IPDC Finance Limited, a non-bank financial institution, has experienced the highest business growth even at the pandemic time, through lending to small ventures that are usually turned down by most lenders.
The company posted a 36.61% hike in its net profit in the January-March quarter – the highest in the last six years.
Not only in quarterly performance, but the IPDC has also outperformed its market competitors, such as IDLC Finance Limited, Lanka Bangla Finance and Delta Brac Housing Finance Corporation, in terms of deposit, credit, and profitability since 2015.
Over the last six years, the IPDC's annual profit grew by 24%, while the IDLC registered a 12% growth, the DBH 5.4% and Lanka Bangla negative 4.3% during the same period, according to a detailed analysis of the IPDC.
The introduction of a new business concept – supply chain financing to small businesses by collaborating with corporates – helped the company achieve high growth, said Mominul Islam, managing director of the IPDC.
Explaining such financing, Mominul said the IPDC has collaborated with different corporates like Aarong and Pran. The company loans their suppliers and distributors against work orders and bills. No collateral is required for borrowers to avail such financing.
Technology has also been developed for such financing, which has reduced loan processing cost and made lending faster.
"We can complete the loan processing in two days and funds are transferred to customers' accounts within half an hour upon their request," he added.
Small suppliers and retailers are getting loans at 9% interest like corporates under the financial product, the IPDC managing director said.
Default loan is zero in supply chain finance as suppliers and distributors are involved in businesses with corporates. If they fail, they will lose business, he also said.
In the first three months of the current year, the IPDC lent Tk1000 crore under the financial product, while it gave loans amounting to Tk2,700 crore last year. It is a revolving loan, which is adjusted between one and six months.
The IPDC launched supply chain financing in 2013, but borrowers showed interest in this product in the last two years, mostly during the Covid-19 period.
Previously, the process of financing was in a traditional manner but the technology was developed during the Covid period to intensify lending.
"When suppliers were in liquidity problem because of the Covid-19, large corporates and multinationals such as Unilever, British American Tobacco, BSRM, bKash, Marico, and Berger Paints requested us to help them," Mominul said.
So, they speeded up financing through the tech-based supply chain product, he added.
Citing an example of how supply chain financing is helping small businesses to grow, he said a client who took a loan of Tk50 lakh from the IPDC in 2013 now sees his or her loan limit reach Tk78 crore against which there is no security other than bills. The client's business grew by 200 times in the last eight years.
The supply chain finance helped the client grow business, he added.
Currently, the IPDC has a 50% market share in domestic supply chain finance, according to the company.
The financial product has largely helped small and medium businesses to grow and create a win-win situation for both borrowers and lenders, the IPDC managing director said.
The IPDC has also targeted limited-income families, nurses, security guards living outside Dhaka and Chattogram for providing them with personal and home loans.
The segment of people has remained unexplored in terms of lending. The IPDC entered into it with a low-cost financing offer, which also contributed to the company's growth, he added.
The IPDC offers affordable home loan under the product titled "Valobasha" at 9% interest rate.
The average loan limit for the group of people is Tk17 lakh, according to the IPDC.
The payment behaviour of such a loan is very good, said Mominul.
The company provided home and personal loans to 4,500 limited income families across the country.
The IPDC is now planning to increase SME loan portfolio, bringing down corporate loans. The share of corporate portfolio came down to 48% now, which was 90% once. The share will be brought down to 30% in the next five years, he pointed out.
When the non-bank financial institution industry is in serious trouble with high default loans, the IPDC has less than 1% in default loan.
The IPDC had the highest default loan of above 43% in 2006 when Mominul joined the company. Its default loans have now come down to the lowest level because of a strong recovery team.
The size of the total loan portfolio stood at Tk5,771 crore at the end of March this year.
The recovery team of IPDC is the strongest in the financial industry, he said.
The IPDC also is ahead in the race of gaining the trust of depositors when the overall industry has been suffering from an image crisis.
The deposit of IPDC grew by 9 times in the last six years between 2015 and 2020, the highest in the industry, when deposits of other market leaders like IDLC, Lanka Bangla and DBH grew by less than two times, according to the IPDC analysis.
The total deposits of IPDC stood at Tk4,192 crore at the end of March this year.
Good communication with clients by letting them know about the company's strength helped to gain deposits, said the IPDC managing director.
The IPDC is a company with the highest global rating and capital base, which helped it gain customers' confidence, he added.