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Term Loan Procedures And Performance Analysis Of Idlc Financial Limited The development of financial market has been deceiving heightened attention from the policy makers in recent years. One explanation lies in the fundamental shift of development strategy reflected in the nearly universal embrace of the private sector as an engine of economic growth, the governments in both developed and developing countries, the international financial institutions which exert tremendous influence on the intelligentsia have all joined together as ardent advocates of private entrepreneurship. IDLC finance Ltd a leading financial institution of the country achieved significant growth in all areas of business up to 3rd quarter of the year 2011. IDLC began its operation in 1985 as the first leasing company in Bangladesh in 1995. IDLC was licensed as a financial institution by the country’s central bank and during the last two decades the company has grown in tandem with the countries growing economy. 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. 1.1 Origin of the Research paper Since the practical orientation is an integral part of the BBA degree requirement, I was deputed by Jagannath University to IDLC financial limited to take real life exposure of the activities of the organization as a financial institution. During my research at IDLC financial limited I have come across with different functions of the company. From them I have decided to work in the field of term loan procedures and performance analysis of IDLC financial limited. This paper have been originated the course requirement of the BBA program. I hope the paper will give a clear idea about the activities and role of term loan procedures and performance analysis of IDLC financial limited. 1.2 Objective of the study The paper will be constructed with an objective to illustrate an overall analysis of the term loan operations and performance of IDLC. However, salient objectives of the paper are: To develop the contribution of NBFI’s give loans and advances for industry, commerce, agriculture, housing and real estate carry on underwriting or acquisition business or the investment. ]  To highlight Rules and Regulations regarding term loan.  To provide an overall idea about how IDLC Finance ltd perform their term loan operations.  To assemble the basic structure of term loan operations of IDLC Finance ltd.


 To highlight the performance of IDLC regarding term loan operations.  To present the term loan based product offered by lDLC. 1.3 Methodology of the study In order to make the paper as perfect as possible I here used data collection procedures which articulate the way that I have followed in my paper. Data Collection Procedures: Data were collected in two ways. 

Primary ways.

Secondary ways

Primary ways of collecting data: The primary data are those which are collected for the first time and thus happen to be original in character. These types of data were collected from personal conversation with the personnel’s of IDLC and from the various financial documents which were not publicly published by performing my research program there. These are shown below in diagram-

Primary ways

Conversation with personnel’s’ of IDLC

Financial documents (Not publicly published)

Secondary ways of collecting data: The secondary data are those which have already been collected by someone else and which have already been passed through the statistical process. From my paper purpose, secondary data were collected mainly from internet to collect annual papers as well as financial highlights of the company. Another important source was the annual papers of the companies and also from the Year book of Leasing finance association which publishes NBFI’s financial data. So it has been shown in diagram below-

Interne t Annual report

Secondary Ways

Text book

Year of book BLKFCA


1.4Limitation of the study There exist some limitations in making the paper. These are stated below:  There were some restrictions in disclosing some information as it was assumed to be confidential. Therefore I could not include those in my paper.  Some of the information that I got from secondary sources were not arranged consistently.  As some companies do not update their web site, therefore it was difficult to get the most recent data.  Direct observation of the customer service of the company requires extensive time involvement, which may not be possible.  Organizational personnel’s unwillingness to answer the questions.  Since Annual paper of 2011 yet to be published almost of all companies so I was in trouble to select time period for financial data analysis. 2.0 Company Information Of IDLC Financial Limited 2.1 IDLC at a glance IDLC Finance Limited commenced its journey in 1985, as the first ever leasing company of the country. In 1995, IDLC was licensed as a Financial Institution by the country's central bank, Bangladesh Bank, following the enactment of the Financial Institution Act 1993. Over the last two decades, IDLC has grown in cycle with the country's transition into a developing country and has emerged as Bangladesh's leading multi product financial institution. To summarize the evolving nature of the company, IDLC has changed its name to IDLC Finance Limited from earlier Industrial Development Leasing Company of Bangladesh Limited in August 2007. Since 1985, when IDLC was formed as the pioneering leasing company in Bangladesh, the company continues to evolve as an innovative financial solutions provider. The company is now able to offer its customers, integrated and customized financial solutions - all under one roof IDLC'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, structured finance services ranging from syndications to capital restructuring and a complete suite of merchant banking and capital market services. 2.2 Vision,Mission,Strategiesobjective, product&service Vision To be the nation’s most preferred financial services provider. MissionTo lead by example through a commitment that empowers the organization at every level to strive for the highest levels of quality, customer care and stakeholder value. Goal To be the most sought after facilitator in creating wealth  To maximize the value of being our customer ,shareholder or employee  To establish strong regional presence


 To optimize contribution to the society Strategies objective ⇒ Create high quality and strategically balanced portfolios ⇒ Provide a range of financial products and services to our customers under one roof ⇒ Strengthening our position in capital market operation ⇒ Balanced diversification of funding sources 2.3 IDLC Product and Service 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 services which have long term prospects. In 1997it 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, issuer management, corporate financing and other investment banking related services. The products and services are as follows:Loan products 1. Lease Finance 2. Term Finance 3. Domestic Factoring of Accounts Receivable 4. Work Order Finance 5. Corporate Real Estate Finance 6. Real Estate Developer Finance 7. Home Loans with Home Loan Shield 8. Home Equity Loans 9. Car Loans for Individuals 1. Business Loan 2. Machinery Loan 3. Double Loan 4. Festival Loan 5. Personal Loan Investment Products: 1. Common Equity investments 2. Preferred Equity Investments 3. Bonds Liability , Products: 1 . Term Deposit Schemes 2 . Debentures 3 . Securitized Bonds 2.4 SWOT analysis SWOT analysis for IDLC can be described as follows:Strengths


Reputation and brand image: IDLC is well reputed company and has developed a brand image that is recognized by the customers. IDLC is an international joint venture company and its shareholders have long records of sustainability and reliability in their respective fields. IDLC is one of the esteemed through introduction of various innovative products and thus meeting the needs of large corporate clients. Product portfolio: IDLC has diverse product portfolio for customers which made them second to none in non banking financial industry. Quality customer portfolio: IDLC has a credit risk management department of multinational standard which enables the company to maintain a quality customer portfolio. Weaknesses: High cost of fund: IDLC as any other NBFIs have high cost of fund in comparison to banks. As NBFIs can take deposit for less than one year from any individuals as banks can do, the deposit base of IDLC is not strong enough to reduce the average cost of fund. More focus on volume : Although IDLC has department called credit risk management to monitor the asset quality of the company, still the company sometimes for the sake of profit and past relationship provide loans to customers who at the end hamper the portfolio quality of IDLC. Too much diversification: Too much diversification of product and services offering hamper the focus on the core services of the organization. Less people in liability marketing: IDLC still employs lesser number of workforces for the aggressive liability marketing in comparison to banks and NBFI like DBH. Opportunities: Continuity of liberalization: Government has continued to liberalize the economy towards more market orientation. This encouraged both local and foreign investors to invest in potential sectors. The privatization plan of government is likely to have positive impact on industrialization. Foreign investment in prospective sectors: In recent days foreign investment in the various prospective sectors has increased phenomenally. This creates a good opportunity for all financial institutions to enter in the booming new sector. Local banks inefficiency:


One of the major reasons for thriving of leasing company in Bangladesh is local banks inefficiency of providing project loan. This phenomenon still persists. Threats Threat from banks: In recent times banks are also entering into leasing business which is generally considered as functions of non banking financial institutions. Regularity control of government The legal framework of Bangladesh is relatively weak. Lack of effective foreclosure laws and recording system creates possibility of forgery and disputes. This may hinder the loan recovery from the defaulters. 2.5 Corporate social responsibility at IDLC Corporate responsibility entails a much wider scope of activates than simply corporate philanthropy. It shows an organization’s commitment towards responsible business practices to protect the interest of all its stakeholder groups, without compromising the rights of the future generations. In line with this view, IDLC has always been keen to commit its resources not only towards maximizing our economic profitability but also to offer better quality of life to both our internal and external stakeholder groups.

Whom IDLC are taking care of

Governme nt exchequer Environmen t

IDLC social corporate responsibility

Our business

Business partner Community Customer


Employee

3.0 Formation of Term Loan in IDLC 3.1 why IDLC for term loan Previously all NBFI’s earning source was only lease financing, but after the emergence of the NBFI sector in our country, NBFI’s begin to diversify their business activities and as a result various kinds of products and services take place to expand the business activities of NBFI’s. I have previously stated those products and services. Term loan is one of these products and services. As a leading player of NBFI sector in our country, IDLC’s term loan operations are increasing day by day and customers are satisfied with that. The main reasons for choosing IDLC for term loan are 1. Quick Service 2. Healthy Relationship with Clients Quick Service: - Clients who need fund immediately or within shortest possible time, better go to IDLC for a term loan. Because: Time needed to deliver the loan to a client in IDLC almost half than that of other financial institution after loan sanction process.

Consumer can get the loan without any hassle, because IDLC is a less complex place where bureaucracy is not practiced highly so that client can get the loan as early as possible. Though IDLC is conservative enough when arranging a term loan contract with a client, the execution of term loan is much quick after gathering details information of client. Strong Relationship with client:IDLC is good at maintaining a long term relationship with clients. This helps clients to get loans with reasonable conditions and IDLC for expanding the business activities.


3.2 Potential Client looks for IDLC seeks out prospective clients regarding term loan operations though appropriate marketing strategy. Through proper Advertising and industry research IDLC finds out who needs' loan and who can repay loans without any confrontment. IDLC retains customers with its best efforts. 3.3 Term loan practice Prospective client search. (appropriate marketing) IDLC's sales executives are always looking for prospective clients for the term loan. They do research on the market prospect and the conditions of possible clients' business. Based on their research they try to identify the trend of the economy and based on this trend analysis they plan their loan portfolio. Information checklist based on requirement Whenever a client wants to take loan from IDLC they provide them an information checklist based on their requirement. If the information provided by the client is considerable then they go for further processing otherwise they reject the loan proposal. Document submission If a prospective client passed through the information checklist process then the client is asked to submit some documents which are required for further assessment. These documents vary in case to case.

Appraisal paper After the submission of all documents the sales executive who bring the client to IDLC prepares an appraisal paper in which he/she gives his/her expert opinion about the loan proposal. CIB paper For assessing a loan proposal IDLC has to verify the proposer's credit paper provided by the Credit Information Bureau (CIB). CIB provides necessary about the credit condition of the proposer. This CIB paper is very much important for assessing a loan proposal. If the paper is favourable for the proposer only then IDLC go for further assessment. Otherwise they reject the proposal immediately. Justification through credit policy After getting positive paper from CIB IDLC justify the loan proposal through its own credit policy. If the proposal complies with the credit policy of IDLC then they approve the loan otherwise the proposal is rejected. Sanction of loan After justifying the loan proposal the loan is sanctioned to the proposer. Document preparation


After sanctioning the loan IDLC officials prepare the documents for the loan signing. Sign after preparing the documents required both the parties sign the document and the loan is provided to the client. Internal control (credit administration) Internal Control & Compliance Committee addresses operational risk and frames and implements policies to encounter such risks. The Committee assesses operational risk across the Company, as a whole, and ensures that an appropriate framework exists to identify, assess and manage operational risk. 3.4 Approval of term loan Term loan is one of the main operations in IDLC Finance Ltd. Basically term loan is given to prospective and profitable customers. Finding out prospective customers by undertaking appropriate marketing and advertisement is one of the potentials of this company. IDLC has to maintain some rules and regulations and some defensive measures to justify a loan application. Certain factors are investigated before approving a loan to a borrower. A different dimension is applicable here. The 7 Cs of credit is an important aspect for perceiving a borrower. 7Cs of' credit Character: IDLC must be comfortable with the borrower's integrity and confidence in his willingness to repay the loan. Certain questions are important here, Has IDLC met the customer? What is his reputation in the community? Is he an upstanding guy or is he a dead beat? IDLC may consider checking references with other business-owners with which the customer does business. Credit History: Credit history of borrower is another important element to consider before approving a loan. IDLC would never loan money to an candidate without first checking his or her credit history. As a potential creditor, IDLC also has the legal right to obtain the borrower's credit paper and examine it in determining whether or not the institution can risk extending the credit. Career History: IDLC asks about the borrower's business. Is it a successful business venture? Has he been in it for a while? Has he had failed business ventures in the past? His past successes or failures may be determinative of his future business success. Capacity: Regarding this aspect of giving loan, IDLC must ask certain questions. In what capacity is the credit going to be used in his business? Is it part of borrowers' inventory? Will the use of goods enable him to generate sufficient funds to repay IDLC and any other creditors? IDLC may consider going over his inventory records with him. The faster he moves his inventory, the more likely his business is a success. Capital: are material here, what is the borrower's financial

Certain questions


net worth? A customer with a positive net worth can survive low cash flow times in his business and still pay creditors invoices. Collateral: IDLC may consider extending only "secured credit." This usually means having the customer pledge real estate or his inventory in exchange for providing the credit. If he defaults on the loan, IDLC gets the pledged property. IDLC makes sure the property hasn't been pledged before. Conditions: IDLC always makes sure the conditions of the sale are clear and in writing, signed by the borrower. This includes payment dates and amounts. If he defaults on any of the conditions, IDLC's collection efforts will go much more smoothly if the conditions of the credit are clear. 3.5 Credit Risk Management in IDLC Credit risk is the possibility that a borrower or counter party will fail to meet agreed obligations. Thus managing credit risk for efficient management of a financial institution (FI) has become the most crucial task. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, and consolidation it is essential that FI’s have robust credit risk management policies and procedures that are sensitive and responsive to these changes. At IDLC, credit risk may arise in the following forms: • • • • •

Default risk Exposure risk Recovery risk Counter party risk Related party risk Legal risk & Political risk

To encounter and mitigate credit risk the following control measures are in place at IDLC:             

Multilayer approval process Policy for maximum sector and group exposure limit Policy for customers maximum asset exposure limit Mandatory search for credit paper from Credit Information Bureau Looking into payment performance of customer before financing Annual review of clients Adequate insurance coverage for funded assets Vigorous monitoring and follow up by Special Assets Management Team Strong follow up of compliance of credit policies by Operational Risk Management Department Taking collateral Seeking external legal opinion Maintaining neutrality in politics and following arm's length approach in related party transactions Regular review of market situation and industry exposure


3.6 Loan upper limit IDLC can give term loan to a client up to a 30,00,00,000 BDT. Maximum amount of a term loan arrangement is based on IDLC's total equity. IDLC gives loan to a client up to a certain percentage of its total equity. This percentage varies from 15-20%. If conditions of a term loan contract are fair enough, IDLC is able to sanction a loan of full amount of the maximum. However the loan upper limit is totally based on borrowers' financial ability. 3.7 Determination of Interest rate of a term loan Interest rate determination of a term loan is very important. IDLC has various kinds of term loan arrangements. Most of these loans have tenure of 3-7 years. IDLC values their customers. So, for the convenience of prospective clients in a term loan arrangements, IDLC sets interest rate on term loan based on customer requirements. Predetermined interest rate rather than fixed IDLC determines the interest based on relationship with the clients. A long term relationship with customer can have an impact on interest rate determination. To retain prospective clients, IDLC sets lower interest rate for a term loan. Another feature is that, Interest rates are predetermined rather than fixed. Interest rates are negotiated with the borrowers and the borrowers can get the loan with the negotiated interest rates. Interest rates are negotiated and predetermined before the term loan is sanctioned to a borrower. IDLC offers competitive interest rates to their customers for a term loan, so that customers can receive a loan with a suitable interest rate, this helps both the customer in receiving a loan with relatively low interest rate and IDLC to gain a competitive advantage in the market.

Asset Liability Management Committee (ALCO) of 'IDLC The Asset Liability Committee (ALCO) of the Company assesses the changes in interest rate, market conditions, carries out asset liability maturity gap analysis, re-pricing of products and thereby takes effective measures to monitor and control interest rate risk. 3.8 Equal monthly installments of a term loan A borrower can repay a term loan by equal monthly installment basis. Based on certain information, like, how much loan a borrower needs, what will be the tenure of the loan and predetermined interest rates a borrower can know what will be the equal monthly installments of that loan. By providing this information in the EMI calculator of IDLC a borrower get to know what will be the equal monthly installments. EMI calculator looks as follows:

How much loan do you need

Tk

Tenor Months Rate of interest Your EMI is

%


3.9 Structured settlements of a term loan The structured settlements of a term loan are originated by IDLC for the convenience of the borrower to repay the loan in a term-loan arrangement in a comfortable way. Through these settlements, borrowers can repay the loan by equal monthly installments however they want. The step up approach: In term loan arrangement having tenure of 3 years with an EMI of 20000 BDT, a borrower may pay lower amounts than 20000BDT in prior years and then he can pay higher amounts than 20000BDT in following years.

A hypothetical step up format would look like following 25000

20000 5000 10000

1500 16000 0

15000

17000 18000 19000

2000 21000 0

10000

22000 23000 24000 25000 30000

5000

The step down approach: In this type of settlement, borrower can pay higher amount than EMI in prior years, later he can pay lower amounts than EMI in order to repay the loan. 0

year1

year2

year3

A hypothetical step down format would look like following 30000

25000

30000 25000 24000 23000 22000 21000 20000 19000 18000 17000 16000 15000 10000 5000

20000

15000

10000

5000

0 year1

year2

year3


4.0 Performance of IDLC 4.1 Operational performance of IDLC during 2010 The company’s diversified operations and subsidiary saw a handsome growth during the year 2010. SME’s in Bangladesh have been making a significant contribution to the country’s economy. There is large gap between their needs and access to reasonably priced funds. Under this back drop, IDLC has taken an initiative small and medium sized business enterprises. The mode of financing of SME division of IDLC includes lease, term loans, short term financing through factoring, bill discounting etc. During 2010 SME division has disbursed BDT 2.712 million against BDT 1820 million in 2009 showing a robust growth of 63%. As on December 31, 2010 the SME asset size of the company stands at BDT4144 million compared to BDT 2544 million at December 2009. Company’s corporate finance division which provides mainly lease and term loans to large corporate houses has disbursed BDT1633 million during 2010 compared to BDT 1929 million during 2009. The year end asset of the division stands at BDT 4638 million. As the corporate financing continued to face stiff competition from commercial banks as regard to the pricing. The personal finance division of the company deals mainly with real estate finance and also provides personal and car loans to some very selective clients. During 2010, this division disbursed BDT 2439 million compared to BDT 2066 million in 2009. The total asset portfolio of the division at the year end stands at BDT 6611.

4.2 Financial performance of IDLC during 2010 IDLC has completed a very successful year in 2010. consolidated operating results during 2010 are summarized below: Particulars

2010

2009

Grow th %

Operating income

3027

1913

58.26%

Operating expenses

946

490

93.26%

Total operating profit

2081

1423

46%

Net profit after income tax

1327

822

61%

Earning per share

221

137

61%


IDLC continues to be recognized as the leading multi product NBFI’s in Bangladesh and is both a bench- mark and a role -model for all competitors. The company’s diversified business strategies; strong compliance culture and the energy and commitment of its staff have combined to generate exceptional results in 2010. 4.3 Business review Lease and loans Amid intense and increasing competition amongst the financial institution as well as the commercial banks. IDLC maintained its leadership position in the market. During 2010, company disbursed BDT 4345 million in lease and term loans compared to previous year’s BDT 3750 million, showing a growth of 16%. The lease and term loans portfolio at the end of the year saw a marginal growth of 6% over the previous year. This year company concentrated more on acquiring better quality financial assets rather than volume achievement for its own sake. The company expects to continue its drive to diversify its client base, maintain portfolio quality and improve service quality.

Lease and term loan Taka in million Real estate finance Although the real estate and housing industry experienced a setback during 2010 with fall in sales due to non - availability of electricity and gas connections as per government decision and hile in apartment price, IDLC housing finance operation witnessed a reasonable growth of 15% in disbursements. Revenue of the operation also witnessed growth of 15%. The housing finance assets as at the close of the year stood at BDT 5605 million , 17% higher than the previous year. Real estate finance BDT in million

4345

450 0

3750

400 0 350 0

3412 2977 2875

300 0

450 0 400 0 350 0 300 0 250 0 200 0 150 0 100 0 50 0

250 0 200 0 150 0 100 0 50 0 0 200 6

200 7

200 8

200 9

201 0


60 00 50 00 40 00 30 00 20 00 10 00 0

70 60 50 00 40 00 30 00 20 00 10 00 00 00

20 06

20 08

20 07

20 09

20 10

Car loans During the year under paper, company disbursed BDT 150 million a against precious years disbursement of BDT 148 million. This operation has earned revenue of BDT 56.09 million during the period. This business is facing enormous competition from commercial banks, which are able to offer lower rates and spend large amounts of money on aggressive marketing campaigns conjunction width a large sales force and branch 5 network. 6 0 5

Car loan Tk in million

35 0

332

332

345

339

30 0

25 0

237

20 0

10 0 20 0 30 0 40 0 50 0

15 0

10 0

5 0

0 200 6

200 7

200 8

200 9

201 0


Term finance Revenue from term financing has also increased in 2010. we can notice an upward trend in term finance activities of IDLC. Portfolio of term finance has increased 956 million BDT to 4207 million BDT Term finance TK in million

4.4 Contribution to national economy IDLC finance limited commenced its journey in 1985 as the first leasing company in the country. With its pioneering role, IDLC has made the lease financing popular in the country and developed the leasing industry, which has a total investment more than 250 billion now, as a vibrant financial intermediary in the medium term financing segment in the country. IDLC is continuously increasing its focus on financing to small and medium enterprises, the engine for growth for any developing economy. During the year under paper, the company has deposited BDT 575 million to the government exchequer as corporate income tax, withholding tax and vat. 4.5 IDLC’s business activities From a business perspective, both existing businesses and new projects in the country suffered from serious energy shortages in 2010. Not surprisingly, new and investment opportunities were relatively scarce. With everybody running after the same clients, the smaller non - banking financial institution sector faced even more competition from the much larger commercial banking sector than in previous years. Traditional term- lending and leasing businesses, particularly in the corporate clients segment struggled to grow. IDLC’s treasury took advantage of inter bank liquidity and were successful in managing down the cost of funds. The capital market segment leveraged off the massive stock market growth and has generated record revenues. IDLC’s consolidated assets, at 2010 year end stood at BDT 26.9 million a 19% growth over 2009. An aggressive deposit program was initiated in the second half of 2010 and by year end , customer deposits had reached the BDT 12.4 billion mark -27% higher than the previous year. IDLC earned a consolidated net profit of BDT 1327 million in 2010 - 61% growth over the previous year. Consolidated earnings per share grew by 61% to BDT 221.18 - compared to previous year’s BDT136.98. As at December 31.2010, the company’s equity had increased by 54% to BDT 3.7% billion over the previous year. Portfolio composition

4.6 Analysis of financial performance 4.6.1 Ratio analysis


The analyses of the financial performance of the four selected Bangladeshi leasing company of last four years are presented below with their average performance and the ratio. Debt equity ratio This ratio is calculated to measure the relative proportions of outsiders’ funds and shareholders funds invested in the company.

Short termfinance, 2% Car loan,2% Investment share, 3%

Lease finance, 24%

shortterm finance car loan investment personalloan marginloan realestate finance

Lease finance

Margin loan 27%

Real estate finance 26%

Table ; Year

Debt equity ratio IDLC PRIME

LANKBANGLA

UNITED

2007

9.54%

4.97%

8.68%

6.6%

2008

8.32%

3.94%

7.79%

6.6%

2009

8.4%

4.05%

5.4%

5.9%

2010 3915

6.30%

2.13%

3.03%

4.7%

4789

Debt equity ratio shows a favourable or unfavourable financial position of the concern depends on the industry 3065and the pattern of earning. A low ratio is generally viewed as favourable 2441 from long term creditor’s point of view, because a large margin of protection provides safety for the creditors.

12. %

10. %

9.54% 8.68% 8.32%

8. %

8.40%

7.79% Idlc 6.60%

Prime

6.60%

6. %

6.30% 5.90%

4.97%

4. %

Lankabangl U anited

5.40% 4.70% 3.94%

4.05%

2.13%

2%

Chart: - Debt equity ratio in the last 4 years From the above mentioned figure it is found that IDLC financial company highest with 9.54%, 8.32% and 8.4 % in 2007, 2008 and 2009 respectively. LANKABANGLA and UNITED also performed above the average where PFI performed always below average. For this segment of analysis higher score provided to the company with lower percentage in every year. The sore of companies under this ratio are as follows 0.00%

0

2007

2008

2009

2010


Table- Sore of companies debt equity ratio Company 2007 2008 2009 2010 IDLC 1 2 3 4 PRIME 4 8 12 16 LANKABANGLA 2 4 9 12 UNITED 3 6 6 8 Return on equity ratio This ratio is a measure of the percentage of net profit to equity Table- Return on equity ratio

Total 10 40 27 23 shareholders fund.

It measures a Year IDLC PRIME LANKABANGL United firm's efficiency A at generating profits from 2007 27.59% 34.76% 41.23% 14.6% every unit of shareholders' 2008 28.43% 36.75% 40.94% 14.0% equity. ROE shows how well 2009 41.05% 49.72% 35.24% 13.5% a company uses investment 2010 43.64% 64.97% 35.49% 26.2% funds to generate earnings growth. Higher percentage of ROE refers higher efficiency in using equity fund. The ROE of the company are presented in the following chart. 70.00 % 64.97 % 60.00 %

50.00 %

40.00 %

49.72 %

41.23 % 34.76 %

30.00 %

27.59 %

40.94 % 36.75 %

41.05 %

28.43 %

4500

35.49 %

35.24 %

20.00 %

Idl cPrim e Lankabangl a unite d

43.64 %

4207

26.20 %

4000

Chart: - Return on equity ratio of the last 4 years 3437 The information shows that LANKABANGLA ROE was much higher in the last two years 2781 with 41.23% and 40.94% respectively but it had been decreased in 2009 and 2010 years. PFI was in top with 49.72%% and 64.97%% in 2009and 2010 respectively but it was 2239 below the average in 2007, 2008 and 2009 IDLC and UNITED. For this ratio higher score will be provided to the organization with higher percentage as higher percentage means 1542 higher efficiency of the organization. 956 The score sheet of companies are provided below Table - sore of companies return on equity ratio 14.60 %

10.00 %

0.00 %

14.00 %

13.50 %

3500

3000

200 7

200 8

200 9

4500

201 0

4000 3500

2500

3000 2500 2000

2000

1500 1000 500

1500

1000

500

Company

0 2005

2006

2007

2007

2008

2009

2010

Total

2008

2009

2010

IDLC

2

4

9

12

27

PRIME

3

6

12

16

37

LANKABANGLA UNITED

4 1

8 2

6 3

8 4

26 10

Return on asset ratio


This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not. Higher the percentage of return, higher the proper utilization of assets. Table- Return on asset ratio year IDLC PRIME LANKABANGLA UNITED 2007

2.37%

4.92%

4.89%

1.824%

2008

2.50%

5.71%

4.66%

1.748%

2009

4.11%

8.89%

5.54%

1.858%

2010

5.35%

16.85%

8.80%

4.08%

18.% 16.85% 16.%

14.%

12.% Idlc Prime Lankabangla United

10.% 8.89%

8.80%

5.54%

5.35%

4.11%

4.08%

8.%

6.%

5.71% 4.92% 4.89%

4.66%

4.%

2.%

2.50%

2.37% 1.82%

1.75%

1.86%

0.00% 2007

2008

2009

2010

Chart: - Return on asset ratio of the last 4 years Form the above chart it can be said that UNITED and IDLC lost its efficiency in the recent years. In 2008, 2009 and 2010 PFI was in the highest position with 5.71%, 8.89%, 16.85respectively where in 2008, 2009 and 2010 LANKABANGLA also hold the highest position with 4.66%, 5.54% and 8.80% respectively. For this ratio higher score will be provided to the organization with higher performance as higher percentage means higher efficiency of the organization in using assets. The score sheet of companies are provided below –

Table - sore of companies return on asset ratio Year

2007

2008

2009

2010

Total

IDLC

2

4

6

8

20

PRIME

4

8

12

16

40

LANKABANGLA

3

6

9

12

30

UNITED

1

2

3

4

10


Earning per share This helps in determining the market price of equity shares of the company and in estimating the company’s capacity to pay dividend to its equity shareholders. The performance and prospects of the company are affected by earning per share. If earning per share increases, there is a possibility that the company may pay more dividend or issue bonus share. Table- earning per share Year IDLC PRIME LANKABANGLA UNITED 2007

50.50

5.99

5.47

27.22

2008

67.73

6.21

9.81

28.95

2009

237

10.60

14

30.72

2010

221.18

19.13

32

71.64

250 237 221.2 200

150

Idlc Prime Lankabangla United

100

71.64

67.73 50

50.5 27.22

0

5.99 5.47

2007

32 30.72

28. 95 9.81 6.21

2008

19.13

14 ]

2009

2010

Chart- Earning per share of the last 4 years The chart shows that EPS of IDLC highest during the years in 2008, 2009 and 2010 with Tk 67.34, Tk 136.98, Tk 221.18 respectively where in 2010 it was leaded by LANKABANGLA with Tk 32 and the EPS of UNITED had been increase in last three years. For this ratio higher score will be provided to the organization with higher percentage as higher percentage means higher efficiency of the organization. The score sheet of companies are provided belowTable :- sore of companies earning per share Company 2007 2008 2009 2010 Total IDLC

4

8

12

16

40

PRIME

2

2

3

4

11

LANKABANGLA

1

4

6

8

19


UNITED

3

6

9

12

Total scoring and ranking According to the analysis the total score of the each according to the score are provided in the following Company DER ROE ROT IDLC 10 27 20 PRIME 40 37 40 LANKABANGLA 27 26 30 UNITED 23 10 10

company chart: – EPS 40 11 30 19

30 and ranking the company Total 97 128 113 62

Ranking 3rd 1st 2nd 4th

According to the analysis it is found that PRIME company has achieved the highest score and the best ranking followed by LANKABANGLA, IDLC and UNITED respectively. 4.6.2Growth rate analysis Growth rate analysis is the most important tool of business expansion comparison. In this study growth rate was calculated on the basis of base year 2006 Score and position are determined under the following percentage. Growth rate of paid up capital Table: - Growth rate of paid up capital YEAR

IDLC

PRIME

LANKABANGLE

UNITED

2007

133.33%

110.%

100%

100%

2008

166.67%

154%

110%

110%

2009

200%

215.59%

126.5%

125.71%

2010

400%

301.84%

151.8%

251.42%

400 % 350. % 300. % 250 % Idl cPrim e Lankabangl a Unite d

200 % 150. % 100 % 50 % 0. %

2007

200 8

2009

2010

Chart: - Growth rate of paid up capital The highest growth rate of paid up capital was IDLC Company with 133.33%, 166.67%, 200% and 400% during 2007, 2008, 2009 and 2010 respectively and also PFI was highest rate with 215.59%and 301.84% during 2009 and 2010. Growth rate of paid-up capital of LANKABANGLA and UNITED was average rate during 2007 and 2008 but UNITED growth rate of paid up capital was increased in 2009 and 2010. Higher score provided to the company with higher percentage in every year. Higher score are distributed for higher rate as following:-


Table: - Score of companies growth rate of paid up capital COMPANY

2007

2008

2009

2010

TOTAL

IDLC

4

8

6

16

34

PRIME

3

6

3

12

24

LANKABANG LA

1.5

3

12

4

20.5

UNITED

1.5

3

9

8

21.5

Lankabangla and United are in the joint position in 2007. That why the score of 2nd and 3rd position are equally divided among them by adding the two score. Growth rate of total investment Table: - Growth rate of total investment YEAR

IDLC

PRIME

LANKABANGLA

UNITED

2007

184%

120%

21.86%

117.93%

2008

265.52%

146.64%

35.39%

122.17%

2009

483.17%

267%

22.38%

123.50%

2010

435.85%

334.5%

36.80%

260.43%

500% 450% 400% 350% 300% Idlc Prime Lankabangla United

250% 200% 150% 100% 50% 0% 2007

2008

2009

2010

Chart: - Growth rate of total investment From the above figure shows that Growth Rate of total Investment of IDLC Company was the highest with 184%, 265.52%, 483.17% and 435.85% in 2007, 2008, 2009 and 2010. Rate of PFI Company was over in


last four years but rate of UNITED was higher than the LANKABANGLA in last four years and rate of LANKABANGLA also was below in last four years. Score sheet of companies are provided below:Table: - score of companies growth rate of total investment COMPANY

2007

2008

2009

2010

TOTAL

IDLC

4

8

12

16

40

PRIME

3

6

9

12

30

LANKABANGLA

1

2

3

4

10

UNITED

2

4

6

8

20

Growth rate of total deposit Table :- Growth rate of total deposit YEAR

IDLC

PRIME

LANKABANGLA

UNITED

2007

144.24%

143.50%

221.21%

214.97%

2008

260.8%

147.08%

321.52%

267.98%

2009

307.77%

312.87%

239.83%

402%

2010

386.24%

253.97%

259.10%

415%

450.00%

400.00%

350.00%

300.00%

Idlc Prime Lankabngla United

250.00%

200.00%

150.00%

100.00%

50.00%

0.00% 2007

2008

2009

2010

Chart: - Growth rate of total deposit From the above chart, it can be described that growth rate of Total Deposits of LANKABANGLA was the highest with 221.21% and 321.52% in 2007 and 2008 respectively but the rate was below in 2009 and 2010 than the other company’s. Rate of UNITED was above with 214.97%, 267.98%, 402% and 415% in last four years but the rate of IDLC and PFI was below in 2007 and 2008. In 2009 and 2010 the rate of IDLC was over with 307.77% and 386.245 in 2009 and 2010. Score sheet of companies are provided below:Table:-score of companies Growth rate of total deposit COMPANY

2007

2008

2009

2010

TOTAL

IDLC

2

4

6

12

24

PRIME

1

2

9

4

16

LANKABANGLA

4

8

3

8

23

UNITED

3

6

12

16

37

Growth rate of total equity Table: - Growth rate of total equity


YEAR

IDLC

PRIME

LANKABANGLA

UNITED

2007

131%

127.53%

119.58%

110.73%

2008

149.19%

184.96%

147.65%

122.61%

2009

251.48%

366.67%

219.56%

135%

2010

387.78%

700.32%

301.75%

173.36%

800 % 700%

600%

500 %

Idlc Prime

Lankabangl United a

400 % 300 % 200%

Chart: - Growth rate of total equity

100%

0 %

2007

2008

2009

2010

From the above chart shows that Growth rate of total equity of PFI company was the highest with 184.96%, 366.67%, and 700.32% in 2008, 2009 and 2010 respectively. Growth rate of total equity of IDLC and LANKABANGLA was above in 2009 and 2010 with 251.48%, 387.78% and 219.56%, 301.75%. On the other, rate of UNITED was below the average rate in last four years. Score sheet of companies are provided below:Table: - score of companies Growth rate of total equity COMPANY

2007

2008

2009

2010

TOTAL

IDLC

4

6

9

12

31

PRIME

3

8

12

16

39

LANKABANGLA

2

4

6

8

20

UNITED

1

2

3

4

10

Table: - Growth rate of Fixed asset YEAR

IDLC

PRIME

LANKABANGLA

UNITED

2007

104.16%

77.32%

83.75%

101.91%

2008

98.99%

79.38%

92.61%

183.78%


2009

132.46%

179.68%

80.75%

184.23%

2010

192.16%

180.79%

100.2%

215.07%

250.00%

200.00%

150.00%

Idlc Prime Lankabangla United

Chart: - Growth rate of fixed asset 100.00%

50.00%

0.00% 2007

2008

2009

2010

From the above mentioned figure it is found that Growth Rate of Fixed Assets of UNITED was the highest with 101.91%.183.78%,184.23% and 215.07%% in 2007 ,2008, 2009 and 2010 respectively . Rate of PFI was below the average rate in 2007 and 2008 but increase in 2009 and 2010.Rate of LANKABANGLA also was below in last four years. Rate of IDLC was above the average in 2007, 2009 and 2010 but below in 2008. Score sheet of companies are provided below:Table: - score of companies growth rate of Fixed asset COMPANY

2007

2008

2009

2010

TOTAL

IDLC

4

6

6

12

28

PRIME

1

2

9

8

20

LANKABANG LA

2

4

3

4

13

UNITED

3

8

12

16

39

Total scoring and ranking According to the analysis the total score of the each company and ranking of companies according to the score are provided in the following chart:-


IDLC

34

40

24

31

28

157

1st

PRIME

24

30

16

39

20

129

2nd

LANKA BANGLA

20. 5

10

23

20

13

86.5

4th

UNITED

21. 5

20

37

10

39

127. 5

3rd

According to the analysis it is found that IDLC company has achieved the highest score and the best ranking followed by PRIME, UNITED, LANKABANGLA respectively. 4.6.3 Mean standard deviation, correlation, regression, and test of hypothesis, Margin loan of IDLC and PFI Company Let, The amount of margin loan of IDLC company = X The amount of margin loan of Prime company = Y Tk in million Year

X

2007

1387.35

2008

3065.95

2009

5861.96

2010

5633.19

N=5

ΣX= 15948.4 5

X2 6758765 .056 848540. 35 3515053 .148 2709571 .136

1924740 .023 9400049 .403 3436245 7.8 3173282 9.58

ΣX=774 = 20076.7 1383192 3 0.68

Y 2823.43 6421.15 2209.37 2910.72 ΣY= 14364.6 8

589424. 7076 8008786 .8 1909371 .24 463012. 2025 = 1097059 4.95

Y2

XY

7971756 .965 4123116 7.32 4881315 .797 8472290 .918

3917085 .6 1968692 4.84 1295123 8.57 1639663 8.8

ΣY = 5492653 1

ΣXY= 5295188 7.81

Mean, = ΣY/ N = 15948.45/4 = 3987.1125 = 14364.68/4 = 3591.17 Standard deviation, SDX= { (X - ) 2/ N} 1/2 = (13831920.68/4)1/2 =1859.56

SDY= {( /N)} 1/2 1/2 = (10970594.95/4) = 1656.09


Standard deviation of IDLC and PFI company were 1859.56 and 1656.09 respectively. Hence, the PFI has been varied comparatively less than that of IDLC Company. Karl Pearson’s coefficient of correlation, r = Σxy / sqrt [(Σ x2) * (Σ y2)] = 52951887.81 / [(77420076.73*54926531)1/2] = .8120 The coefficient of correlation is 0.8120 that means there is a highly positive correlation between IDLC and PFI company. Regression equation (line), X on Y:

Where, bxy= ΣXY/ ΣY2 =52951887.81/54926531 = .9640

= bxy

⇒ X-3987.1125= .9640(y-3591.17 ) ⇒ X- 3987.1125 = .9640y – 3461.888 ⇒ X = .9640y +525.2245 Y on X: =byx =52951887.81 / 77420076.73= .68396 ⇒ Y - 3591.17= .68396(X-3987.1125) ⇒ Y - 3591.17= .68396x – 2727.025 ⇒ Y =.68396x +864.145

where, byx= ΣXY/ ΣX2

Test of hypothesis, H01:

=( 3987.1125 -3591.17) / [(1859.562/5) + (1656.092/5)]1/2 =395.94 / (691592.68 + 2742634.088)1/2 = 479.21 / 1853.167 = .2586 At 5% level of significance, the critical value of z is ± 1.96 and the computed value of z is 0.2586 therefore, the hypothesis is accepted. Hence it is concluded that, there is a no significant difference between the IDLC and PFI Company. Housing loan of IDLC and PFI Company Let, The amount of housing loan of IDLC company = X The amount of housing loan of PFI company = Y Tk in million Year X 2007 2674..3 09 2008 3318.4 6

2022541. 91 605299.5 6

X2

Y

7151928. 627 11012176 .77

9122.3 5 8250.0 0

Y2 17110011 83217269. .78 52 10654185 68062500 .61

XY 24395982 .71 27377295


2009 4788..5 4 2010 5604..5 7 N=5 ΣX= 16385. 879

478960.8 849 2274365. 61 = 5381167. 964

22930115 .33 31411204 .88 ΣX2= 72505425 .61

1183.2 8 1388.0 7 ΣY= 19943. 7

14460109 1400151.5 58 12944560 1926738.3 .6 25 ΣY2= 154606659 = 55168866 .4

5666183. 611 7779535. 48 ΣXY= 65218996 .8

.91

Mean, = ΣY/ N = 19943.7/ 4= 4985.925

=16385.879 / 4 = 4096.47 Standard deviation, SDX= { (X - ) 2/ N} 1/2 = (5381167.964 / 4)1/2 = 1159.867

SDY= {( /N)} 1/2 1/2 = (55168866.91 / 4) = 3713.787

Standard deviation of IDLC and PFI Company were 1159.867 and 3713.787 respectively. Hence, the IDLC Company has been varied comparatively less than that of PFI Company.

Karl Pearson’s coefficient of correlation, r = Σxy / sqrt [(Σ x2) * (Σ y2)] =65218996.8 / [(72505425.61*154606659.4)1/2] = 0.61599 The coefficient of correlation is 0.61599 that means there is a highly positive correlation between IDLC and PFI Company. Regression equation (line), X on Y:

= bxy

⇒ X-4096.47 = .4281 (y-4985.925 ) ⇒ X-4096.47 = .4281y – 2134.474 ⇒ X = .4281y + 1961.996 Y on X: =byx =65218996.8 /72505425.61 = .8995 ⇒ Y -4985.925 = 0.8995(X-4096.47) ⇒ Y -4985.925 = 0.8995x -3684.774 ⇒ Y = 0.8995x + 1301.151

Where, bxy= ΣXY/ ΣY2 =65218996.8/154606659.4 = .4218

where, byx= ΣXY/ ΣX2

Test of hypothesis, H02:

= (4096.47 -4985.925 - 0) / [(1159.8672/4) + (3713.7872/4)]1/2


= - 889.455 / (336318.80+3448053.47) 1/2 =- 889.455 / 1945.3463 = - .45722 At 5% level of significance, the critical value of z is ± 1.96 and the computed value of z is -.45722, therefore, the hypothesis is accepted. Hence it is concluded that, there is a no significant difference between the IDLC and PFI Company. Loan against deposit of IDL and PFI Company Let, The amount of IDLC company= X The amount of PFI company = Y Tk in million Year X 2007 2008 2009 2010 N=5

X2

Y

2720.9 5 5134.7 2

1433964.3 38 1479355.2 83

7403568 .903 2636534 9.48

2491.4 5 1204.0 1

451368.98

2057.. 30 5760.7 6 ΣX= 15673. 73

3463814.1 83 3394170.6 17

4232483 .29 3318635 5.78 ΣX2=71 187757. 45

1696

15267.073 6 4424.644

= 9771304.4 2

1886.0 78 ΣY= 7278.2 4

378901.80 25

Y2

XY

6207323.1 03 1449640.0 8

6779110.8 78 6182254.2 27

2876416

3489180.8

3557290.2 22 ΣY2= = 14378309. 849962.50 49 01

10865242. 7 ΣXY= 27315788. 61

Mean, = 15673.73/4= 3918.4325

= ΣY/ N 7278.24 /4= 1819.56

Standard deviation, SDX= { (X - ) 2/ N} 1/2 = (9771304.42 / 4 1/2 = 1562.95

SDY= {( /N)} ½ = (849962.5001/4)1/2 = 460.967

Standard deviation of IDLC and PFI company were1562.95 and 460.967 respectively. Hence, the IDLC Company has been varied comparatively less than that of PFI Company. Karl Pearson’s coefficient of correlation, r = Σxy / sqrt [(Σ x2) * (Σ y2)] =27315788.61 / [(71187757.45 * 14378309.49)1/2] = .55058 The coefficient of correlation is 0.55058 means there is a highly positive correlation between IDLC and PFI Company. Regression equation (line), X on Y:

= bxy

Where, bxy= ΣXY/ ΣY2


=27315788.61 /14378309.49 = 1.89979 X-3918.4325 = 1.89979 (y- 1819.56) ⇒ X- 3918.4325 =1.89979 y – 3456.782 ⇒ X = 1.89979y+ 461.65 Y on X:

=byx

⇒ Y -1819.56 = .3837 (x – 3918.4325) ⇒ Y – 1819.56 = .3837 - 1503.5025 ⇒ Y = 0.3837 + 316.05

Where, byx= ΣXY/ ΣX2 =27315788.61/71187757.45 =.3837

Test of hypothesis, H03:

= (3918.4325 – 1819.56) / [1562.952/4 + (460.9672/4)]1/2 = 2098.87 / (610703.176 + 53122.0304)1/2 = 2098.87 / 814.75 = 2.576 At 5% level of significance, the critical value of z is ± 1.96 and the computed value of z is 2.576, therefore, the hypothesis is rejected. Hence it is concluded that, there is a significant difference between the IDLC and PFI Company. 5.0 Term loan based product offered by IDLC

5.1 Home Loan As one of the leading Home Loan providers in the country, IDLC offer the most convenient Home Loan facility to suit customer needs. Benefits  Consider all applications equally, irrespective of any profession  Provide a dedicated and supportive service both before and after the disbursement  Option to choose either Fixed or Variable rate of interest  Sanction the loan within the shortest possible time, and also before starting construction of the building or purchase of the apartment  Early pre-payment option, either in part or full, with convenient conditions  Avail Municipality Holding Tax rebate  Offer maximum loan facility to Non-resident Bangladeshi (NRB)  Enjoy competitive interest rate and lower fees


Availability of Home Loans  For purchase of apartment/house/commercial space/approved housing plots  For construction of residential/commercial buildings  For renovation or extension of residential complex  As Home Equity loan against mortgage of property Eligibility Eligible for the Home Loan facility if fulfill the following condition25 years and above of age, but not more than 60 years, except professional. Earning on a regular basis from a sustainable source of employment or business.

Factors affecting Loan Amount Home Loan amount depends on the repayment capability. A number of factors are taken into consideration. Such as       

The monthly net disposable income, age, qualifications Value of the immovable property Number of family members and dependants Monthly expense Other fixed obligations Nature of job/business Savings habits etc

Residential Purpose: 70% of the purchase price, including registration cost, or 80% of the construction cost of residential house can be offered as Home Loan Commercial Purpose: 50% of the purchase price, including registration cost, can be offered as Home Loan Loan Term Residential Purpose Category

Maximum Term

Maximum Age

Professional

20 years

65 years

Businessmen

15 years

60 years

Non Resident Bangladeshi (NRBs)

10 years

60 years

Service Holders

20 years

60 years

Commercial Purpose: Maximum 7 years for any profession


Repayment Mode: The entire facility has to be repaid through Equal Monthly Installments (EMI) Security Mortgage of the property itself or any other equivalent security, as acceptable to IDLC. Interest Rate and Fees IDLC offer a competitive interest rate and low fees. IDLC set individual rates by taking into consideration 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.

5.2Car Loan Product Features In today’s age, owing car is no longer considered a luxury; rather it has become a vital part of our everyday life. A car is now a useful investment that improves our quality of life. With Car Loan facility, any one can own his dream car and add more excitement in his life. Benefits  IDLC sanction the loan within 72 hours of receiving the application, subject to receipt of all documents required by IDLC  IDLC offer financing for both brand new and re-conditioned cars  No security is required  No Personal Guarantee is required  Offer competitive interest rate  Gain expert advice on car market conditions  Ensure a dedicated and supportive service both before and after the disbursement.  Allow partial or full prepayment option with minimum charges Eligibility A borrower is eligible for car loan if he is  Salaried executive or a professional or a businessman  Age between 22 and 60 years  Minimum monthly income is Taka 25,000 (including income of spouse, in case of Joint Application)  Work experience of minimum 2 years service.  Resident of Dhaka or Chittagong. Loan Amount IDLC provides maximum assistance to fulfill borrower's requirement. IDLC finances both brand new and re-conditioned cars. Borrower can avail car loan from Tk 200,000/- to Tk.


4,000,000/-or 70% of the value of the car (including registration cost), whichever is lower. But if borrower is ready to provide 50% of the car value as cash deposit with IDLC, he will enjoy a special rate for his entire car loan. Payment Terms: A borrower can repay the loan according to his convenience but he has can take a maximum of sixty (60) months period to repay the loan for both brand new cars and reconditioned car. Required Documents:Employed One recent copy of passport size photo, National ID card and Bio data Application form (properly filled up)

5.3Women Entrepreneur Loan Women Entrepreneur Loan is a loan facility offered to small and medium business enterprises operated by women entrepreneurs. This Term Loan facility is offered for the purpose of meeting Working Capital requirements and purchasing fixed assets. Eligibility Entrepreneurs having a minimum of 2 years experience in the same line of business. The business must be a going concern with minimum operational experience of 2 years Loan Limit From Taka 3, 00,000 to Taka 50, 00,000 Interest Rate 10% - the lowest interest rate in the market Features  IDLC offer loan without any collateral for up to Tk 15, 00,000  IDLC offer loan for Working Capital Finance and Lease finance for business  Borrower having loan facilities with other financial institutions can also avail this facility  Convenient repayment options are offered, consisting of equal monthly installments and customized repayment schedule  Bring fast and quality service at borrower doorstep 5.4 SME Loan SME Loan is a facility designed to finance small-scale trading, manufacturing and service ventures to help them meet short-term cash flow needs and bridge the fund-flow gaps. Eligibility Entrepreneurs need to have minimum 2 years of experience in the same line of business. The Business must be a going concern with minimum operational experience of 2 years. Loan Limit


Minimum Taka 3, 00,000 to maximum Taka 75, 00,000 Features  Loan without any collateral for up to Taka 15,00,000  For partial cash-secured loan up to Taka 35,00,000  Loan for Working Capital Finance or Lease finance for business  Borrowers having loan facilities with other financial institutions can also avail this facility  Convenient repayment options are offered, consisting of Equal monthly installments and customized repayment schedule  To bring fast and quality service at borrower doorstep. 6.0 Recommendation & Conclusion 6.1 Major

Finding

Throughout the Research paper preparation, I found out some salient features of term loan operations of IDLC Finance ltd. These findings can be summarized as follows: • Non banking financial sector is important to increase the mobilization of term saving and for the sake of providing support services to the capital market. • Term loan is one of the main operations in IDLC Finance Ltd • Term loan is given to prospective and profitable customers • IDLC set interest rate by taking into consider customers financial condition, amount borrowed, and repayment terms. • It provides various financial products and services to individuals, small, and medium enterprise. • The tenure for term loan is about 3 years to 7 years. But in case of home loan, the tenure of loan is much longer. • Not require any collateral for home loan, SME loan, and car loan. • IDLC charges 2% penalty if any prepayment of loan occurs. • IDLC seeks out potential clients regarding term loan operations though suitable marketing strategy. 6.2 Recommendation Throughout my research paper I would like to propose some policy insinuation so that IDLC can perform better in term loan operations & improve some sector. These are as follows: • Alternative Funds: IDLC has to explore alternative sources of funds. Because the Cost of fund for IDLC is much higher. In order to sustain the high cost of borrowing, IDLC may be inclined to invest in the high return segments which can expose them to proportionately higher risks. Moreover, vicious competition among competitors may also force IDLC to reduce the


margin at the expense of quality of the asset portfolio. Adequate risk management capabilities are needed to be developed to face these types of challenges. • Attractive Term Loan: IDLC has to diversify its term loan based products more and offer more attractive term loan arrangements to the borrowers so that the company can get the competitive advantage over the market. The Industry analysis team of IDLC has to be more efficient in seeking out prominent clients for term loan operations. IDLC will have to begin new windows for term loan operations to attract new customers in market segment. • Market Promotion: In today’s business, promotional activities is one of the most important tasks for improvement of the business, IDLC does not concentrate much about this. Hence the firm could be benefit if it invests in the market promotional activities. • Branch Proliferation: IDLC has only twelve branches; four in Dhaka, two in Chittagong, one in Narayanganj, Narshingdi, Savar, Bogra , Sylhet, Comilla. It would be benefit if it opens branches in the other places like Jessors, Rajshahi, Kulna and also some other places as there are huge opportunities of business. • Employee’s Incentives: The firms may increase the efficiency of its personnel’s by increasing incentives, training, etc so that employee can feel comfort by remaining IDLC. • Information System: IDLC could improve it information technology by employing the high technology base information system and networks as I have observed that their IT professional is not very much concerned about IT infrastructure still now using weak infrastructure system. 6.3 Conclusion Financial institutions play an important role in the economic development of the country and lease financing is a major aspect of these institutions. Being a financial institution IDLC also plays an important role in lease financing. Throughout my research paper I have tried to show the term loan and performance analysis of IDLC as well as the overall functions of the firm. Here I have used my theoretical knowledge which I have achieved in my educational period and also I use what I have learnt throughout my research paper regarding the facts. From this paper, the most recent term loans and performance analysis of IDLC has been evaluated. I have also tried to compare IDLC term loan with other firms of the same industry where I have used different tools and techniques which also I have learnt during my BBA Program. Finally I tried to make an interpretation from analytical point of view and came up with a view that IDLC is growing and even more successful in the industry.


complete IDLC FINAL 18112011_edited  
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