IIDFC: An NBFI that leads by example

Depositors of Industrial and Infrastructure Development Finance Company Limited (IIDFC) did not have to wait a single day to get their money back after maturity, said Managing Director Md Golam Sarwar Bhuiyan in an interview with The Business Post’s Mehedi Hasan

What is IIDFC's current status?

IIDFC is one of the country's most well-known NBFI; its board of directors is made up of top bankers, insurance executives, successful entrepreneurs, and retired government officials.

The company was granted a license by the Bangladesh Bank on January 23, 2001, and it began operations in May of same year.

Our primary concentration is on the industrial and infrastructure sectors, although we also lend to small and medium enterprises (SMEs).

IIDFC's total deposit was Tk907.98 crore at the end of December last year, compared to Tk1,392 crore in loans.

Last year, IIDFC's operating income was Tk21 crore.

What are some of the challenges that IIDFC faced amid the pandemic?

Despite the central bank's deferral facility, the majority of our clients repaid their debts on time during the pandemic period and we have thus far been able to continue to conduct our business by obtaining deposits from clients.

In turn, even in the midst of the epidemic, we are very careful of repaying depositors' money after maturity. When a number of NBFIs were unable to reimburse depositors on schedule, IIDFC depositors did not have to wait a single day for their money to be returned after maturity.

What plans does IIDFC have to reduce its NPLs?

IIDFC's non-performing loans (NPLs) accounted for 24.44 per cent of its total outstanding loans at the end of March last year, while some defaulted loans have left legacies.

We've devised a strategy for recouping the defaulted loans. In some cases, we take legal action against defaulting borrowers, while in others, we sell mortgages to recover the loans.

Our primary focus right now is on loan recovery, and we expect our NPLs to drop to a manageable level this year.

Are NBFIs depended on bank deposits?

Generally speaking, we mobilize two sorts of deposits: institutional deposits and individual deposits—which is our prime deposit source. We have always tried to limit our reliance on banks due to their high lending rates.

What is the progress on BSEC’s restructuring of failing NBFIs?

Because the majority of NBFIs are listed on the stock exchange, the Bangladesh Securities and Exchange Commission (BSEC) has taken steps to rebuild the failing institutions.

Directors and chairmen of some NBFIs have already been replaced, and some of their boards have been restructured, thanks to the commission.

Have you experienced a public relations disaster as a result of the failing NBFIs?

Although in 2020, the NBFI sector suffered an image crisis for failing to refund client deposits, this is now changing, as most NBFIs are now repaying depositors' money on schedule following maturity.

Meanwhile, as a few NBFIs are still experience difficulties due to slow business, the situation will likely improve once the pandemic is over.

What advice do you have for ailing NBFIs?

Any financial institution's corporate governance is critical. All financial institutions, not just troubled NBFIs, should be required to meet the central bank's corporate governance requirements. A smart and capable management team is also necessary for a successful NBFI.