Mr. Mominul Islam is the Managing Director & CEO of IPDC. Prior to that, he was the Deputy Managing Director of the Company from July 2008 to December 2011. He had joined IPDC in 2006 as Head of Operations. During his tenure at IPDC, he has played pivotal role in reshaping the organization through strategic planning, organizational restructuring and automation, process re-engineering, control and compliance, and service quality, and so on. Prior to joining IPDC, Mr. Islam has worked in American Express Bank (AEB) and Standard Chartered Bank (SCB) for more than 7(seven) years with an enriching career in different areas of the Banks, such as General Banking, Re-engineering, Service Quality, Risk Management, Project Management, Business Contingency Planning, etc. During his tenure at AEB he went through the Six Sigma Black Belt training at Brighton, UK, and
managed several Six Sigma projects for AEB Bangladesh, Singapore, UK, Hong Kong, India, and USA.
In the last two years, Industrial Promotion and Development Company (IPDC)-a non-banking financial institution (NBFI)- of Bangladesh has literally been going through a ‘Purple Patch.’
Their re-branded logo is more of ‘Pink’ color than ‘Purple’ though. Mominul Islam, the Managing Director (MD) and Chief Executive Officer (CEO) of IPDC meanwhile termed the color ‘Magenta’. ‘
Purple’, ‘Magenta’ or ‘Pink’-the color barely matters. Under the dynamic leadership of Mominul Islam-the youngest CEO of any major financial institutions of the country, IPDC has been able to create a ubiquitous presence that it lacked for a long time despite being the oldest private financial body in the country.
Fintech recently interviewed this brilliant young CEO and talked about IPDC’s revival as well as about the way of bringing dynamism in the country’s business sector.
FINTECH: Can you tell us about your journey in becoming one of the youngest CEOs in the financial sector of the country?
MI: After completing my BBA from Institute of Business Administration (IBA) in Dhaka University (DU), I joined the American Express Bank back in 1999 in its Chittagong branch. I worked in the branch banking for nine months. Within one year, I was adopted for a very challenging job of the head of projects and re-engineering. After successfully doing that job for some time, I was sent to London for Six Sigma Black Belt Training. It’s the advanced projects management training. I completed that training in 2001. After that I returned to Bangladesh and I was picked up for global transformation project management in Singapore, Hong King, UK and Chennai and for US.
I used the knowledge that I received in the Six Sigma training for process improvement and business transformation. So when I was working for advanced deposit structure products in Singapore, Hong-Kong and UK after completion for the project, I was nominated for the premier performer award. I believe that Six Sigma Black Belt training aids me a lot to be in the position where I am now.
In 2005, the American Express Bank planned to close down its operation and Standard Chartered Bank purchased its operation in Bangladesh. I was offered to stay with the American Express to work with the global transformation team but I opted for moving to Standard Chartered Bank rather than working with the global transformation team there.
I was also offered a post in Dubai but I declined as I didn’t want to travel that much at that time. I used to travel a lot during my career in American Express and I was tired of it. Besides, because of some family issue, I really didn’t want to move out from the country then.
After a short stint at Standard Chartered, in 2006, I got an offer from the IPDC. It was not an easy decision to take back then as from one of the best multinational banks in the world, I was offered to move to a small NBFI. But I love challenge and I saw potential of IPDC. Besides, my former boss at American Express Bank- Mr Shah Alam Sarwar (now the Managing Director of IFIC Bank) was heading IPDC at that time. So I decided to join there.
FINTECH: What was the situation in the IPDC back then?
MI: To be very frank, the situation of IPDC was bad then. IPDC was established back in 1981 and it was one of the oldest private financial institutions of the country. But when I joined there in 2006, it actually was in a pretty bad shape. It was in a vulnerable position as there was a huge pile of non-performing loans (NPL) which dragged the organization on the verge of collapse. The amount of non-performing loan was almost 43%. The organization was heavily depending on bank borrowing and long-term lending in the market. There was a huge liquidity crunch in the market at that moment and fund management on daily basis itself became a headache. Besides, there was no proper system in the company at that time. So basically it was an investment bank without proper governance, risk management framework and technological backbone.
So my first job as the head of operations was to have a proper organogram and organizational structure in place. I tried to have an understanding of the process and I tried to automate the system. It took around a year for me to re-structure the whole organization. I spent countless sleepless nights. I was working for straight seven days and there was no weekend for me.
In the meantime, several new people came into the organization but most of them didn’t stay there for long. In early 2008, when I was just 31 years, I was made the acting CEO of the company after our CEO left the organization. At that age, it was the biggest challenge that I ever took in my life. The pressure was immense.
I was having over 100 hours of work per week in the office. I was however taking that as challenge. I tried to have more fresh blood in the organization because I believed that fresh recruits out of university are driven by passion. They also have a dedication to prove themselves. I was in charge as the acting CEO for six months. Then another new CEO joined in. Within three months he also moved out. The board then thought of making me the CEO. The organization was very thin on senior management at that time. So my appointment as CEO was approved by the board and it was sent to Bangladesh Bank for its approval. Bangladesh Bank however said that I didn’t have the required experience to become a CEO. For becoming a CEO, I needed to have at least 12 years of experience which I didn’t have at that time. I only had 10 years.
The board understood the regulatory constraints. So they appointed a new CEO-Humaira Azam (now the DMD of Bank Asia). She was there for three years. By the end of 2011, she joined a commercial bank. By that time, I had gained my twelve year experiences. By the age of 35 years, I became the CEO of the IPDC in January 04, 2012. Now this is my sixth my years as the CEO.
FINTECH: IPDC is one of the oldest private sector financial institutions of the country. Why do you think it had gone into such a bad shape when you joined there?
MI: IPDC is first private sector financial institution in the country among banks and NBFIs. This company has a very strong heritage. The institutions which worked behind the formation of IPDC were World Bank Groups, IFC, German Development Organization, Commonwealth Development Organization, the Aga Khan Fund for Economic Development (AKFED) and also the government of Bangladesh. At that time all the banks of Bangladesh were nationalized and there were only few foreign banks and nothing else. The only financial institution that was catering to the financial need of the local organization was Bangladesh Shilpa Hrin Sangstha. But there were lots of bureaucratic issues. For project appraisal, they used to take two years.
So there was a great need for a local private sector financial institution. Thus the journey of IPDC had begun in 1981 to cater the need of local emerging businesses. IPDC is behind the success of a number of large conglomerates and different ventures in Bangladesh at their incubation stage. We were behind Transcom, Pran, Square groups. The first private sector five star hotel –Westin-wasfinanced by the IPDC. Apollo hospital was financed by IPDC. Citycell, the first private sector telecom company, GMG, the first private sector airlines, Fantasy Kingdom, the first theme park. Holcim-the first preference share investment, Summit-the first independent power producer, DBH-the first housing finance company, Ekushe TV- the first private sector TV channel and Scholastica-the first institutional investment in private sector education- all were financed by IPDC.
IPDC was always at the forefront of new ventures and innovation. It also help created new products. It aided to establish first institutional venture capital in Bangladesh. We are the sponsor shareholder of three NBFIs-IDLC. IDLC was formed within IPDC with the help of IFC. IPDC and IFC was the sponsor shareholder. Then we introduce leasing in Bangladesh. We were the sponsor shareholder of the NBFI-National Housing which wanted to introduce housing finance in Bangladesh. We introduce the first preference share in Bangladesh through Holcim.
So there is no doubt that IPDC has established a strong legacy throughout the years. The problem is, while the innovation was there, there were lack of corporate governance and technological adaptability. These are very important for financial institutions. IPDC lacked those. Because of that, IPDC was falling behind of others.
You have to realize that in financial institutions, we are ultimately dealing with risk and our products are also risk. So without corporate governance and technological adaptation, you cannot manage risk properly. Besides, the business scenario can change with technological innovations. The taxicab sector was a very promising sector in Bangladesh and IPDC invested heavily there. Unfortunately, the taxicab sector never picked up. There were other bad investments as well. For a financial institution, it’s normal to have bad investment, but it’s important to learn from the failure and to re-design the investment portfolio with the learning from the failure. I believed, for a certain period in the IPDC, there was a lacking in doing so and because of that, the organization was on the verge of collapse.
FINTECH: What was the motivation behind IPDC’s re-branding? Why the tagline ‘Jaago Ucchashe’ has been used in the branding?
MI: In 2004, there is a change in the shareholding position. IFC sold their share to AKFED and AKFED becomes the majority shareholder in the company. The government has also retained its position and then we went for public listing in 2006 but still AKFED holds the controlling share in the company. Because of some past experience, they were very edgy about taking new shareholders in the company. Due to their conservative attitude, our competitors went ahead of us and become bigger. IDLC-of which we were the sponsor shareholder, became the market leader in the NBFI sector of the country. They expanded in many horizons. But IPDC remains stagnated.
So at that time, we were thinking deeply that what can be done to bring this company back to its iconic status. At that moment Brac came in and showed its interest. It was very beneficial for IPDC because AKFED didn’t have that much expertise or experiences Bangladesh, which Brac has. AKFED sold a part of its share to Brac and now it becomes the largest shareholder now. Brac now owns 25% of the share, Ayesha Abed Foundation owns 10%, AKFED owns 11%, the government owns 22%, RSA Capital run by Mahmood Sattar and Sameer Ahmed owns 5%, the institution owns 11.29%, foreign shareholders own 2.93% and the general public own 12.84%.
After Brac bought shares and joined IPDC, things got boosted. We were thinking of a massive and complete facelift of the company’s image. We sit, discussed and analyzed thoroughly about the need of the local market to identify our scopes and challenges. I personally believe in the mantra that where there are challenges, there are opportunities. The incorporation of Brac made us to look the potential market with scope for conducting socio-economic business.
But first, we felt that we would need to build a solid brand. Because when we enter into a large scale network of retial or SME sector, people have to be familiar with our brand to trust us with their money. So we re-launched the brand.
Bangladesh has come a long way since its independence. It now has become a land of opportunity and prosperity. So when we thought of re-launching our brand, we wanted to do that in such a manner that it would reflect this transformation of Bangladesh. So,we came up with the re-branding tagline-‘Jaago Ucchashe’.
It reflects that we want to harness the huge potential of the young entrepreneurs and we are asking them to come forward.
FINTECH: What are the main business focuses of the re-launched IPDC? Which sectors it is working on primarily?
MI: The true business is something by which you solve a problem in the society that no one else wants to solve. At the same time, you have to make sure that the solutions that you provide come in economically viable way.
So, when we re-launched our brand, we had set up goals for the next five years. In our goals, we wanted to build our capacity and expand the distributor network. We wanted to expand our territory to places where other financial organizations hesitate to go because we want to bring more inclusivity.
We found that there was a huge gap in the demand and supply in the housing market. In Bangladesh, the mortgage to GDP ratio-which is the leading indicator to understand the housing market scenario of a country, is only around 3%. To give a give context about how low that number is- I am giving you another number that in the developed countries, this ration is usually 80%. Malaysia has 45%, Thailand has 26%. Even our neighboring India has 10%. So there is a huge gap in this sector in Bangladesh.
The development in the real estate sector is only concentrated in Dhaka and Chittagong. Because of this, the property prices in these two cities have gone so high that a typical middle income family cannot afford an apartment, let alone a land here. So what happens, most of the middle income people buy a property at the end of their career with money from pension and provident fund and they can barely enjoy the home ownership at that age. Secondly, this also prompts corruption as a huge amount of undisclosed money is being spent in the real estate sector. This flow of black money into the real estate sector again increases the property price.
The practice in the real estate sector is also very unhealthy. The prevailing practice here is that people build the building in which they are going to live in a very inefficient manner. This is because of the cash constraint they have in constructing the building in one phase. Because of the time value of money, this type of constructions is actually proven to be a loss. Home is a very basic need. In Bangladesh, we have been able to uplift ourselves in such a position where we can say that our basic needs including food, clothing and education are met. But we still have a lot to do in the housing sector as well as in the healthcare sector.
You also have to understand that housing has a tremendous positive impact on GDP because housing has the highest multiplier GDP impact. There are around 234 industries that have direct linkages with the housing sector. So an investment of Tk 1 in the real estate sector basically has a multiplying effect of Tk 234 in the GDP. So IPDC wanted to work on this sector which is still not being addressed properly. It wanted to come out with idea to cater the need of people outside of the highly concentrated market in Dhaka and Chittagong.
So we have started providing affordable house loans. Our Home loan can be availed for up to 25 years and any amount supported by income. Generally, IPDC offers home loan 85% of the property value. The actual term and amount depends on the property value and customer profile. These Home Loans come with a very attractive built-in insurance policy to safeguard your most precious asset(s). We ensure the most robust coverage which protects your property from risks, such as death, critical illness, permanent disability, or perils (fire, cyclone, earthquake, etc.); relieving you and your family from the burden of the loan in the event of any such unforeseen circumstances, ensuring your dream home to be there for your family, forever.
We have also found ways to provide home loan in innovative manner. As expanding branch network is very expensive, for distributing home loan, we thought of finding new ways to reach to the customers. We have made contracts with BSRM and M.I Cement. There is no real estate company at the rural parts of Bangladesh and people build the houses by themselves by hiring engineers and architects. So they have direct exposures to the cement and steal dealers. When they go to the dealers of BSRM or M.I Cement, their agents informed the customers about the IPDC home loan. So basically we have expanded our network through collaboration with companies with mutual interest.
Besides, home loan we wanted to work for women empowerment. We saw that only 14% women is currently being employed in the formal sector. We also found that only 3.14% SME loans were given to women. So there was a huge gap there as well. So we wanted to reach out to give more loans with affordable interest to women. We believed that if women are empowered and they are given the chance to become a breadwinner, then it will do well for the family as well as for the society.
We also wanted to harness the huge potential of our youth and for that we have launched our youth entrepreneurship program. Every year, around 2.2 million young people enter into the labor force. However Bangladesh can only cater around 7,000,00-8,000,00 in the job market. So we wanted to build new entrepreneurs so that they wouldn’t only look for jobs rather start a business of their own.
IPDC has been using Brac’s large network. Brac is actively aiding to us to run our entrepreneur development program. Under the program 10 outlets are open in four cities where young entrepreneurs come to get training about new entrepreneurships. After they complete their training, they are offered financing from IPDC to start their businesses. We are also reaching out to different universities to motivate the young business graduates for entrepreneurship.
FINTECH: Who are in the boards of IPDC? Are they giving you enough freedom to run the organization? Also how your manpower is shaping up to take the challenge of a re-branded organization?
MI: We wanted to leapfrog, so we brought in people with dynamic experiences and leadership quality in our board. Dr Muhammad Musa is the current Chairman of the board now. He has an extensive background in leading humanitarian, social development, and public health organizations at international, cross-cultural settings. Dr Musa has worked for 32 years with CARE International as one of its senior international management professionals. He has long experience in strategic leadership, governing board management and executive-level management of large-scale operations.
Then we brought Mr Sameer Ahmad as a nominated director, who is a versatile investment banker with 20 years of experience encompassing the geographic areas of Europe, Middle East, Emerging Africa, and South East Asia. Mr. Ahmad has established himself as one of the leading investment bankers in Bangladesh. His presence at the board gives us the idea of venturing into new investment avenues. We also have Ms Nasreen Sattar as Independent Director, who is the first Bangladeshi women to become a CEO of a foreign bank on foreign soil. Her last assignment was as CEO for Standard Chartered Bank, Afghanistan where she successfully led the Bank over challenging and difficult times.
We have Amin H Manekia as the Vice Chairman. Mr. Manekia has a vast and diversified expertise in the field of marketing, finance, healthcare and banking. He has pioneered the concept of automatic beverage dispensing machines in India. We also have leading banking and finance industry figures like Mr Mamdudur Rashid, Additional Managing Director of Brac Bank and Salahdin Arshad Imam, a renowned independent financial consultant. Mr Asif Saleh, a senior director from Brac and Mr Shameran Abed from Ayesha Abed Foundation are in the board as nominated director.
From the government, we have Mr Sadaruddin Ahmed, an Additional Secretary with the Finance Division of the Ministry of Finance and Md Enamul Haque, an Additional Secretary with the Ministry of Industries.
So our board is comprised of these unique and talented individual helped IPDC to shape up in modern manner.
We have also tried to bring in best business graduates of the country as well the seasoned professionals working in the best institutions in the market. We have brought people from Nestle, Grameenphone, Samsung Electronics who have better understanding of the consumer behavior and also about the actual ability of the important market players. We also brought in people from multinational bank in the credit section of our institutions to conduct risk management in proper manner. For managing home loans, we brought people from DBH. So from just 100 people at the end of 2015, the organization now has over 300 people.
FINTECH: With adaptation of new technologies, many companies are actually letting a part of their workforce go. Under the circumstances, you have been hiring more manpower to run your company. Does that mean, IPDC is not adopting or embracing new technology?
MI: No, Not at all. You have to understand that, we were on the process of bringing a patient from the ICU to a general ward. IPDC was struggling for long to make an impact in the financial arena of Bangladesh. So we first wanted to give it a strong footing.
When I took the charge of the company in 2012, we had a loan portfolio of Tk 312 crore. Now we have over Tk 1,900 crore. Obviously, it’s not an exponential growth but it’s a steady and healthy growth. We also have a deposit portfolio of Tk 1,700 crore which was Tk 370 crore when I took charge.
From five small branches, we now have 14 branches.
By 2020, we want to have to have Tk 11,000 crore in our balance sheet. So that is the basically the amount that a mid-size bank has. For a commercial bank to bring that kind of radical transformation is very difficult. They are crippled by the legacy issues. It is very difficult for them to bring massive changes.
IPDC is a very compliant organization but at the same time, we are very agile. If you lo at our people, you will see that they are very young. Most of them are in their late twenties or thirty’s. This young workforce is by default tech-savvy. They want to do everything on-line and they want to do it with latest gadgets and technologies. So IPDC is bringing in more people to expand the network but at the same time, it is investing in technology to make the system more efficient and transparent.
We are also mulling ways to bring in more technology driven products in the market.
We know that the need for NBFI’s in the economy is twofold. The first is their specialization on particular sector which they can perform in quicker and more efficient ways than the commercial banks. That’s why there are housing finance companies or merchant banks. The other one is their innovative ways bringing new products. IPDC is running by these two mantras of NBFI and I believe we are succeeding in doing that.