NEWS AND INSIGHTS

Rizwan Dawood Shams, managing director of IPDC Finance PLC, discusses how the organisation went from being a corporate focused lender to prioritising small businesses and how it goes beyond just lending to support SMEs
 

IPDC started its journey in 1981 as a lender exclusively for private sector financing, with a primary focus on corporate businesses. Since when did you start shifting focus to small enterprises and why?

IPDC's journey began in 1981 with a focus on large infrastructure projects. However, our vision for supporting SMEs has always been present, taking root with the establishment of a dedicated SME department in 2008.

Since 2016, this commitment towards SMEs has become increasingly central to our mission. We recognised the vital role of SMEs, particularly in empowering youth, women, and underserved regions. As a result, we have actively improved financial access for these groups. Today, nearly 40% of our SME portfolio consists of small businesses, demonstrating our alignment with this vision.

Furthermore, our launch of the 'IPDC-DANA' significantly expanded our focus on micro merchants. We have unlocked the potential of countless underbanked and unbanked micro merchants across Bangladesh, even in remote areas. 

This commitment deepened in 2023 with the digitalisation of IPDC DANA. This FinTech solution provides a faster loan application system specifically catering to these smaller businesses through a sustainable business model.

One of your promotional campaigns says, "Mul dhon niye, no tension, Achhe IPDC SME loan." How are you keeping SMEs "tension-free" in accessing loans?

We know securing collateral and working capital can be a huge stress for SMEs, especially for those just starting out or with limited infrastructure. That is why we have taken a multi-pronged approach, offering a variety of loan options, including working capital financing and collateral-free loans.

We provide a diverse range of loan products, acting as a financial toolbox for entrepreneurs. We offer term loans for business expansion needs, flexible working capital financing for regular operations, and even specialised solutions like lease financing for heavy machinery and factoring for managing receivables.

Furthermore, we cater to specific industries through supply chain financing. We have supply chain financing facilities for suppliers to major conglomerates. IPDC has specialised credit facilities like factoring and Import Duty Financing for SMEs. Our cluster financing is also a remarkable initiative fostering rural economic growth for marginalised SMEs.

But it is not just about products. Our innovative cashflow assessment goes beyond traditional methods to understand a business's true potential, not just rely on collateral.

We have also streamlined processes and offer standardised products. This means less paperwork and faster approvals, allowing entrepreneurs to focus on growth, not navigating complexities. We are constantly innovating too, looking at ways to make the process even smoother and explore new financing solutions, like dedicated options for vehicles — a key need for many businesses.

SMEs are still largely unbanked and low-interest stimulus loans remain elusive for them due to complicated procedures. How friendly is IPDC with SMEs? Is the share of SME financing growing in your loan portfolio?

We are dedicated to empowering underserved communities, particularly women and youth, through the SME department, which actively works to improve the lives of marginalised groups and entities in remote areas. 

Despite SMEs being largely unbanked and struggling with access to low-interest stimulus loans due to complicated procedures, IPDC has tailored its services to meet their needs, providing not only financial assistance but also market opportunities and essential knowledge on financial literacy and business documentation. Through tailored courses, training programs, and capacity development sessions, IPDC equips entrepreneurs with the skills needed to navigate market complexities and establish a robust industry presence. 

Reflecting our commitment, the share of SME finance in our loan portfolio is steadily growing, solidifying IPDC's position as a premier financier dedicated to fostering sustainable growth and development among SMEs. The SME client base has nearly tripled since 2020, with the loan portfolio growing at 37%. 

Furthermore, IPDC DANA simplifies access to financing for even micro-retailers through a streamlined documentation process. By championing financial inclusion for SMEs, IPDC aspires to be a true partner in their success, driving Bangladesh's economic development.

Would you tell us about your SME loan scheme Joyee? How has the response been so far? 

Financial inclusion for women entrepreneurs is a core focus at IPDC. Our IPDC Joyee Product offers competitive interest rates year-round, specifically tailored to their needs. But Joyee goes beyond just financing. IPDC Joyee 360 empowers entrepreneurs further by providing a holistic support system. This includes access to crucial resources like market expansion opportunities, capacity development through training workshops, and essential business support services.

The response to Joyee has been nothing short of phenomenal. In 2023, our Joyee portfolio has grown to Tk331.9 crore, with the number of female entrepreneurs nearly doubling! Over the past year, about 200 female participants have benefitted from Joyee's financial literacy training programs, equipping them with the knowledge to navigate financial obstacles.

By providing collateral-free loans, comprehensive support services, and financial education, IPDC Joyee empowers entrepreneurs not only to secure funding but also to thrive in the business world. 

SMEs often lack access to the market. They cannot afford technologies and training. Being a pioneer in many milestones in the private sector, how are you linking SMEs with large industries for rapid industrialisation? Such linkage is often cited as instrumental for massive industrialisation in Japan, Germany and South Korea.  

We know SMEs face hardship because of limited market access and a lack of skill development opportunities. That is why we launched Joyee 360, which goes beyond just providing collateral-free loans, addressing the financial constraints entrepreneurs face. 

It also tackles market access by financing entrepreneur fairs and events, connecting them with potential buyers and fostering network growth. Furthermore, Joyee recognizes the importance of capacity development. We partner with training institutions to offer discounted workshops on digital marketing and e-commerce, equipping entrepreneurs with the tools they need to thrive in today's digital world.

Finally, Joyee provides invaluable business support. Our team offers advisory services on everything from business startups and licensing to legal documents. With Joyee, all entrepreneurs have a comprehensive support system behind them. Additionally, Joyee offers specialised services for women entrepreneurs, enabling them to network and conduct business meetings at our dedicated Mirpur sub-branch.

Do you have plans to expand branch coverage or other mechanisms to widen your reach for rural SMEs?

At IPDC, we actively focus on reaching marginalised SMEs. Our broad branch network covers all districts, and recent launches of Barishal branch and Mirpur Joyee 360-sub-branch exemplify our commitment to physical presence. However, physical reach alone isn't enough. Conventional outreach methods can be costly, necessitating a multi-faceted approach.

For this reason, embracing technology and digitalization is key. We already have internal digital integration with end-to-end file processing systems. This will be transformed into a universal digital platform, accommodating both customer requests and smoother internal processes. One key factor is that we utilise in-house tech teams. This approach fosters greater control and potentially faster implementation.

We have also worked on fintech solutions like 'IPDC DANA' to reach geographically dispersed small entrepreneurs.

Another effective catalyst in expansion is collaboration with aggregators, associations, and commercial bodies.  As per Bangladesh Bank guideline, we are working with clusters to bring SMEs under financial inclusion. 

This combined approach ensures we are there for our SME entrepreneurs. It empowers them to grow their businesses and contribute to a more inclusive financial landscape