Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Chapter One Introduction
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Introduction IDLC Finance Ltd, a leading Non-Banking financial institution (NBFI) The company's wide array of products and services range from retail products, such as home and car loans, corporate and SME products including lease and term loans, deposit schemes, structured finance services and so on. The company's wide array of products and services range from retail products, such as home and car loans, corporate and SME products including lease and term loans, deposit schemes, structured finance services ranging from syndications to capital restructuring and capital market services. The company also strengthened its presence in the country's growing stock market with launching a subsidiary-IDLC Securities Limited-which is offering full-fledged brokerage service for retail and institutional clients. From last 2 years, they are getting more and stronger. With a strong organizational structure, they are on the way to be the number one leasing company in Bangladesh.
A. Background The main objective of BBA program is to create skillful professionals for the business sector in Bangladesh specially in banking sector. To become skilled in any field a person should know the pros & cons of that particular area. However, it cannot be achieved only through the reading the book. There is a gap between thing mention in the book and real life situation. Keeping this fact in mind, BBA program is design to reduce this gap between this two and to reinforce the theoretical knowledge acquired so far from BBA program. Therefore every student of BBA program is sent to different organization for practical orientation at the end of the program and they require to submitting a report after completion of the practical orientation. I am very glad for getting the opportunity to accomplish my practical orientation at the IDLC Finance Company Ltd. 1.1 Objectives of the study/research The objectives of the report are as follows: The basic objective of this paper is to be acquainted with how a financial institution evaluate individual and corporate potential client to serve them consumer loan services, to sanction different types of loan and advance of different limit to different customer and charges different
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
interest rate to different borrower as well as helping in transaction. That is what factors determines these decision. The specific objectives are: 1. To fulfill the partial requirement of BBA program. 2. To be acquainted with the background of the Finance Company, IDLC Finance Company Ltd. 3.To know more about Consumer Loan policy and the credit sanctioning policy . 4. To have an adequate knowledge about which factors mostly affects the loan sanctioning decisions, what amount of loan should be sanctioned to a particular
loan
applicant depending on his credit worthiness. The basic objective of this paper is to be acquainted with
how a non banking financial institution evaluate individual potential
borrower - based on which sanction different of credit limit to different customer and charges different interest rate to different borrower. That is what factors determine this decision.
1.2 Methodology In order to accomplish the study objectives a number of variables were identified for exploration. The study is primarily a descriptive and an empirical one. No major statistical analysis and advanced technique was used to reach the findings. Rather logical judgment was used to reach at the conclusions. Sample Information Samples are collected from the corporate client of IDLC finance Ltd of Consumer Division.Here, the samples had been picked up on a judgmental basis. For the organization part, much information had been collected from different published articles, journals, brochures and web sites. All the information incorporated in this report has been collected both from the primary sources and as well as from the secondary sources. 1.3Rationale of the Study
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Theoretical knowledge is not enough for a business student. Because there is a far gap between theoretical knowledge and practical field, our internship program has been launched mainly to bridge this gap. Bangladesh is one of the developing countries with a large unemployed population. As the opportunity to expand agricultural sector is limited, so we have to incline to expand industrial sector to overcome our existing problems like unemployment, low economic growth and low living standard. Here industrial sector is very weak. To consider the real situation government has established Bangladesh Shilpa Bank to stimulate industrialization. This bank provides term loan to different industries and entrepreneurs. The purpose of Bangladesh Shilpa Bank is not only to grant credit but also to develop the country through industrialization by selecting correct project and provides assistance in different ways to implement the selected project successfully
1.4 Scope and Limitation The scope of the report was to find the financial aspect of the operation of the bank. In addition, the report was done to find the effectiveness of the different Department’s services. Further more, the report also focused on the feasibility study and practical market issues about new ventures and operational procedures of Financial Institutions. An infrastructure of organization has been detailed, accompanied by company corporate perceptive and look into the future. The scope of this report is limited to the overall descriptions of the bank, its services, and its position in the industry, and its competitive advantage. The scope of the study is limited to organizational setup, functions, and performances. Limitation, which I have faced while doing my internship report are discussed below: * As, I had more dependence on the primary sources, so there might be some level of inaccuracy with those collected information. Though, adequate verification and cross- checking was used, to minimize the error level.
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
* Confidential information regarding past profit or product cost, financial information was not accurately obtained. Alike all other banking institutions, DBBL is also very conservative and strict in providing those information. In those cases, I have relied upon some assumptions, which in result have created certain level of inaccuracy. Still, I had tried my best in obtaining those sensitive information, as much as possible. * Next, many of the analysis on the obtained data are based upon my sole interpretation. This in result might bring some biases, as lack of knowledge and depth of understanding might hinder me to produce an absolute authentic and meaningful report
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Chapter Two
Industry Information
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Non-banking financial Sector of Bangladesh 2.1 Overview of non-banking financial institution: A non-bank financial institution (NBFI) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFIs facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier’s check issuers, check cashing locations, currency exchanges, and micro loan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide “multiple alternatives to transform an economy’s savings into capital investment act as backup facilities should the primary form of intermediation fail. The major business of most NBFIs in Bangladesh is leasing, though some are also diversifying into other lines of business like term lending, housing finance, merchant banking, equity financing, venture capital financing etc. Lease financing, term lending and housing finance constituted 94percent of the total financing activities of all NBFIs up to June 2006. A break-up of their financing activities reveals that the share of leasing and housing finance in the total investment portfolio of NBFIs has gradually decreased from 59 and 15 percent, respectively, in 2002 to 46 and 14 percent in June 2006. The share of term loans, on the other hand, has increased from 20 percent to 34 percent during the same period implying increased focus on the former. The evolvement of NBFI business. 2.2 Non-banking financial institutions in Bangladesh : Non-banking financial institutions
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
1. Uttara Finance and Investments Limited 2. United Leasing Company Limited (ULCL) 3. Union Capital Limited 4. The UAE-Bangladesh Investment Co. Ltd 5. Saudi-Bangladesh Industrial & Agricultural Investment Company Limited (SABINCO) 6. Reliance Finance Limited 7. Prime Finance & Investment Ltd 8. Premier Leasing & Finance Limited 9. Phoenix Finance and Investments Limited 10. People's Leasing and Financial Services Ltd 11. National Housing Finance and Investments Limited 12. National Finance Ltd 13. MIDAS Financing Ltd. (MFL) 14. LankaBangla Finance Ltd. 15. Islamic Finance and Investment Limited 16. International Leasing and Financial Services Limited 17. Infrastructure Development Company Limited (IDCOL)¿ 18. Industrial Promotion and Development Company of Bangladesh Limited(IPDC) 19. Industrial and Infrastructure Development Finance Company (IIDFC) Limited 20. IDLC Finance Limited 21. Hajj Finance Company Limited 22. GSP Finance Company (Bangladesh) Limited (GSPB) 23. First Lease Finance & Investment Ltd. 24. FAS Finance & Investment Limited 25. Fareast Finance & Investment Limited 26. Delta Brac Housing Finance Corporation Ltd. (DBH) 27. Bay Leasing & Investment Limited 28. Bangladesh Industrial Finance Company Limited (BIFC) 29. Bangladesh Finance & Investment Co. Ltd. 30. Agrani SME Finance Co. Ltd.
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Chapter 3 Organization Part
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
3.1 Overview IDLC Finance Limited was established in Bangladesh in 1985, as the first-ever leasing company of the country, through the collaboration of IFC, German Investment and Development Company (DEG), Kookmin Bank and Korean Development Finance Corporation, the Aga Khan Fund for Economic Development, the City Bank Limited, IPDC of Bangladesh Limited, and SadharanBima Corporation. As the company evolved over the years, the foreign shareholding gradually moved out and the last foreign shareholding was bought out by local sponsors in 2009. IDLC’s strong focus on revenue diversification has led to the establishment of different client segments in the Corporate, Retail, SME and Capital Markets of Bangladesh. The current product portfolio consists of Corporate and Structured Finance solutions for local and multinational corporate houses; Personal financing products such as deposits, home loans, car loans, personal loans etc.; financing facilities for Small and Medium Enterprises; Merchant Banking solutions such as Portfolio Management and Investment Banking (IPO, RPO, Bond Issuance, Rights Shares Offering etc.); and Brokerage services. With this diversified array of products, IDLC Finance Limited is at present the largest multi-product Non-Bank Financial Institution in Bangladesh, having two wholly-owned subsidiaries, IDLC Investments Limited and IDLC Securities Limited for carrying out its capital market operations. The Group is represented by over 609 employees working in 26 branches in the major cities of the country. IDLC is highly respected by its clients, peers, employees and regulators for its professional pool of resources, its progressive and enabling work environment, and its strong ethical practices. With significant growth in its business and profit over the last few years, the company has consistently demonstrated exemplary corporate governance and strict statutory compliance, and is a standard bearer in this regard in the financial sector of Bangladesh. Moreover, starting from 2010, its silver jubilee year, IDLC has decided to step up its
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
commitment to sustainable business practices, with particular focus on environmental and social development. It has subscribed to a number of leading local and international sustainability initiatives including the Bangladesh CSR Centre, the UN Global Compact (UNGC) and the UN Environment Program Finance Initiative (UNEP FI), and IDLC is the first company to become a member of UNEP FI from Bangladesh. As part of this commitment, IDLC is now active in promoting responsible practices among its stakeholder groups, mostly its employees and clients, while it is streamlining its own policies and practices to emerge as a truly responsible brand. Mission IDLC will focus on quality growth, superior customer experience and sustainable business practices
Vision IDLC will be the best financial brand in the country.
Strategic Objectives
Grow and develop our talent pool Fully leverage the new core banking platform Optimise distribution points Grow and diversify funding sources Grow sales and service capabilities in the Consumer Division Aggressively grow the SME portfolio Focus on top-tier clients in the Corporate segment Consolidate capital market operations and enhance capabilities Embrace internationally-accepted corporate governance and sustainable business practices
Core Values
Integrity Customer Focus Trust and Respect Equal Opportunity Eco-friendly Passion Simplicity
Code of Conduct and Ethics
In accordance with the approved and agreed Code of Conduct, IDLC employees shall:
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Act with integrity, competence, dignity and in an ethical manner when dealing with customers, prospects, colleagues, agencies and public Act and encourage others to behave in a professional and ethical manner that will reflect positively on IDLC employees, their profession and on IDLC at large Strive to maintain and improve the competence of all in the business Use reasonable care and exercise independent professional judgment Not restrain others from performing their professional obligations Maintain knowledge of and comply with all applicable laws, rules and regulations Disclose all conflicts of interest Deliver professional services in accordance with IDLC policies and relevant technical and professional standards Respect the confidentiality and privacy of customers, people and others with whom they do business Not engage in any professional conduct involving dishonesty, fraud, deceit or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness or professional competence
Organogram : Organization
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
3.2 Company Information Registered Name of the company IDLC Finance Limited IDLC stand for Industrial Development Leasing Company
Legal Form A public limited company incorporated in Bangladesh on May 23, 1985 under the Companies
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Act 1913 and listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited on March 20, 1993 and November 25, 1996, respectively. The company licensed as Financial Institution Act, 1993 on February 7, 1995. Company Registration No
C 14218/1992 of 1984-1985
Bangladesh Bank License No
BCD (Non-Banking)/Dhaka/2/1995
Tax Identification Number (TIN)
210-200-1222/LTU/Dhaka
VAT registration Number
9011043908
Registered Office and Mailing Address IDLC Finance Limited st
Bay’s Galleria (1 Floor) 57 Gulshan Avenue, Gulshan 1 Dhaka 1212, Bangladesh Tel: +880 2 883 4990 (Auto Hunting) Facsimile: +880 2 883 4377, 883 5887 Corporate Website: www.idlc.com Email address:
[email protected]
Auditor HodaVasi Chowdhury & Co. Chartered Accountants BTMC Bhaban (Level 8) 7-9 KaziNazrul Islam Avenue Karwan Bazar C/A, Dhaka 1217 Principal Bankers: Standard Chartered Bank, Citibank N. A. 3.3Products and Services of IDLC : To ensure steady and long term growth as well as to sharpen its competitive edge in a changing and challenging business environment, IDLC always endeavors to diversify into other financial
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
services which have long term prospects. In 1997, it expanded its range of services by introducing Housing Finance and Short Term Finance, which have broadened its customer base and have contributed significantly to IDLC’s growth and profitability. In early 1999, after getting license of Merchant Banking from Securities and Exchange Commission, IDLC started its operation of underwriting, issue management, corporate financing and other investment banking related services. The products and services are as follows,
1 Leasing: Assets are leased to clients on predetermined rental basis for a fixed term with a purchase option at the end.
2 Term Loan: The customers are offered loan facilities for a determined term at a negotiated rate.
3 Equity Financing: IDLC invests money into equity of both publicly traded and non-traded companies for dividends and capital gain.
4 Inter Corporate Deposit (ICD): This disbursement scheme is offered to clients under two variations: a) Non- Revolving ICD which consists of single disbursement of funds b) Revolving ICD where multiple disbursements and collections take place
5 Work Order/ Purchase Order Financing: The clients are financed against their work order or purchase order on a revolving basis.
6 Factoring: Under this scheme, IDLC finances receivables of supply of goods or delivery of services on credit to help the clients realize the maximum portion of their payment soon after they have made the delivery to the buyer. The payment is collected from the customers and the balanced
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
amount is re-reimbursed to the clients. 7 Syndication: IDLC helps to raise fund for clients with huge financial requirement through syndication and also help them with the documentation, execution and administration of the syndicated finance. 8 Securitization: IDLC sell financial instruments of organizations in local financial market backed by their asset/cash flows such as loan, lease etc. 9 Bridge Finance: This refers to short-term finance (maturity of not more than 12 months) in anticipation of immediate long term financing such as public issue, private placement, syndication, loan, lease, debenture, etc. 10 Cap Invests: IDLC maintains a non-discretionary portfolio account for clients where they have absolute power to make investment decisions. The portfolio manager provides margin loan to clients and also prepares the list of securities in which they can invest. 11 Deposit Schemes: IDLC offer different variety of deposit schemes for clients. o Cumulative Term Deposit o Annual Profit Term Deposit o Monthly Earner Deposit o 500 Days Term o Double Money Deposit o Triple Money Deposit
12 Car Loan: Term loan are offered to clients for acquiring car, brand new or reconditioned, for their personal use and the ownership is transferred on loan repayment.
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
13 Home Loan: IDLC offers loans to purchase apartment to individuals for their personal use.
14 Real Estate Finance: IDLC finances clients to construct house, renovate and extend house, for office chamber/space for professionals etc. under two different schemes: Developer’s Finance Scheme Corporate Finance Scheme
15 Private Placement: IDLC places the shares/debenture with both domestic and overseas investors (institutions or individuals) on private placement basis.
16 Underwriting: IDLC makes a univocal and irrevocable commitment with an issuing company to subscribe to the securities of that company when the existing shareholders or the general public do not subscribe to the securities offered to them. The different types of underwriting offered are: Initial Public offering (IPO) of common stock, preferred stock, debentures etc Right Issue Underwriting of public securities-loan, lease, debenture
17 Issue Management: Under this activity, IDLC plan, coordinate and control the entire issue activity of clients and direct other agencies for successful marketing of securities.
18 Financial Advisory Service: IDLC help the existing venture or a new venture by providing various advisory services such as
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
corporate counseling, project counseling, capital restructuring, financial engineering etc.
Product List NANE OF PRODUCT LINE
PRODUCT NAME Syndication Advisory Services
Structure Financing
Merger & Acquisition Securitization Local Enterprise Investment Center Real Estate Finance
Real Estate Financing
Home Loan
Short term Financing
Factoring of Account Receivable Work order Finance
Cumulative Term Deposit Annual Profit Earner Deposit
Deposit Schemes
Monthly Earner Deposit Double Money Deposit
3.4 Subsidiaries IDLC Securities Limited (IDLCSL) 18
Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
IDLC Securities Limited, a fully owned subsidiary of IDLC, offers full-fledged international standard brokerage service for retail and institutional clients. It has seats on both Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. It is also a Depository Participant (DP) of Central Depository Bangladesh Limited (CDBL).
IDLC Investments Limited (IDLCIL) As required by the Bangladesh Securities & Exchange Commission (BSEC), the Company formed a separate subsidiary on May 19, 2010 in the name and style “IDLC Investments Limited” to transfer its merchant banking activities. The Company obtained license from BSEC on August 02, 2011 and commenced its business on August 16, 2011. The main businesses of the company are portfolio management, issue management, underwriting of securities and advisory services. 3.5History (Key Milestone) Date
Description
23-May-85
Incorporation of the Company
22-Feb-86
Commencement of leasing business
1-Oct-90
Establishment of branch in Chittagong, the main port city
20-Mar-93
Listed with the Dhaka Stock Exchange Limited
7-Feb-95
Licensed as Non-Banking Financial Institution under the Financial Institutions Act, 1993
25-Nov-96
Listed with the Chittagong Stock Exchange Limited
15-Jan-99
Commencement of Corporate Finance and Merchant Banking operations
22-Nov-04
Launching of Investment Management Services "Cap Invest"
2-Jan-06
Opening of first SME focused branch at Bogra
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
6-Apr-06
Opening of Uttara Branch
1-Jul-06
Relocation of Company's Registered and Corporate Head Office at own premises at 57 Gulshan Avenue
18-Sep-06
Commencement of operation of IDLC Securities Limited, a wholly owned subsidiary of IDLC
5-Aug-07
Company name changed to ‘IDLC Finance Limited’ from ‘Industrial Development Leasing Company of Bangladesh Limited’
6-Jan-09
Opening of Sylhet Branch
26-Aug-09
Opening of Gazipur SME Booth
24-Feb-10
Inauguration of Savar Branch
8-Aug-10
IDLC opened its 2nd branch in Chittagong at Nandankanon
27-Oct-10
IDLC stepped in Comilla
27-Dec-10
Opening of Keraniganj Branch
15-Jun-11
IDLC started its operation at Mirpur
9-Aug-11
Inauguration of Tongi Branch
16-Aug-11
Commencement of operation of IDLC Investments Limited, a wholly owned subsidiary of IDLC
18-Jan-12
Opening of Jessore Branch
11-Mar-12
IDLC re-brands
8 Jun 2014
Opening of the Khulna Branch
28 Oct 2014
Opening of the Bhulta Branch
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
10 Nov 2014
Opening of the Natore Branch Enter Corporate Deposit Issue Management Underwriting Private Placement
Merchant Banking Services
Portfolio Management Trust ship Management Car Loan
Personal Loan
Personal Loan Small Business Medium Business Supplier Finance
SME Loan
Women Entrepreneur Loan Commercial Vehicle Loan
Capital Market
Portfolio Management Investment Banking Market Commentary Brokerage
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
3.6External Environment
Porter’s 5 forces Model A) Rivalry among the existing firms: Number of competitors: In banking and non-banking financial institution industry, the number of firms is high. So, the intra-industry rivalry is high. Fixed rate: In this industry, large percentage of cost is fixed. So, the intra-industry rivalry is high. (B) Threat of new entrants: Established companies: all the companies are already established and they are performing highly. So the threat of new entrants is low. Legal Barriers: The threat of new entrants is low because of high legal restrictions. Access to channels of distribution and relationships: Existing good relationships between companies and customers in banking and non-banking industry will make it difficult for new companies to enter in this industry. Overall consideration shows that the average threat of new entrant for IDLC Finance Banking industry is low. (C) Bargaining power of buyers: Buying volume: For Some buyers who can invest in large volume have the bargaining power very high. Product differentiation: Most of the products offered by different firms in the industry are virtually identical. So, here the bargaining power of buyer is high. Production costs: As the buyers are aware of cost, the bargaining power of buyers is high. D) Bargaining power of suppliers:
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Forward integrate: As the Suppliers can forward integrate, the bargaining power of suppliers is high. Percentage of suppliers’ business: As the big depositors are low in number, the bargaining power of suppliers is high. Product differentiation: Some of the products of suppliers are highly differentiated. So, in this case, the bargaining power of suppliers is high. By considering all the points, we found that the Bargaining power of IDLC Finance is high. E) Threat of substitutes: Substitute products/service could be offered by Co-operative Society In online, like facebook, ad-sense, ad-word, are providing account with very easy steps to use those in playing game, but now a days even you can with draw this money or you could buy products from online. But still the threat of substitute products is low. Because this business depends on believes and the faith of people. 3.7Internal Environment
Green Banking ‘Green banking’ has become one of the most discussed concepts globally. Originating in the west, it is now practiced across emerging and developing economies around the world as well. The concept endorses environment-friendly banking practices and deals with financial products, services and processes with the ultimate objective of reducing the carbon footprint and managing the environment in an intelligent and sustainable manner, while at the same time running the business profitably. Hence, green banking ensures the utilization of organizational resources in favor of the environment and the community at large and in the process, plays a critical role in finding solutions that aligns the interests of our stakeholders, especially our customers and shareholders, with the broader interests of the planet.
IDLC’s journey on the green path The Green Banking Policy Guidelines issued by the Bangladesh Bank has opened up a number of avenues for IDLC in its quest to become green. The policy requires much more than just
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
pursuing green projects, technologies and initiatives that manage environmental impacts better; in fact, the concept has come to mean a complete change in the organization’s DNA by embracing holistic policy formulation and governance
IDLC undertook a number of projects that would substantially increase our share of the green portfolio
In 2014, IDLC financed renewable energy projects to generate 300 KW of electricity from solar energy, thereby providing electricity to around 20,000 people living in off-grid areas of rural Bangladesh while creating livelihood opportunities for 200 families IDLC is also in the process of raising a fund of Taka 934.5 million for three energy-efficient environment-friendly brick kiln projects. These three projects are expected to produce 300,000 bricks per day with close to zero emission. IDLC adopted server virtualization, largely reducing power consumption and CO2 emissions every year. Communication and branch level connectivity through video conferencing and Microsoft Lync has largely reduced physical travel requirements by employees, thus saving significant travel time and fuel consumption
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Chapter 4 Financial Highlights
4.1Current Performance (Ratio analysis) Particulars
2013
2014
Return on Investment (ROI)
2.31
2.66
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Return on Assets (ROA)
2.18
1.92
Loans to deposit ratio (total loans/total deposits)
1.28
1.24
Cost of fund
12.37
10.56
Particulars
2010
2011
2012
2013
2014
Growth
Debt equity ratio (Times)
8.65
8.16
8.38
9.50
9.04
(4.89%)
Financial expenses coverage ratio
1.77
1.39
1.33
1.34
1.45
8.00%
Current ratio (Times)
1.39:1
1.31:1
1.21:1 1.14:1 1.13:1
(0.88%
Return on total assets (%)
3.43
2.93
1.81
1.92
2.18
0.26
Non-performing loan ratio (%)
2.84
2.32
2.09
1.63
2.02
0.39
Return on shareholders’ equity
35.99
27.51
16.76
19.24
22.37
3.13
4.01
4.00
2.93
4.03
5.74
42.23%
Financial Ratios
(Times
(%) Earnings per share*
4.2Financial Performance Taka in million Financial Performance
2010
2011
2012
2013
2014
Growth
Total assets
26,930
31,165
37,784
50,429
58,927
16.85%
Long term liabilities
21,745
25,299
32,492
43,951
51,371
16.88%
Term deposit balance
12,373
16,828
22,008
29,064
35,240
21.25%
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
4.3Operational Performance Taka in million Operational Performance
2010
2011
2012
2013
2014
Growth
Operational income
3,047
2,160
2,403
2,761
3,658
32.46%
966
913
1,058
1,243
1,464
17.71%
Financial expenses
1,822
2,364
3,103
4,138
4,543
9.80%
Profit before tax
1,956
1,217
1,252
1,325
2,187
65.00%
Net profit after tax
1,327
500
713
669
1,246
86.05%
Average effective tax rate
32.16
58.88
43.07
49.48
43.04
(6.44)
Operational expenses
4.4Market Shares Comparative Shareholding Structure of IDLC as on December 31, 2014 Types of Shareholders
2013 No. of shares held
2014
% of total
No. of shares
shares
held
% of total shares
Sponsor/Direct or
102,668,423
63.82
121,575,525
60.46
Institutions
23,390,029
14.54
32,265,079
16.04
Individuals
34,816,548
21.64
47,253,146
23.50
Total shares held
160,875,000
100.00
201,093,750
100.00
Top ten shareholders of IDLC as on December 31, 2014
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Types of Shareholders
2013
2014
No. of shares
% of total
No. of
% of total
held
shares
shares held
shares
45,634,598
28.37
50,283,246
25.00
Eskayef Bangladesh Ltd
12,870,000
8.00
16,087,500
8.00
Transcraft Limited
6,456,335
4.01
8,070,418
4.01
Bangladesh Lamps Ltd
2,123,550
1.32
2,654,437
1.32
Sadharan Bima Corporation
12,257,065
7.62
15,321,331
7.62
Mercantile Bank Limited
12,065,625
7.50
15,082,031
7.50
Reliance Insurance Co.
11,261,250
7.00
14,076,562
7.00
Bangladesh Fund
5,145,910
3.20
6,432,600
3.20
Marina Apparels Limited
1,608,750
1.00
2,010,937
1.00
Pubali Bank Limited
2,566,100
1.60
1,673,078
0.83
The City Bank Limited Transcom Group
Limited
IDLC’S share price as on December 31 Particulars
2011
2012
28
2013
2014
Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Highest (Taka)
140.10
93.90
64.5
75.7
Lowest (Taka)
137.30
91.40
62.5
73.7
Closing (Taka)
138.50
91.90
62.9
74.7
Shares traded
79,200
27,000
244,400
685,710
11.037
2.49
15.47
51.42
(No.) Market Turnover (Taka in million)
4.5Corporate Resources:
Structured Finance (STD) The Structured Finance Department (SFD) is a specialized business unit of IDLC under its Corporate Division. The unit was established with an aim to facilitate syndication arrangements, arranging onshore as well as offshore structured finance, agency and trusteeship services and pre-investment feasibility studies. The department commenced operations through loan syndication in 2000 to meet the increasing demands for the product for large industrial and infrastructure project financing. Over the years, the department has continued to arrange syndication deals in the form of term loans and working capital facilities.
Presently, SFD is involved in deals that require various modes of financing. Being one of the leading structured finance solution providers, the department arranges financing through a wide range of products that include term-loans (both local and foreign currency), working capital facilities, Investment Promotion and Financing Facilities (IPFF) and subordinated bonds for Tier-
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
II regulatory capital requirement of commercial banks, among Achievements in 2014 In 2014, the SFD demonstrated impressive business growth despite an adverse market scenario. While many other players in the industry were struggling to survive, we witnessed tremendous earnings growth. A significant part of our business accrued out of arranging Tier-II subordinated bonds for commercial banks. The department arranged 02 (Two) coupon bearing Tier-II subordinated bonds for two major banks in order to fulfill their regulatory capital requirement under the BASEL-II framework.
In addition to the regular business, the SFD established several innovative ideas. The department arranged a seminar on syndication titled ‘Syndication Financing in Bangladesh: Past, Present and Beyond.’ The goal of the seminar was to bring all the stakeholders under a single platform and discuss different issues with regards to syndication. The seminar received numerous accolades from various industry stakeholders and a review was published in the renowned national daily, ‘The Daily Star’.
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Chapter 5 Sectional PartConsumer Loan Services system
5.1C O N S U M E R D I V I S I O N
IDLC’s Consumer division was established in 1997 as part of the Company’s diversification towards the establishment of an alternative cost-effective source of funds for providing financial services to customers. At present, the Consumer division is the second largest business segment of IDLC in terms of
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
asset portfolio and the largest with regards to funds under management (advances and deposits). The significance of the division can be gauged from the fact that it works as a brand ambassador of the Company for the retail segment by reaching at the doorstep of the targeted market with its wide range of lending (home loans, car loans and personal loans) and deposit products (flexible term deposit packages and regular earner packages). As they grow bigger and better, they will effect changes to the organizational structure, creating a leaner and more flexible division. Overall, they plan to reach Taka 50 billion worth of portfolio by the end of 2017. Some of their other initiatives include the following: We intend to continue to expand our geographical coverage. They will implement a new and improved model for loan appraisals, thereby driving automation and infusing scalability into their operations.
5.2 Overview of Consumer Division Status within company:
Second (in terms of Portfolio)
Largest (in terms of Fund Under Management)
Products and Services: Home loan, Car Loan, Personal Loan, Loan Against Deposit and Term Deposit
Loan Portfolio, 2014: Taka 17,519 million (2013: Taka 12,950 million)
New Disbursements, 2014: Taka 8,587 million (2013: Taka 6,258 million) Disbursements CAGR over the past five years: 37%
Total number of relationships for Loan: 7,402
Deposit Portfolio, 2014: Taka 35,241 million (2013: Taka 29,164 million) New Deposit Sourcing, 2014: Taka 12,669 million (2013: Taka 10,598 million) Deposit Sourcing CAGR over the past five years: 22%
Total number of relationship for Deposit: 6,355
5.3 Consumer Loan:
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Loan PACKAGE: IDLC Finance Limited offers a total 4 types of consumer loan
LOAN PACKAGE CLASSIFICATION Home Loan 1.Biparty Agreement Loan (BAL) 2. Tripartite Agreement Loan (TLA) 3. Four-party Agreement Loan (FLA) RM BLA 90 days/180 days RM TLA 90 days/180 days
Car loan
----------------------
Personal Loan
------------------------
Loan Against Deposit
------------------------------------
Consumer Loan Disbursements Taka in million
Year 2010 2011 2012 2013 2014 2015
Taka 2439 2867 4201 6258 8587 9020
Total Number of Loan Customers 33
Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Year 2010 2011 2012 2013 2014 2015
Numbers 2556 3525 5168 6013 7402 9482
Number of Car Financed (CL) Year 2010 2011 2012 2013 2014 2015
Number 118 124 93 327 680 690
Home Loan IDLC becoming the leading Home Loan Provider in Bangladesh
Home Loans Available For Purchase of apartment/ house/ commercial space/ approved housing plots
Construction of residential/ commercial building
Renovation or extension of residential house
Home Equity loan against mortgage of property
Eligibility You are eligible if you are:
25 years and above but not more than 60 years of age
Earning regularly from a sustainable source of employment or business
Factors Affecting Your Loan Amount The home loan amount depends on your repayment capability. A number of factors are such as
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Number of Homes Financed Year 2010 2011 2012 2013
Number 1077 1024 1053 1519
2014 2015
2083 1995
Product-wise Asset (Taka in million)
Particulars
2010
2011
2012
Home loan
5,645
7,025
8,366 11,308
Car loan
343
388
Personal loan
213
213
414 190
2014
Growth over 2013
15,006
33%
787
1,813
130%
166
142
(14%)
2013
Monthly net disposable income, age, qualifications, value of the immovable property, number of family members and dependents, monthly expense, other fixed obligations, nature of job / business and savings habit are taken into considerations.
Residential Purpose: 70% of the purchase price including registration cost or 80% of the construction cost of residential house.
Commercial Purpose: 70% of the purchase price including registration cost.
Loan Term Residential Purpose
Category
Maximum Term
Maximum Age
Professional & Service Holders
20 years
60 years
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Businessmen
15 years
60 years
Non Resident Bangladeshi (NRBs)
10 years
60 years
Commercial Purpose: For any profession, maximum 7 years Repayment Mode The entire loan to be repaid by Equated Monthly Installments (EMI) Security Mortgage of the property itself or any other equivalent security acceptable to IDLC. Interest Rate & Fees IDLC offer their clients a competitive interest rate and low fees. They set individual rates on the basis of a customer’s financial status, amount borrowed and repayment terms. Property Insurance Mortgaged asset should have fire or earth quake insurance by any IDLC nominated insurance company.
Documentation Required to Apply a. Employed Recent passport size photo, copy of National ID Card and Bio data
Latest salary slip/salary certificate Bank statement for one year
Statements of assets with copies of evidence Evidence of other income (if any) CIB Application Form
Allotment agreement with developer/ owner Money receipts of amount already paid to developer/owner
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
b. Self Employed
Recent passport size photo, copy of National ID Card and Bio data Tax assessment paper for last 3 years (Tax return & Assessment order) Profit & Loss account and Balance sheet of business for last 3 years
Evidence of presents work in hand and value Bank statement for the last one year Statement of assets with copies of evidence
Evidence of other income (if any) CIB Application Form
Money receipts of amount already paid to developer/owner c. Non-resident Bangladeshi (NRB) One copy recent passport size photograph
Latest salary slip/salary certificate showing all deductions. Employment-contract
Residency permit or latest work permit (if applicable)
Copy of continuous discharge certificate (CDC) for merchant mariners Overseas and local bank account statements for last 12 months.
Bio data and family background.
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Company Profile/Brochure/ Web Mail Address Power of Attorney (POA) to a Bangladeshi resident as per IDLC’s format. POA will also provide Personal Guarantee to the loan (Attachment)
For the above document in a language other than English, please get it translated into English and attested by the Bangladesh Embassy.
IDLC Construction Loan IDLC offer loan for construction project, either new or existing, that requires financing, client can get it funded with IDLC Construction Loan Loan Term Maximum 20 years Eligibility Service Holder
Professional
Self-employed
Landlord
Business person
Security of the Loan Registered Mortgage of the property to be financed, or any other security acceptable to IDLC
3.4.11 Home Loan Shield Home Loan Shield is a specially designed Group Life Insurance Scheme, which protects Clients family in their unfortunate death. The shield takes over the outstanding principal amount of their home loan with IDLC thus protecting their beloved family from burden of repayment. Benefits Borrower’s family is secured from loan burden at the unfortunate death of main earner of the family Lowest possible single premium
Free of cost medical examination from recognized hospitals (cost will be borne by the
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
borrower only when application is turn down by the insurer) Proportion return of premium for early loan foreclosure
Financing of the premium is also available (IDLC will provide, if required)
Income Tax relief on premium payment
Eligibility Applicant’s Monthly gross income is within Tk. 50,000/
Applicant’s those who have no house/ apartment either in their name or their spouse/ children’s name in the areas specified above
Applicant’s those who have not yet availed home loan from any bank/ financial institutions
For salaried applicants, officially those who have no employee housing loan scheme or those have so but still not avail the facilities are eligible for this loan The property itself will be kept mortgaged as security
Features Maximum loan amount is Tk. 2,000,000/Maximum loan term is 20 years The insurance coverage ranges from Taka 200,000/- to Taka 10,000,000/-. Maximum size of apartment is 1250 sft. Moratorium period is 1 year Entire loan can be disbursed within one year from the date of first disbursement
Car Loan Eligibility A salaried executive or professional or a businessman Between 22 and 60 years of age
Minimum monthly income of Tk. 25,000/- (this will include income of spouse in case of joint application) A minimum of two (2) years of service A resident of Dhaka or Chittagong
Loan Amount IDLC provide both brand new and re-conditioned cars. Clients can avail car loan from Tk 200,000/- to Tk. 4,000,000/- or 70% of the value of their car (including registration cost).
Home loan variable Interest rate matrix (%) Effective from February, 2015
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Internship Report-“As a nonbanking finance company consumer loan services system of IDLC finance Ltd”
Segment
A
Loan Amount
Below 10 yrs.
10yrs
