What are the issues that the IFIC Bank stresses?
A bank needs to be connected with the mainstream flow of the economy if it wants to reach a sustainable stage. Beyond the metropolitan cities, there is a different world inside the country that creates the highest employment opportunities and housing facilities.
We want to establish a connection with the particular world as it would, we believe, render a strong foothold for advancement. However, it is easier said than done in the reality of Bangladesh.
How is it tough to implement?
If you support the agriculture sector in Australia, a farmer owns vast swathes of farmlands there, typically ranging from 100 to 150 square miles. But the scenario is quite different here as the number of people with a hefty balance is relatively lower. We, around 60 banks, are pursuing the small group of people, though the majority have only modest financial holdings.
Here, the challenge we have been facing is to collect the small savings from different parts of the society and disburse it back to them in the form of a loan. The process requires a significant amount of cost. The IFIC Bank, however, worked hard for nearly 10 years and managed to find out a way through technology and a proper supply system. The productivity of human resources has also enhanced, which made the cost tolerable.
Instead of approaching through agents, or any other third parties, we have opened nearly 1,400 branches and sub-branches – 200 branches and remaining sub-branches -- across the country. Each of the sub-branches employs at least two officials.
Are you counting the agent banks as sub-branch?
Not at all. The sub-branches are directly connected to the banking system. If a branch becomes a planet, the sub-branches are like its satellites, offering the same services. We would reach out to the general people at villages, collect their small savings, and provide them with small amounts on credit.
Here, our prime challenge is cost management, while the second one is to ensure if the loans are disbursed, maintaining control and risk management. We have recently launched a branch at Tetulia. We must keep it under control if a man or woman is fleeing the locality after borrowing money. It will not be possible to maintain this level of control if we depend on agents or any other third parties.
We have set up a model, using technology, supply system, and a low-cost environment. We have expanded across the country through the model.
Can you please shed light on the benefits you achieved through the expansion?
If I say one by one – housing loans compose around 22 per cent of IFIC Bank’s total lending. We are disbursing loans to construct semi-pucca houses. We have rolled out a product called ‘Aamar Account’, which brought us around 26 per cent of total deposits.
What prompted you to launch the home loan scheme?
This is what my entire game plan is based on. We have noticed that if the home loan is disbursed only in the city areas, its default rate would be the highest. Conversely, if I lend out Tk 1000,000 to 2500,000 for constructing semi-pucca houses in Laksam, Madhupur, or Tetulia, it will garner the lowest default rate.
The lenders here are helpless. A powerful borrower can easily prolong the loans up to 25 years, filing a case and using the legal loopholes. If a giant borrower does not repay, or fails to repay, it will eat up a large sum of money, like Tk 5 billion. Moreover, it is easy to realise the home loans as it requires submitting a good collateral.
Isn't it an ambitious target?
No, as the IFIC Bank now maintains a wide range of networks. When Sonali Bank has a total of 1,237 branches, we operate nearly 1,400 branches. Simply put, I want to conduct our banking activities with a large group of people. There are 170 to 180 million people under around 40 million families, and we want 10 million of the families to be involved with IFIC Bank.
What were you saying about the Aamar Account?
People deposit their money in banks to earn some interest. Another reason is to enjoy the convenience of depositing and withdrawing money with ease. At the same time, the clients want to withdraw money staying at home. A client can easily draw some money using his or her account at a minimal interest during the month-end crisis and repay it at the beginning of the following month. The product 'Aamar Account' has been launched, incorporating all these facilities.
What are the other products in your bucket?
We have launched a new product called 'Shohoj' for the poor village people who want to save a small amount, ranging from Tk 500 to Tk 2,000. It enables them to deposit money in the bank, instead of keeping it at their houses.
At the same time, we have launched a product called 'Shohoj Rin', targeting this group of people. We have another product – Suborno Gram – to boost the activities in the village economies. We have reached a level where an IFIC Bank branch is available within two to three miles in the cities and within five miles in village areas.
Instead of lending Tk 100 million to a single client for fish-farming, we want to disburse the fund among 100 people. Besides, we have prepared each of our officials for providing 23 types of services.
What is the manpower count in your bank?
It is nearly 5,000, where 36 per cent are women. We do not differentiate between male and female, or Hindu and Muslim. We have introduced a uniform system for all. We can monitor all branches and sub-branches from the head office. This is what actually refers to a 24/7 service.
All other banks also provide the services you mentioned. What is the specialty of the IFIC Bank?
It is a good point. The first difference from the others is – we manage all our activities with our own staff. Second, we offer true online facilities, allowing a customer from Dhaka, for example, to visit a branch or sub-branch in Panchagarh and request a home loan. If one seeks the services, most of the other banks will deny.
Did all other banks fail to provide this service?
How would they provide? None but Sonali Bank maintains this level of network.
You are disclosing all of your business strategies. Won't your peers learn those?
Is it possible for me to play like Messi, seeing his playing style? How many years of preparation did it take for Messi to become what he is today? We have also put in ten years of hard work.
Let me shift the focus to another issue, the regional ideas have lost their relevance with the adoption of technology. The distance from Bangladesh to the USA is now similar to the distance from the sixteenth floor to the ground floor of my building.
What is the current picture of defaulted loans at your bank?
Six per cent.
It is a big rate in the context of the private sector. Is it a longstanding tendency? Why would people deposit money in your bank amid the current inflation?
It is a helpless ground for us. I gave an impression at the beginning that a group of people nurture the tendency of not repaying loans, in addition to the legal complications. What I would say is that we are approaching a large group of people, instead of a limited group. At the same time, we laid emphasis on collecting deposits from a large number of people.
Inflation has connections with interest rates and monetary policy. I would not make any comment on the issue as it is beyond my control. The policymakers could say it better if we are maintaining a deposit base in consistence with inflation.
Here, the final issue is if we are providing the best in the field. There are 13,000 ATM booths across the country, and our debit card can be used at all of them. Thus, all the 13,000 ATM booths work for me, without any extra charge.
Do you still maintain the position as Grameen Bank director?
No, I have recently left the position. I have served the bank for 9 to 10 years and strengthened its organisational structure during my tenure.
A client should turn to the capital market to collect a large capital, and to banks to collect current capital. But the opposite scenario prevails in the country. Are the banks making good profits using this advantage? Will the banks be able to maintain this level of profit when there will be a strong capital market?
We would perform better. It's true that it is not a bank’s responsibility to provide long-term loans. The banking sector would see its risks minimised had a strong capital market in place.
Now, a large share of the profit we make goes to cover up the defaulted loans. We are now financing both capitals and loans. If we provide only loans, the default loans would subside.
As a banker, I always welcome an efficient capital market.
*This interview, originally published in Prothom Alo print and online editions, has been rewritten in English by Misbahul Haque.