Our target is to create one-crore depositor base: IFIC Bank MD

IFIC Bank plans on increasing its depositor base from the current 12 lakh to 1 crore by leveraging its extensive network of sub-branches across the country. To further enhance its outreach, the private lender intends to engage at least one member from each family in the country, thereby expanding its individual deposit base. Shah A Sarwar, managing director and chief executive officer of IFIC Bank, discusses the bank's strategy in an interview with The Business Standard's Special Correspondent Jebun Nesa Alo and Staff Correspondent Sakhawat Prince.

IFIC Bank has the largest network with 1,104 sub-branches across the country. What is the story behind the expansion?

Any country's financial institutions must be connected to the mainstream economy of that country to be viable, which is true for developed countries as well. You have to connect to the mainstream economy because the primary goal of the business model is long-term sustainable growth.

In our country, the mainstream economy is still based on the agriculture sector and agriculture-based industries. This sector has a lot of employers and a large population. By absorbing this, we are moving forward to expand our activities in this sector. The country has a relatively high number of people with limited financial resources. Our business model involves collecting small amounts of money from customers and redistributing it to people in need. To do this, we have to take services to the village level. And this is the main reason why we prioritize operating on a sub-branch basis.

However, challenges arise when trying to implement the model on the ground. Factors such as delivery costs, operational risks, and credit risk management must be carefully considered and addressed. To overcome these challenges, we have invested significantly in human resources and technology. We have improved productivity, control functions, and developed a low-cost delivery channel to serve our customers effectively. This service delivery model has been crafted in alignment with this business model.

How much will the sub-branches help in the rural economy?

Everyone wants to enter the rural economy due to its potential for growth and development. However, three significant challenges need to be addressed: the cost of delivery, operation management, and credit management. In the rural economy, a middleman culture has taken root. When a common man seeks a loan of Tk50,000, they are forced to go through middlemen, leading to additional costs and difficulties. This situation emphasizes the need to eliminate middlemen and establish a direct link with customers.

Suppose there are 7-8 bank branches in an upazila headquarters, then what will you do by opening a new bank branch there? Instead, you may plan to establish a controlling unit there and then choose six additional places where there are minimum economic activities. By expanding the bank's presence to such marginalized areas, a viable connection is established. And we are working in this way.

Which feature does IFIC present to the customers among so many banks in the country?

The number of special products that we have developed. Suppose I have created a product called "Amar Account." Generally, most people come to the bank with some common expectations, such as making deposits, taking out small loans, or sending money to family or relatives. We have created a product, "Amar Account", by combining all these services together.

Currently, "Amar Account" accounts for 30% of total deposits in IFIC Bank, making it a highly successful and impactful banking offering. Home loans were a significantly neglected segment in our country. There are approximately one crore homes, belonging to four crore families. If a Tk5 lakh investment is made in each of the one crore homes, the home market will amount to Tk5 lakh crore. However, presently, outstanding loans in this sector are no more than Tk50,000 crore. Our bank is deeply involved in addressing this gap.

We don't limit our loans to only buying flats in the cities. We also provide loans ranging from Tk5 lakh to Tk10 lakh to build semi-pucca houses in rural areas. Currently, 20% of my bank's total loans are invested in this sector, making IFIC the largest lender of home loans.

How can a customer obtain a loan from the "Amar Bari" product?

Interest rates on home loans were notably high in our banking sector. However, we managed to launch a home loan with a single-digit interest rate for the first time. Our processes are designed to be simple and automated, ensuring a smooth and quick experience for our customers. Within 48 hours, applicants receive a decision on their loan application, without any need for intermediaries. Transparency is a core aspect of our service, with no hidden charges involved. Making payments is hassle-free, adding to the convenience of the loan process. As a result of these efforts, our home loan product has become incredibly popular within just five years.

Now, let's discuss another product, "Subarna Gram". This product is a serious initiative aimed at developing the rural economy. Bangladesh has achieved self-sufficiency in food production, with a significant contribution from cash crops, fish, and cattle rearing. We prioritize this sector by directly reaching out to users, which has led to tremendous success. The central bank sets targets for agriculture and CMSME loans, and our bank consistently fulfills each target due to our strong presence in these areas. Garments and industrialization are also given great importance, with a focus on maintaining formal discipline and efficient operations in these sectors.

Do you have any target with regard to agriculture or SME growth?

Our minimum target is to fulfill the target given to us by the Central Bank. We are doing corporate business, but our focus is to diversify the exposure. As I told you, our 30% deposits come from just one product, and this is what we want. Currently, 67% of our total book is now individual deposits, and we want to take this ratio to 75%. Ten years ago, it was 45%.

You want to raise personal deposits to 75% of your total book. Does this cost less?

The involvement of people is more important than the cost. The cost may be high, but we are giving importance to sustainability. I am focusing more on the one that gives more stability. My pain may be a little too much, but it does not matter. No officer of IFIC Bank goes to ask for a deposit from anyone. We want to promote our brand through above-the-line marketing. Customers come to my bank because of my services.

When I joined this bank, our deposit was Tk8,000-9,000 crore, which now stands at Tk41,500 crore. We have a target that one crore families out of four crore families in Bangladesh will be our customers. That is, one out of every four people will be a customer of this bank. Currently, our number of clients is 10 lakh. But, we will reach our target soon. The sub-branches that we have opened have not yet started full-fledged operations. Do you know why? Most of them got approved during the Covid period.

How is IFIC's investment in technology?

To run any bank, you have to invest in robust technology. This is because you handle people's data here. So, we started focusing on this aspect from day one. In 2005, we contacted one of the world's most famous software suppliers. And, went for its upgradation in 2015. We have contacted a new company. There are two aspects of digital activities. One is that you have to make the base very strong. Otherwise, it can leak anytime. Secondly, customer connectivity should be increased. We are making investments at a serious level in both places. We have invested a minimum of five hundred crore rupees in the last ten years.

What is IFIC's target regarding profit?

We have managed to create a sustainable deposit base and have a sizable deposit. We are also trying to diversify our products and take them to an individual level. The third point is that we are seriously identifying the legacy accounts that our bank has. We are focusing on slowly getting them out by cleaning and provisioning them, and increasing our profitability by making our recoveries stronger.