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International Finance Investment and Commerce Bank Ltd (IFIC Bank) looks at inclusive expansion of its banking network to connect the rural unbanked people, strengthening its ‘remittance distribution channel’ and making it sustainable in the long run.
“The urban sector is already over saturated regarding expansion. Now, our strategy is quality and inclusive expansion in the rural areas connecting more and more unbanked people,” Shah A Sarwar, managing director and chief executive officer of the bank told recently in an interview.
Connecting unbanked people is important also because successful remittance business mainly depends on strength of its downstream distribution network, he said.
Mr Sarwar, however, sees materialisation of such expansion of banking service as a challenging task because one has to think over ensuring violable cost of delivery and managing operating risk.
“If we expand business in the conventional bricks and mortar basis, it will not be sustainable model; and when you collect deposit and provide services to the customers among the mass people, managing operating risk is very crucial,” he said.
To successfully meet the challenge, the 30-year experienced banker laid stress on taking help of technology and other innovative methodology.
In this connection, Mr Sarwar mentioned the mobile financial services that the IFIC Bank is set to formally launch next month in the country.
Mr Sarwar also cited different other banking services such as the agriculture and SME loans and microfinance that are useful to connect the unbanked people.
About bringing the remittance, he said, “Major challenge of the successful remittance business is not the upstream collection; rather its downstream distribution is a major issue. If you have a robust downstream distribution of remittance, you can really look for upstream mobilisation.”
Established in 1976, the bank now has 110 branches across the country. The IFIC Bank MD expressed the need for having at least 400 branches that need to be at low cost formula among the mass people. “We are now trying to address it in this way,” he continued.
The bank was set up as a joint venture between the government and sponsors in the private sector to facilitate the international business.
In 1983, when the government allowed banks in the private sector, IFIC Bank was converted into a full-fledged commercial bank. The government now holds 32.75 per cent of its share capital. Directors and sponsors own 8.62 per cent while the rest is held by the general public.
The IFIC Bank is now thinking to convert its conventional banking into Shariah-based one considering its demand in the country and methodological capability to provide services to all the clients, interested in both Shariah-based and conventional banking services.
As a major share holder at the bank, the government already gave ‘no objection’ in this connection. The bank is now applying for permission from other relevant regulators.
“We think that if the IFIC Bank as a first generation bank went into the Shariah-based banking, it would be able to serve the larger community of the people because there is no hindrance for the conventional banking customers to do banking at the Shariah-based one. So, we can serve both,” he said.
“Actually, Shariah-based banking is a kind of methodology of banking; it does not inhibit the conventional banking methodology; if you are habituated in conventional banking, there is no handicap for you to do Shariah-based banking,” he continued.
“But the customers, who want Shariah-based banking, are not interested in the conventional banking. That’s why we are thinking to convert our conventional banking into the Shariah-based one,” Mr Sarwar, who joined the bank as its managing director on December 2, 2012, added.
Mentioning prospects of Shariah-based banking in the country, Mr Sarwar also cited its challenge saying that “It’s a big challenge to do methodological refinement of the system in implementing it in the mass level. Otherwise, you are neither here nor there.”
In a query on what factors led the bank in gaining some recent vivid achievements in profit, return on assets (ROA), earnings per share (EPS) and ROE, he said, “There is no alternative of compliance and governance in a bank. Efficiency, compliance and good governance led the indicators improved, and we are practicing these.”
The IFIC Bank is also aiming to increase its sponsor shares at the Nepal Bangladesh Bank in Nepal from 40 per cent to over 50 per cent. Earlier, IFIC had controlling shares at that bank, he said.
Regarding recent political unrest, he gave a cautious signal to the banking sector. “There will be serious impact of the ongoing political turmoil in the first quarter next year.”
Mr Sarwar started his career as management trainee at ANZ Grindlays Bank in 1982. Over the last 30 years, his career evolved as a well rounded banker with adequate exposure in general management, client coverage, risk management, operations and it management.