‘IPDC working towards building an equitable society’

IPDC provides innovative products to create new markets and serves broader stakeholders based on technologically enabled and socially responsible business models with a focus on the cottage, micro and medium enterprises (CMSMEs), Ashique Hossain, Head of Credit Risk Management, IPDC Finance told The Business Post’s Shahin Howlader in an interview    

What inspired you to go for such a radical career shift from engineering to Credit Risk Management? 

After graduating from BUET in Civil Engineering, I joined as a Hydraulic Engineer at the Institute of Water Modelling. Around that time, I began developing an interest in business. Immediately after my MBA, I joined IPDC as a management trainee, and there has been no looking back since then. I consider myself fortunate to witness the company grow multifold and rise from the verge of collapse to an invincible spot. At IPDC, every day is yet another level of understanding Relationship Management, Credit Analysis Management, Strategic Planning, Market Trends, or Structure Finance. 

The pandemic has made loans repayment quite challenging. What risks might financial institutions face due to this uncertainty?

I think, for banks or FIs, maintaining the existing asset quality has been mainly helped by supportive measures such as payment deferrals and relaxed loan classifications. However, this will emerge as a critical challenge post-pandemic. Another critical industry challenge could be proper monitoring of regular and rescheduled loans, as the sector’s already high level of Non-Performing Loans (NPL) may worsen. It may negatively impact interest income and cash flow, leading to value reduction of risk-weighted assets and the institution’s capital adequacy scenario. Besides maintaining close client relationships, IPDC took prudent loan provisioning strategies to act as a buffer. Presently we have set aside around 2 per cent of our loan portfolio in the form of additional provisioning and interest suspense.

Has Covid made you rethink the existing Risk Management Modelling in practice?

The crisis highlighted the importance of evaluating risk from a 360-degree perspective. Specifically, models of predicting creditworthiness and stress testing are all severely tested by the pandemic-triggered economic downturn. Although being risk-averse is easy in our business, this is the time when businesses need the most assistance. So, it is essential to develop a strong relationship with customers to understand their needs. The crisis has also accelerated the shift to digital engagement. Technology has forced financial institutions to be more progressive and innovative through digitisation. Thanks to our continued investment in digital transformation, IPDC operated seamlessly during the pandemic. Bangladesh Bank has already taken the initiative to launch an e-KYC mechanism. We have internally developed an end-to-end digitised online loan approval system that allows quicker, smoother decision-making. At IPDC, we work closely to use big data and machine learning technologies to evaluate customer needs, make credit decisions, and build a more robust
ecosystem.

IPDC is considered a fin-tech-inspired company. How has the process transformed over the years?

IPDC has always been progressive in providing innovative customer solutions. IPDC’s business strategy goes beyond profit growth to create new markets. We serve broader stakeholder needs based on technologically enabled and socially responsible business models, focusing on the cottage, micro and medium enterprises (CMSMEs), women and young entrepreneurs, and lower-middle-income households. IPDC’s decision to operate in the mass market through geographic and industry segregation has led to its evolution as a fin-tech-driven company. To provide innovative housing solutions, we have focused on affordable home loans to serve the country’s lower and middle-income population located in non-metro and rural locations. Additionally, we are focusing on improving our SME financing footprint as well. We have overcome the geographical barrier by digitising our credit approval system, which minimises turnaround time. Regardless of their size and operation, suppliers of different reputed companies enjoy seamless, paperless, fast, and secure supply chain finance solutions through Orjon, IPDC’s state-of-the-art blockchain-based Supply Chain Finance (SCF) platform and the country’s first. The upcoming “IPDC EZ,” our consumer goods financing platform, will be a breakthrough in Bangladesh, providing card-less, interest-free financing for consumer demands. On the other hand, “IPDC Dana,” our Retailer Financing Platform, is there to finance the retailers based on their sales data. We are working towards IPDC playing a pivotal role in building an equitable society.

What are your suggestions for other financial institutions on credit risk management? Do you think under the Covid induced economy, banks and financial institutions’ credit risks have increased?

Credit risk is a core risk for financial institutions resulting from the borrowers’ failure to meet their obligations. First, the organisation should have a robust risk management framework where the functional units work independently to manage this risk. To handle NPL and relevant challenges, you need to have a good screening process, defining your risk appetite and the target. A credit risk policy based on the current market and industry scenarios will help the institution grow its portfolio. It’s also essential to have a portfolio monitoring mechanism in place. Maintaining regular and friendly customer communications is also necessary. Most importantly, you should know the end-use of the loan.Covid-19 has made Banks & FIs rethink their credit risk strategy and process. We need to achieve balance by encouraging informed credit decision-making. Proper industry analysis and investment forecasting are vital for credit decision-making, appropriate review and monitoring of loan files.

Any advice for the young CROs willing to join in IPDC

IPDC has been instrumental in its take on fintech solutions, which speaks a lot about the automation in CRM as well. However, it is crucial to apprehend the humane aspect of this role. Solid risk managers must be forward-looking and strategic-minded, having the ability to understand potential risks for the firm, both at the departmental level as well as in a wider firm perspective. The head of Risk Management or CRO must be able to keep pace with the quick and volatile nature of not only the financial markets but also deal with new political, financial, and professional environments. Risk management can perfectly marry art and science. Often, good risk management goes unseen – if things go well no one knows what strategies were implemented behind the scenes to prevent disaster. So be prepared.