the country, is interested. “This makes good business sense for them because the consumption of steel will increase.”
Islam said his company has already started the work; the product will be formally launched this year.
By 2020, the company plans to reach 15,000 families, helping them realise their dreams of owning homes.
The company is also focusing heavily on SME finance. SMEs in the service sector do not get adequate access to working capital. They supply goods and services but their bills are paid three to six months later. As a result, their money is always stuck.
“We see a big opportunity and value added to the service sector,” Islam said.
IPDC will lend up to 80-85 percent of the bill amount and take the money when the SMEs receive the bills.
“It can give huge support to the SMEs.”
Historically, IPDC is a large project finance company, due to which its lending in SMEs is low.
Still, 17 percent of its loan portfolio is in the SME segment, 70 percent in corporate segment and 13 percent in retail.
It has set its sights on green financing, with loans going to solar panels and solar-based industries, auto-brick fields and modernisation of existing industries with efficient lighting.
He said the lending system must adopt new thinking and has to be technology-driven. IPDC is sponsoring Startup Dhaka, an initiative that identifies and supports new initiatives by young entrepreneurs.
“New jobs have to be created, and venture capital can be a very useful tool to promote entrepreneurship in the country,” he said.
Islam, who started his career in 1999, also talked about the health of IPDC.
When he took over as the managing director of the company in January 2012, its bad loan portfolio was about 43 percent, which has since come down to less than 1 percent.
In the last five years, the company has become one of the fastest growing financial institutions in Bangladesh.
In 2011, its loan portfolio was Tk 380 crore, which rose to Tk 1,420 crore in June this year.
The profit was Tk 11 crore in 2011, which more than doubled to Tk 24 crore last year. In the first six months of the year, the company has clocked in a profit of Tk 18 crore.
“We are growing in a very balanced way. We are not only ensuring the growth but also quality and efficiency.”
The CEO sees the shareholding structure of IPDC as its biggest strength. It has owners from the private sector to the government, from local companies to foreign firms.
“It is not an individual or a profit-making concern trying to manoeuvre the operation of the company for something of short-term gain. This is a very long-term focused company with a holistic approach to business rather than only profit-seeking.”
The government of Bangladesh owns 21.88 percent share, Brac 25 percent, Aga Khan Fund for Economic Development 11.05 percent, Ayesha Abed Foundation 10 percent, RSA Capital 5 percent, institutions 11.32 percent and general public 15.75 percent.
The listed company gave 20 percent dividends last year.
Islam, who joined IPDC in 2006 as head of operations, said the company now stands on healthy fundamentals and is growing fast.
IPDC has five branches now, with plans to open 12 more this year, mostly outside Dhaka.
It has 170 employees and plans to raise their number to 250 by 2016.
Islam, who holds a degree from the Institute of Business Administration, is bullish about the economy.
Despite various challenges confronting the economy, Bangladesh would continue to grow steadily for the next 10 to 20 years, riding on demographic dividends, he said.