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Exclusive Interview

Capital adequacy has become a pressing issue for many NBFIs

Published : Sunday, 26 January, 2025 at 12:00 AM  Count : 420
IDLC Finance CEO tells
The country's financial sector faces mounting challenges, yet IDLC Finance, a non-bank financial institution remains a beacon of stability and trust. M Jamal Uddin, Managing Director (MD) and CEO of IDLC Finance in talks with The Daily Observer recently reveals the strategies behind the company's enduring success. 

From maintaining financial discipline to embracing innovation, IDLC sets example of resilience in an evolving context. He said capital adequacy has become a pressing issue for many non-bank financial institutions (NBFIs). 
However, IDLC consistently stays ahead. "Our capital adequacy ratio reflects a disciplined approach to financial management and sustainable growth," Jamal said. In excess of regulatory requirements, the company has maintained its AAA credit rating for 13 consecutive years-a rare feat that underscores its robust capital base and strategic foresight.

In addition to capital base strength, IDLC has effectively managed its non-performing loans (NPLs), a persistent challenge in the sector. Through advanced risk assessment frameworks and data analytics, the company has minimized credit risks. 

By September 2024, IDLC's NPL ratio stood at 4.98 per cent, significantly lower than the industry average of 13 per cent. "Our proactive measures, combined with a 100.72 per cent coverage ratio, ensure that we remain resilient in managing potential credit losses," Jamal explains. A dedicated recovery team plays a crucial role in optimizing loan recovery processes, fostering trust among stakeholders.

Liquidity management, another critical area for NBFIs, is a cornerstone of IDLC's strategy. The company prioritizes a diversified deposit base and strong asset-liability management. By the third quarter of 2024, customer deposits grew by 2.30 per cent, reaching BDT 82.32 billion, while the loan portfolio expanded to BDT 111.7 billion. 

"We focus on balancing liquidity and profitability to maintain competitiveness in a challenging market," Jamal said. This disciplined approach ensures stability in both operations and financial performance.

Operational efficiency and governance are equally integral to IDLC's success. Transparency, accountability, and sustainability drive its business model. By integrating technological advancements and streamlining processes, the company has achieved notable financial success.  As of September 2024, the return on equity (ROE) reached 8.65 per cent, while the return on assets (ROA) improved to 1.14 per cent.

"Our operational resilience reflects our commitment to governance and innovation," Jamal adds, emphasizing the importance of staying future-ready.

In line with global financial trends, IDLC has embraced digital transformation as a key growth driver. Innovative products like the Online DPS through bKash have not only enhanced customer convenience but also advanced financial inclusion. 

In 2023, over 25 per cent of new deposit accounts were opened digitally. "Our digital roadmap focuses on user-centricity, ensuring seamless and secure financial services for all customers," Jamal emphasized. Technology continues to play a pivotal role in loan processing and customer engagement, positioning IDLC as a leader in the digital finance landscape.

Sustainability lies at the heart of IDLC's long-term vision. As the first Bangladeshi signatory of the Net-Zero Banking Alliance, the company has prioritized green and sustainable financing. In 2023, over 44.33 per cent of its disbursements fell under sustainable finance, with 11.88 per cent directed toward green initiatives. 

Programs like the Purnota SME Loan empower women entrepreneurs, while financing for effluent treatment plants highlights IDLC's commitment to environmental preservation. 

"Sustainability is not just a priority-it's a responsibility," Jamal said adding that these efforts align with the UN Sustainable Development Goals (SDGs).

Looking ahead, IDLC remains focused on sustaining its leadership in the NBFI sector. For the first three quarters of 2024, the company reported a consolidated net profit after tax of BDT 1,254 million, reflecting a 25.3 per cent year-on-year growth. 

Earnings per share rose to BDT 3.02, and the loan portfolio surpassed BDT 111.7 billion. "These milestones are the result of our unwavering dedication to governance, customer-centricity, and innovation," Jamal affirms.

As IDLC blends traditional values with modern financial solutions, it sets new benchmarks for the sector. By fostering stability, embracing change and prioritizing sustainability the company not only addresses immediate challenges but also paves the way for a brighter future. 

Jamal concludes saying, "Our mission is to create value for all stakeholders while driving innovation and growth in the financial sector."

In a dynamic and often uncertain environment, IDLC Finance continues to demonstrate how resilience, foresight and innovation can redefine success.



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