Professional Documents
Culture Documents
Ar 2016
Ar 2016
Exploring IPDC 04
Discovering extensive range of products and services 05 - 06
Expanding Milestones 07
Financing Projects 08 - 09
Our Footprints 10
Our Forseers 11
Our Go-getters 12
Our Organogram 13
Chairman's Message 15 - 16
CEO's Message 17 - 19
Our Credos 20 - 21
Our Celebrations 22 - 24
Moments from the 34th Annual General Meeting 25
Notice for the 35th Annual General Meeting 26
Letter of Transmittal 27
Shareholders' Profile 29
Distribution of Shareholding 30 - 31
Directors' Report to the Shareholders 33 - 41
Key Operational and Financial Data of Preceding Five Years 42
Assessment Report on the Going Concern of IPDC 43 - 44
Pattern of Shareholding 45
Meeting Attendance by Directors during the year 2016 46
Profile of the Board of Directors 47 - 50
Corporate Governance Compliance Report on SEC's Notification 51 - 54
Statement of Compliance on the Good Governance Guidelines issued by Bangladesh Bank 55 - 56
Corporate Governance Certificate 57
Report of the Audit Committee 58 - 59
CEO and CFO Certification to the Board 60
Statement of Ethics and Compliance 61 - 62
Statement of Human Capital 63 - 64
Risk Management 66 - 70
Value Added Statement 71
Economic Value Added (EVA) 71
Market Value Added (MVA) 71
Value Added and its Distribution 72 - 73
Audited Financial Statement 75 - 117
Horizontal and Vertical Analysis 118 - 119
Graphical and Tabular representation of Key Ratios and Information 120 - 123
Sustainability Reporting 125 - 126
Corporate Social Responsibility (CSR) 127 - 131
Environmental Initiative and Obligation 132
We Protect. We Grow 133
Disclosure on Green Banking 134
Disclosure on Capital Adequacy and Market Discipline 135 - 139
Performance of Operating Segments 141
Credit Rating Information 141
Maturity Analysis of Asset 142
Classification and Impairment of Investments 143
Statement of Non-Performing Loans 144 - 145
Statement of Sector Wise Exposure 146
Human Resource Accounting 147
Loan and Advance Portfolio Classification as per BB Guideline 148
Contributions to National Exchequer 149
Glossary 151
Notes 152
Proxy Form 153
Attendance Slip 153
Exploring IPDC
Business Description
Since its inception in 1981, IPDC has played a pivotal role in reshaping the private sector industrialization of the country through
innovative financial products and services. Today IPDC is a diversified financial institution with a wide range of products and services
covering corporate finance and advisory services, SME finance supply chain finance, retail wealth management and retail finances.
The principal businesses of the Company are related to finance and finance associated activities. These businesses include deposits
mobilization; credit to corporate organizations; Retail and SMEs, factoring finance; project finance; leases; hire purchase;
equity/quasi-equity investments and advisory services. IPDC provides multiple business services through its 9 branches including
Head Office. There are three branches in Dhaka. Those are located in Motijheel, Dhanmondi and Uttara. Besides these, there are five
other branches in five large cities, which are in Chittagong, Sylhet, Narayangonj, Gazipur and Bogra.
Legal Form
A public limited company incorporated in Bangladesh under the company Act 1913 (now the Companies Act 1994), listed with the
Dhaka and Chittagong Stock Exchange Limited since 02 December 2006. Licensed as Financial Institution under Financial
Institutions Act on 07 February 1995.
04
Discovering Extensive Range of Products & Services
IPDC is a diversified nonbanking financial institution catering to Corporate, SME and Individual clienteles for their finance and
savings needs. IPDC offers easy and customized solutions with fastest turn-around time. Besides, IPDC provides advisory services
to Corporate and SME clients for their new undertaking under the structured finance wing. Following is the list of products and
services offered by IPDC under the Corporate, SME and Retail business segments:
Corporate Business
The Corporate Financial Services Division of IPDC offers the full spectrum of corporate finance services to large public and private
enterprises. Products under corporate finance are as follows:
Lease Finance
Lease financing is provided against industrial machineries, commercial equipment, generators, vehicles, vessels, industrial large
engines, etc. that will be newly procured. Lease facility may also be provided against already procured/in-use industrial machinery,
commercial equipment, office equipment, generators, vehicles, vessels, engines, etc.
Term Loan
Term Loan is designed for the long-term business purposes. Term Loan is generally provided to meet various capital/fixed
expenditures such as balancing of production line, modernization of manufacturing process, expansion of capacity and space, etc.
Project Financing
For projects requiring large-scale investment, IPDC brings other Financial Institutions/Banks to raise funds through syndication
where IPDC acts as the lead arranger for the financing. Project Financing provided for setting up of a new unit as addition to the
existing product line and capacity, a new concern of an existing group, a new Joint Venture project of an existing company, etc.
Lease Finance
Lease finance is offered to small/medium size business for procuring fixed asset like commercial/office equipment, machineries,
generators, vehicles, vessels etc.
05
Financing Women Entrepreneurs
This product is exclusively tailored for the women in business to give them that extra edge and succeed.
Factoring
IPDC Factoring provides advance cash against invoices or bills. With IDPC factoring, customer does not need to wait for 90 to 180
days with their accounts receivables to meet their liquidity needs.
Retail Business
The Individual Financial Service division offers a variety of personal financial services to fulfill the needs of individuals. Liability
schemes offers mainly two types of schemes. The schemes are deposit schemes and savings schemes. A wide range of deposit
products which can be both beneficial and profitable as per the client’s needs under these two schemes. The unit provides high
quality services coupled with maximum security. Depositors can earn competitive returns from the hard-earned savings as well as
avail loan facilities against their deposits. A short description pf products under Retail business segment is given below:
Savings Schemes
Products under this schemes are Deposit Premium, Millionaire Deposit, Ultiflex Deposit schemes.
Deposit Schemes
Several range of products are offered in this type schemes. These are Annual Profit, Cumulative Profit, Fixed Deposit General,
Monthly Profit, Double Money Deposit, Quarterly Profit Schemes.
Home Loan
With a host of Home Loan options, the Home and Mortgage Unit aims to meet the individual needs for housing solutions.
Auto Loan
The Auto Loan Unit specializes in car financing for individuals and institutions.
Personal Loan
The Personal Loan Unit offers any purpose loans for personal need.
Club Royal
This is a complete package of prerogative services including personal financial advice to the high-value customers.
06
Expanding Milestones
Year
History
IPDC became the first private sector Development Finance Institution (DFI) in Bangladesh 1981
IPDC sponsors IDLC, the first leasing company, thereby introduced lease financing in the market 1985
IPDC gets the license from Bangladesh Bank as a Financial Institution under the Financial Institution Act 1993 1995
IPDC introduces Short Term Working Capital and Bridge Loan Finance 1999
IPDC introduces the concept of Preference Share Investment in the country by investing in Hyundai Cement Bangladesh 2000
(Later on known as Holcim Bangladesh)
IPDC invests in Preferred Stock of Delta BRAC Housing, the pioneer is Housing Finance in the private sector of the country. 2000
IPDC introduces Zero Coupon Bond through securitization of receivables with technical assistance from World Bank. 2004
AKFED takes the majority share of the company through buying the stakes from IFC, DEG and CDC. 2004
IPDC introduces Auto Loan and Club Royal, a High Net Worth Lifestyle product, first in the NBFI sector. 2008
-BRAC (25%), Ayesha Abed Foundation (10%), RSA Capital Limited (5%) acquires 40% shares from AKFED with AKFED 2015
retaining 11% of the shares.
-Establishing the five-year Strategic paper by realigning its focus on youth, women and Undeserved areas.
2016
-IPDC revamped and rebranded itself to IPDC Finance Limited from Industrial Promotion and Development Company of
Bangladesh Limited
07
Financing Projects
08
Generation Next (GENNEXT) Fashion Limited, Garment and Textile Industry
Babar Shoes Industries Limited, Shoe Industry Brothers Furniture Limited, Furniture Industry
Geo Steel (BD) Limited, Steel Industry Quantum Corporation Limited, Food Industry
09
Our Footprints
Chittagong Branch
Avenue Tower (3rd Floor) 115/134,
Lalkhan Bazar,Beside Dampara Police Line,
Chittagong.
Tel: +(88-031) 2866892-4
Fax: +(88-031) 2866895
Email: email.ctg@ipdcbd.com
10
Our Forseers
11
Our Go-getters
12
Our Organogram
13
Board of Directors
Board Audit Committee
Company
Head of Head of Head of Head of Head of Internal
Chief Financial Head of Chief Operating Head of Credit DMD & Head of Secretary
Corporate Human Corporate Business Audit &
Officer Treasury Officer Risk Management Retail Business & Head of
Business Resources Communications Transformation Compliance
Legal Affairs
Corporate
Head of Head of Head of Head of Head of National Sales
Finance
Central Information General Service Marketing, Distribution, Manager,
Operations Technology & Security Retail Business Retail Business Retail Business
Channel
Finance Deposit Product Branches Area/ Regional
Operations Sales Manager
Contact
Middle Market Mortgage
Center
Finance Treasury
Operations
Auto
Special Asset
Management Credit
Administration Personal
Loan
Deposits
Priority
Relationships
“We are optimistic about the macroeconomic
environment of the economy and the prospect
of the financial industry.“
Dr. Muhammad Musa
Chairman
15
Chairman’s Message
It is my great pleasure to welcome you all to the 35th Annual General Meeting of IPDC Finance Limited On behalf of the Board, I am
delighted to present key highlights of performance, future challenges and prospect of your company.
2016 has been a challenging year for the Banks and Non-Banking Financial Institutions (NBFI) as characterized by continuous
deterioration of asset quality, excess market liquidity, sluggish demand for credit which has resulted in lower Balance Sheet growth.
Yet, IPDC has registered strong operating performance, largely driven by solid balance sheet growth. At the end of year 2016 credit
portfolio has reached BDT 19,480.6 million, up by 203.6% from 2015. Classified loan ratio hit an industry-record-low of 0.71% at the
end of December 2016. IPDC has posted a 26.2% growth in Net Profit in 2016. EPS (Earning per Share) has moved to BDT 2.00 in
2016 from BDT 1.59 in 2015. The company also maintained healthy capital base reflected by higher capital adequacy ratio (CAR) of
22.09%. The results reflect our promise to deliver sustainable growth in our balance sheet and growing returns to our shareholders.
After transferring fund to statutory reserve based on the financial results of 2016, the Board recommends 20% (twenty percent)
stock dividend for the year ended 31 December 2016 for the approval of the shareholders.
The company contributed BDT 223.0 million to Government Exchequer in 2016 against BDT 116.3 million in 2015. We try to
contribute to the society through different initiatives. Our human resource policies strongly address areas like health and safety,
career advancement, equity and fairness and gender diversity at work place. In addition, financial inclusion of the people and
empowering women through financing are woven into our current business model.
As your company continues to grow, we are firmly focused on maintaining good corporate governance, putting sound internal
control system and risk management framework in place, promoting ethical practices and complying with laws and regulations. We
maintain highest standard of transparency and provide public disclosures to our keep stakeholders informed of our activities.
In December 2016, we changed our company name as “IPDC Finance Limited” to redefine our brand promise for the long-term
purpose of the company.
We are optimistic about the macroeconomic environment of the economy and the prospect of the financial industry. We identified
few market potentials specially in women entrepreneurship, SME (small and medium enterprises), retail and housing segments. Our
future growth strategy revolves around these pillars. We have taken an integrated approach of doing business. Therefore, we have
invested in all aspects of organization such as business, information technology, distribution, human resource and brand.
We are thankful to our customers for their continued loyalty and confidence on us. The Board also would also like to express its
appreciation to the management and employees for their outstanding commitment and effort. The Board is grateful to the Central
Bank for their prudential guidelines and support to us. The Board is also grateful to the shareholders who always keep confidence in
us. The Board is thankful to BSEC (Bangladesh Security and Exchange Commission), CSE (Chittagong Stock Exchange), DSE (Dhaka
Stock Exchange) and other regulators and valued business partners for their support to us.
Thank you,
16
“If you can dream it, you can achieve it.”
Mominul Islam
Managing Director and
Chief Executive Officer
17
CEO’s Message
In early 2016, IPDC finalized its five-year strategic plan keeping in view of the socioeconomic challenges and opportunities of
Bangladesh with an aim to make it more relevant to the aspiration of the country. With a growth led business plan in place,
appropriate capacity building took place in the areas of human resources, distribution network, technology and brand keeping
customer centricity at the core. As a result, 2016 marked as a record-breaking year for the company with strong operating
performance backed by solid business growth.
IPDC has done exceptionally well and exceeded expectations in all key performance areas. In 2016, Loans and Advances grew by
more than threefold to BDT 19,480.6 million from BDT 6,415.8 million in 2015. Deposit grew to BDT 17,179.2 million, up by 262.1%
against BDT 4,744.7 million in 2015. Classified loan ratio has gradually moved down during last five years and hit industry-record-low
at 0.71% in 2016 against 1.98% in 2015. Operating Profit has registered a growth of 12.5% against last year taking the figure to BDT
501.6 million in 2016 against BDT 445.8 million in 2015. Profit After Tax has increased to BDT 303.1 million in 2016, jump by 26.2%
against BDT 240.2 million 2015. EPS (Earning per Share) has moved to BDT 2.00 in 2016 against BDT 1.59 in 2015. CAR (Capital
Adequacy Ratio) remained strong at 22.09% at the end of 2016 against the Central Bank’s requirement of minimum 10.00%. The
strong CAR provides us ample opportunity to grow our asset further before we raise additional capital.
Established in 1981, IPDC has been evolving itself to cater to the private sector industrialization of the country focusing primarily on
the corporate segment. In December 2016, the company changed its name to ‘IPDC Finance Limited’ and relaunched its brand to
reposition itself to the diverse market segments of Corporate, SME ad Retail it wishes to serve as per the strategic plan. With
effective market communication, IPDC has emerged as one of the most vibrant and customer centric financial brands of the country.
IPDC also revamped its product ranges for the target market segments. IPDC has set ‘affordable home financing across the country’
as one of its key strategic priority. The home loan portfolio has grown by 11.6 folds during the year to BDT 1,560.09 million at the end
of year 2016 from only BDT 135.03 million a year earlier. Supporting new entrepreneurs in the SME sector remains another strategic
priority for IPDC. We are focusing on the Factoring Finance as a collateral free lending vehicle for the fast-growing SMEs in
collaboration with the corporate relationships. The Factoring Finance portfolio has grown by 3.5 folds in 2016 to BDT 675.92 million.
We have put women empowerment by supporting the women to acquire financial and nonfinancial assets as key pillar of our growth.
We have designed products with special benefits for women depositors and borrowers. As a result, around 30% of our individual
customers (both deposits and loans) are now women which was less than 10% a year earlier. IPDC has started disbursing credit and
mobilizing deposits beyond the mega cities. The company expanded its distribution reach by opening three new branches in
Narayanganj, Gazipur and Bogra. To keep pace with the growth, the company strengthened its human resource capacity by
recruiting and training people in both business and support functions. With an aim to grow and diversify its asset base, IPDC had
clear and balanced strategies in place embracing diverse customer groups and wide geographical boundaries. On funding side, IPDC
continued to add on low-cost retail deposit for profitable and sustainable growth in balance sheet. IPDC intends to gradually reduce
its dependencies on bank borrowing.
Customer always remains at the heart of everything we do. In 2016, we established dedicated Call Center to serve our customers
better. We continued to reengineer and simplify our business processes not only to bring efficiency but also to deliver delightful
experience to our customers. We undertook the initiative to build Sales, Customer Relationship Management (CRM) and Loan
Origination System to efficiently serve our growing customer base which is expected to go live in early 2017. Understanding the
current and future need of the business, we made significant investment in information technology, distribution network and brand
building. We made notable tie ups with strategic partners to leverage our distribution channel, increase our footprints, maximize
cross-selling opportunities and gain synergies through sharing resources and collaborative efforts.
IPDC nurtures a very open and vibrant working environment where people remain engaged and connected and work together
towards achieving the common goal. For the long-term success of the company, we have taken a holistic and integrated approach
of doing business. Therefore, we have embedded good governance, effective internal control system, strict compliance and ethical
culture into our business, process, systems and culture. We maintain zero tolerance on integrity and ethical issues. We make sure
that our business complies with regulatory requirements and is aligned with the long-term interest and risk appetite of the
shareholders.
We pledge to remain transparent and provide sufficient disclosures to our customers, shareholders, regulators and other
stakeholders. In our journey at IPDC, we try to build partnership with our stakeholders and promote constructive dialogues with them
to make sure that our strategies and decisions are consistent with their expectations.
We promise to stay ever-ready to embrace the changes in the external environment and aim to respond positively to the risks and
opportunities it creates.
18
We try to stand beside the good causes of the society. In this context, IPDC distributed blankets and free medicine to the poor
cold-affected people. Around 5,100 people were benefited by this initiative. The company also extended financial support through
charities in form of giving free eye check-ups; distributing free medicines; supplying eye glasses to the distressed children;
sponsoring competition to promote early child education program for the underprivileged children; distributing bicycles to girls
student; supporting building of libraries at the schools for underprivileged children; donating toys to the underprivileged children;
supporting supply of dry foods to the flood affected areas etc.
Bangladesh economy has produced another good year in 2016, which is evidenced by low inflation rate of 5.0%, healthy foreign
exchange reserve of BDT 32 billion, higher consumer spending, growing per capita income, GDP growth rate of 7.1%, stable foreign
exchange rate and tested ability to absorb external shocks exposed by global macroeconomic environment. Moreover, people are
spending more on consumer durables and life style products and significant proportion of total work force is coming from young and
middle aged group. Hence, we are optimistic about the prospect of the economy and the financial industry. Our forecast suggests
that the demand for domestic investment and credit is expected to speed up in 2017. Thus, financial industry, which somehow
struggled in 2016, is expected to regain its momentum in 2017. The economy and financial industry is expected to stay buoyant in
coming years.
It had been a difficult journey for IPDC to reestablish itself on a strong foundation which is reflected by clean balance sheet, higher
capital base and lower classified loan ratio. In 2016, we reviewed our business fundamentals and redefined our growth pillars for the
sustainable long term success of the company. IPDC will continue to build its business focusing on its strategic pillars including
empowering women, creating entrepreneurs, brining joys to lives through consumer convenient goods at home and fulfilling dreams
of thousands of middle and low income households across the country through offering Affordable Home Loans, besides continuing
to support the private sector industrialization. In coming years, IPDC will invest significantly in technology led business models to
introduce new financing to the underserved population of the country with better convenience and lower cost. We aim to make
meaningful contribution to the society as well as pledge to deliver long-term value to our shareholders. We aspire to establish IPDC
as the strongest financial brand in the country for the households and women segment.
We are thankful to our valued customers for their long and valuable association with us. We are grateful to our regulators especially
Bangladesh Bank who have been relentlessly providing guidance and support to us. We also express our heartiest gratitude to our
valued shareholders who continue to keep faith on us. I am indebted to the honorable Board of Directors of the Company for
adopting exemplary corporate governance practice and culture and providing us the vision, courage and guidance to shape the
future direction of the company.
We will continue to create positive impact to the surrounding societies, environment, economy and life of the people. We promise
to create values for our shareholders and pledge to protect their long- term interest.
Thank you,
Yours truly,
Mominul Islam
Managing Director and Chief Executive Officer
Dhaka, 19 February 2017
19
Our Credos
From the very inception, IPDC on record has been playing an instrumental role in building up the nation when it was in the phase of
dire need. And now when IPDC is fortunate enough to witness the rising nation, yet again it emerged to cater to the latent demands
of the people which were least expected from any financial institution so far. IPDC is impartially enthusiastic to rise with the nation
by putting forward youth, women and underserved areas. In alignment with its vision to be most passionate financial brand in the
country, IPDC has embraced a new logo and pay off line “Jaago Uchchashe” that speaks loud of its perception behind the revamp of
the organization. Moreover, the contemporary color palette that has been chosen for the brand exclusively has been a breakthrough
choice moving away from the traditional banking and NBFI like. IPDC strive to not only promote its offerings rather provide financial
assistance by guiding customers to reach the best fit for them which need not be IPDC product only. That’s where IPDC finds itself
serving as a true financial partner to let its customers fulfill all their desires and live unbound.
Our Mission
To enable our customers and communities to rise unbound, to live up to their fullest potential by extending innovative financial
solutions in a friendly, timely, transparent and cost-effective manner.
Our Vision
To become the most passionate financial brand in the country with special focus on youth, women and underserved areas.
Core Values
Setting
Displaying Harnessing
Promoting the standard
the highest Demonstrating the power of
Diversity for the best
level of a strong Always Technology
in the Corporate
Integrity Will to Win encouraging to deliver
work place Citizenship
in the way we in the Teamwork better
and in the
conduct market place customer
community communities
ourbusiness experience
we wo
20
These three pillars are built on the following sets of core values:
Delivering extraordinary customer experience by placing customer at the heart of everything we do
Displaying the highest level of integrity in the way we conduct our business
Demonstrating a strong will to win in the market place
Promoting diversity in the work place and community
Encouraging teamwork and collaborative efforts
Harnessing the power of technology to deliver better customer experience
Setting the standard for the best corporate citizenship in the communities we work
Home Loans
Given the demand and growing income level of the middle and low income households, IPDC aims to build home loan portfolio by
creating new market (middle and low income households) with new set of product propositions.
Empowering Women
Creating and promoting women entrepreneurs though financing has been included in our strategy agenda.
Creating Entrepreneurs
With the emergence of new generations and their attitude towards doing business, IPDC plans cater to this sector with right product
offerings and distribution coverage.
Beyond Megacities
IPDC envisages to extend retail credit beyond the megacities where level of competition is yet to intensify.
21
Our Celebrations
IPDC Revamp
Jaago Ucchash Activation
When IPDC has it reincarnation by embracing a new name,
logo and pay off line. Before, declaring it to the world, IPDC
made a point to celebrate the joy of its much-awaited
announcement and revelation to its own members. Hence, a
very endearing activation had been in place to create the
ambience of starting a new era. Everyone was in the IPDC
branded T-shirt. The new logo was revealed by the CEO and
MD, Mr. Mominul Islam himself. Everyone gave a piece of
their mind with their own perception of “Ucchash” on the
Ucchash Board. After which the whole environment turned
fun and frolic with the photo session on social media photo
booth and Ucchash themed snacks. The day ended with
each and every employee having their profile picture on
social media with the IPDC ‘Jaago Ucchashe’ frame depicting
one big family to the world under a single face.
Employee Night
Before the big night on 20th December 2016, IPDC took the
previous night on 19th December to mark an unforgettable
night with all the employees and staff. The night started with
MD and CEO addressing and charging up the night. Several
gifts and prize distribution upon games involving everyone in
the room raised the spirit of participation among all.
Everyone was baffled at the unique way of disclosing the
logo by Guinness record holder Canadian bubble artist Fan
Yang who thrilled everyone for the very first time in
Bangladesh. The series of skits and dance performance from
the employee themselves as well as the band enticed
everyone. The night got younger with everyone grooving
over the DJ’s music. The grand dinner served in Radisson Blu
Dhaka dazzled the taste buds till date.
Gala Night
The much longed and coveted night had witnessed its
existence on the 20th December 2016. The night marked the
embarkation of new era for IPDC Finance Limited. All the
stakeholders from clients and partners shared this moment
of joy. His highness Mr. Abul Maal Abdul Muhith country's
Finance Minister honored the gathering. All the guest were
awe struck with the AV that brought goosebumps as it
depicted the very milestones it marked with its inception to
the day of rebranding by molding a new era. All the guests
were stunned with the bubble artist’s Fan Yang , Guinness
world record holder’s sensational act of revealing the logo to
the world. All the guest witnessed such trail blazing act first
time ever in Bangladesh. The all busted in thunderclap with
every stunt of the artist along with the string of enticing
performances. The giant Ucchash board capped in various
thoughtful wishes and stimulated the spirit of unbound
success ahead.
22
Editor’s Meet
Before the bells of Rebranding, IPDC grabbed the attention of
all the top-notch editors of the country with a very
sophisticated gathering at the most coveted Editor’s Meet in
Splash, Westin Dhaka. The evening had witnessed the most
influential personalities in the world on news and media. The
news of which buzzed in the city for quite some time.
23
Pohela Boishakh, 2016
The whole office was draped in the festive aura with the
decoration to the outfit to Bengali cuisine that lit up the
tastebud of all employees. In IPDC , bringing together all the
stakeholders in the moments of joy and celebration, hence a
special lunch was organized for the clients as well as the
employees to relish the traditional food and give inherent
meaning to the day.
24
Moments of 34th Annual General Meeting of IPDC Finance Limited, 2016
Shareholder registering their presence for the Honorable Chairman delivering his speech
Annual General Meeting at the registering booth in the 34th Annual General Meeting
The Board of Directors at the 34th Annual General Meeting One of the Honourable shareholders addressing
in the 34th Annual General Meeting
Chairman exchanging opinions with the shareholders The Board of Director,IPDC officials and few
in the 34th Annual General Meeting of the shareholders inthe 34th Annual General Meeting
25
NOTICE OF THE 35th ANNUAL GENERAL MEETING
Notice is hereby given that the 35th Annual General Meeting (AGM) of the shareholders of IPDC Finance Limited will be held at Trust
Milonayaton, 545, Old Air Port Road, Jahangir Gate, Dhaka Cantonment, Dhaka-1206 on Tuesday, 02 May 2017 at 9:00 a.m. to
transact the following proceedings:
AGENDA
1. To receive and adopt the Directors’ Report, Auditor’s Report and Audited Financial Statements of the Company for the year
ended 31 December 2016;
2. To declare dividend for the year ended 31 December 2016;
3. To elect/re-elected Directors;
4. To appoint the Auditor and to fix their remuneration;
5. To confirm the appointment of nominee directors, Mr. Mohammad Mamdudur Rashid & Ms. Tamara Hasan Abed of BRAC, Mr.
Md. Enamul Hoque & Mr. Sadaruddin Ahmed of Government of the People’s Republic of Bangladesh;
6. To transact any others business (if any) with the permission of the Chair.
Samiul Hashim
Company Secretary
Notes:
1. 13 March 2017 was the Record Date for entitlement of the Dividend for the year ended 31 December 2016
2. Admission into the venue of the AGM will be allowed on submission of the attendance slip.
3. Only the share holders or their appointment proxies will be allowed to attend the meeting.
4. A shareholder, intending to appoint a Proxy, must deposit the duly stamped Proxy Form at the Company’s registered office no
later than 48 hours before the day of the AGM.
5. Except the shareholders or valid proxies, no one will be authorized to complete registration process.
26
Letter of Transmittal
To
All Shareholders,
Bangladesh Bank,
Registrar of Joint Stock Companies and Firms,
Bangladesh Securities and Exchange Commission,
Dhaka Stock Exchange Limited, and
Chittagong Stock Exchange Limited.
Dear Sir(s):
We are pleased to enclose a copy of the Annual Report of IPDC Finance Limited together with the Audited Financial Statements for
the year ended 31 December 2016 for your kind information and record.
Sincerely Yours,
Samiul Hashim
Head of Legal Affairs and Company Secretary
27
Shareholders’ Profile
Capital Structure Aga Khan Fund for Economic Development (AKFED): Aga
IPDC Finance Limited is the first private sector financial Khan Fund for Economic Development (AKFED) is an
institution of the country established in 1981 by a distinguished international development agency dedicated to promoting
group of shareholders namely International Finance entrepreneurship and building economically sound enterprises
Corporation (IFC), USA, German Investment and Development in the developing world. AKFED operates as a network of
Company (DEG), Germany, The Aga Khan Fund for Economic affiliates with more than 90 separate project companies
Development (AKFED), Switzerland, Commonwealth employing over 47,000 people. Because of its development
Development Corporation (CDC), UK and the Government ethos, it reinvests all profits in further development. For more
Peoples Republic of Bangladesh (GOB). than 75 years, AKFED has made investments and operated
companies in the developing nations of Africa, South Asia and
In early 2004 AKFED acquired 70% stake in IPDC by purchasing Central Asia. The Fund is active in 18 countries in the developing
the shares from IFC, CDC and DEG. In 2006, the shareholding world: Afghanistan, Bangladesh, Burkina Faso, Burundi, the
structure was changed by issuance of public shares with AKFED Democratic Republic of the Congo, India, Ivory Coast, Kenya,
maintaining the management control of the company holding Kyrgyz Republic, Mali, Mozambique, Pakistan, Rwanda, Senegal,
51% of the shares. Syria, Tajikistan, Tanzania and Uganda.
In 2016, BRAC (25%), Ayesha Abed Foundation (10%), RSA AKFED seeks to create profitable, sustainable enterprises
Capital Limited (5%) acquired 40% shares from AKFED with through long-term investments that result in strong equity
AKFED retaining 11.05% of the shares. The rest are owned by positions. This in turn allows AKFED to take a “hands-on”
Government of People’s Republic of Bangladesh (21.88%) and approach by providing managerial and technical expertise.
General Public (27.07%). Profits generated by the Fund are reinvested in other economic
development initiatives under the AKFED umbrella.
As on 31 December 2016, IPDC has an Authorized Capital of
BDT 4,000,000,000; and Issued, Subscribed and Paid up AKFED often works in collaboration with local and international
Capital of BDT 1,515,005,670. Ordinary shares have a face value development partners to create and operate companies that
of Tk.10 each. provide goods and services essential to economic
development. These range from banking to electric power,
Brief Description of the Owners agricultural processing, hotels, airlines and
telecommunications. AKFED also works with Governments to
BRAC: BRAC, an international development organization based help promote the creation of enabling legal and fiscal structures
in Bangladesh, is the largest non-governmental development that encourage the growth of the private sector.
organization in the world, in terms of number of employees as of
September 2016. Established by Sir Fazle Hasan Abed in 1972 Ayesha Abed Foundation (AAF) : In 1982, Ayesha Abed
after the independence of Bangladesh, BRAC is present in all 64 Foundation was founded in the honor of the late Ayesha Abed.
districts of Bangladesh as well as other countries in Asia, Africa, The primary focus of AAF was clear to empower women from
and the America. BRAC is in a strategic partnership with UK's every nook and cranny of Bangladesh; especially women in
Department for International Development and Australia's devastating states who had endured a lot of pain and suffering.
Department of Foreign Affairs and Trade where they are working
together to bring positive changes in the lives of people. AAF acts as a facilitator in gathering and organizing both skilled
and untrained artisans from various village organizations across
BRAC employs over 100,000 people, roughly 70 percent of the country and providing them with training and employment
whom are women, reaching more than 126 million people. The in its numerous centers which serve as Aarong's production
organization is 70-80% self-funded through a number of social hubs. Even Aarong was born out of need, initially acting as the
enterprises that include a dairy and food project, a chain of only buyer for AAF products. Aarong is a social enterprise
retail handicraft stores called Aarong, Seed and Agro, Chicken creating livelihood and opportunities for over 65,000 rural
etc. BRAC has operations in 11 countries of the world. artisans, 95% of whom are poor women. Ever since AAF was
founded, Aarong has primarily been taking hand-made
Government of the People’s Republic of Bangladesh: The products by workers who are under it.
Government of Bangladesh aims at diversifying the economic
base of the country by facilitating investments in an identified AAF’s work can be considered to be completely synonymous to
series of priority areas. Ministry of Industries and Ministry of women empowerment. AAF doesn’t just generate income for
Finance was responsible for the inception and initial investment women but works towards enabling women with courage,
during the inception of IPDC with the target of facilitating and independence and dreams waiting to be realized.
promoting industrial financing in Bangladesh.
29
RSA Capital: RSA Capital is a private equity firm from We aim to generate sustainable financial returns to our
Bangladesh. RSA established its name through a milestone shareholder and protecting their interest and seizing growth
transaction – the world’s first microcredit securitization for opportunities within the risk structure of the shareholder.
BRAC (the world’s largest NGO).
IPDC has a total 151,500,567 shares with 88.95% domestic
The firm primarily provides Structured Finance, Equity and holding and 11.05% foreign holding. Details of shareholding
Merger and Acquisition advisory services to financial structure are as follows:
institutions. They also make domestic and international
proprietary and strategic investments.
Amount in BDT
2016 2015
Share capital
Authorised
400,000,000 ordinary shares of Taka 10 each 4,000,000,000 4,000,000,000
Foreign
Aga Khan Fund for Economic Development (AKFED) 167,441,320 139,534,440
167,441,320 139,534,440
Domestic
BRAC 378,751,410 315,626,180
Ayesha Abed Foundation 151,500,570 126,250,480
RSA Capital Limited 75,750,280 63,125,240
Government of the People's Republic of Bangladesh (GoB) 331,476,640 276,230,540
General shareholders 410,085,450 341,737,850
1,347,564,350 1,122,970,290
1,515,005,670 1,262,504,730
2016 2015
Number % of holding Number % of holding
Share capital
Foreign
AKFED 16,744,132 11.05 13,953,444 11.05
16,744,132 11.05 13,953,444 11.05
Domestic
BRAC 37,875,141 25.00 31,562,618 25.00
Ayesha Abed Foundation 15,150,057 10.00 12,625,048 10.00
RSA Capital Limited 7,575,028 5.00 6,312,524 5.00
GoB 33,147,664 21.88 27,623,054 21.88
General shareholders 41,008,545 27.07 34,173,785 27.07
134,756,435 88.95 112,297,029 88.95
151,500,567 100.00 126,250,473 100.00
30
Share holding structure Distribution of No. Shares-2016
27.068% 11.052% 2.62% 1.39 1.43% 0.58%
25.00% 0.32% 0.97%
1 to 500 shares
AKFED 501 to 5,000 shares
BRAC 5,001 to 10,000 shares
Ayesha Abed Foundation 10,001 to 20,000 shares
RSA Capital Limited 20,001 to 30,000 shares
GoB 30,001 to 40,000 shares
General shareholders 40,001 to 50,000 shares
50,001 to 1,00,000 shares
10.000%
21.880% 5.000% 1,00,001 to 1,000,000 shares
80.44% 9.29%
2.39% over 1,000,00
0.57%
No. of No. of % of
shareholders shares holdings
Number of shares
31
Directors’ Report to the Shareholders
Economic Review of Year 2016 Tax revenue collection in the first half of FY 2016-17 and
World economy implementation of ADP (annual development program) has
fallen short of target. Government continues to rely on
The world has not recovered fully yet from the global financial borrowings to finance the deficit. Government initiatives in the
crisis. The global economic growth is estimated to have slowed areas of energy, special economic zones, and rapid transit
in 2016 to a post-crisis low of 2.3%; however, a moderate systems are yet to receive the desired momentum. The overall
recovery is expected in 2017 with the GDP forecast to increase fiscal policy, however, has been consistent with macroeconomic
to 2.7%, which is mainly driven by the growth in emerging and stability.
developing economies.
Financial sector
While the world is on the verge of economic recovery, the
prospect of 2017 and beyond is against under serious cloud Sluggish performance of real estate sector and low appetite for
following some geo-political events in 2016 such as Britain’s private sector investment have resulted in low demand for
vote to leave European Union (Brexit), appointment of a new US credit. The gap between demand and supply has caused excess
president, OPEC’s decision to cut crude oil production, leakage liquidity in the market. As a result, interest rates on both loans
of Panama Papers and the fact that Central Banks of advanced and deposits continued to fall and loans and advances posted a
economies have reached their limits of expansionary monetary modest growth. Industry wide asset quality has deteriorated
policy measures that could restrict them from taking further further as reflected in higher non-performing loan ratio. In
addition, gradual implementation of BASEL III has reduced
33
Directors’ Report (continued)
banks’ lending capacity. With low balance sheet growth, million in 2016 vis-à-vis BDT 5,525 million in 2015. In addition to
reduced spread and falling asset quality, Banks and NBFIs are the product wise portfolio diversification, the credit portfolio of
facing difficult times to achieve profitability targets. In an IPDC is also well diversified across different sectors.
attempt to curtail deterioration of asset quality, the Central Bank
has strengthened its vigilance and supervision over the Performance Highlights
industry. Despite the weaker performance of the financial sector, IPDC
recorded an extraordinary performance as measured in terms of
Overall performance of the industry is largely held back by the important KPIs including balance sheet growth, profitability,
weaker lending performance, operational inefficiencies and NPL management and solidity of its financial position. It was
poor asset quality of state-owned banks. In addition, few made possible because of the combination of various factors
unexpected events in the banking sector have created some such as new strategies for target market segments, revamping
disturbances in the overall discipline of the industry. of products and services ranges, improved human resource
capacities, prudential credit risk management and robust
Call money borrowing rates remained stable with the year follow-up to reduce non-performing portfolio (NPL) and mostly,
average of 3.67%. Average interest rate on loans and advances the team work and collaborating efforts of the employees.
has fallen to 10.45% in 2016 from 11.68% in 2015 and similarly Exponential growth carries with it some measure of risks. IPDC
interest rate on deposit has gone down to 5.65% in 2016 from has been well-aware of the inherent risk it faces and it has
6.83% in 2015. Because of the parallel shift in interest rates, consequently strengthened its risk management framework and
spread stayed flat at 4.80% in 2016 vis-à-vis 4.85% in 2015. internal control systems to best in class standards to all allow us
Classified loan ratio of banks hit high at 10.3% as of September to deliver strong and sustainable value to its shareholders.
2016.
Outstanding loans and advances has jumped to BDT 19,481
Because of higher delinquency rate, lower margin and higher million in 2016, up by 204% against BDT 6,416 million in 2015.
capital adequacy requirement on corporate portfolio some Classified loan ratio stood at 0.71% in 2016 as opposed to
Private Commercial Banks (PCBs) tend to diversify their 1.98% in 2015. IPDC’s classified lending portfolio continued to
portfolio with renewed focus on high-yield SME and retail reduce in every year since the year 2010 due to its prudent
lending. policies and rigorous due diligence exercised while extending
new credit as well as intensive focus on recovery from the
In NBFI sector, average interest rate on loans and advances has legacy default accounts. The lower level of classified loan ratio
fallen to 13.10% in 2016 from 14.89% in 2015 and similarly bears testament to our combined efforts in improving assets
interest rate on deposit have fallen to 9.03% in 2016 from quality.
10.56% in 2015. Average cost of fund has moved down to 7.95%
in November 2016 from 8.98% a year ago. Classified loan ratio On the deposit front, focus remained on individual small ticket
stood at 9.0% as of June 2016. deposits rather than large ticket institutional deposits. During
the year 2016, IPDC continued to add on low-cost and
Principal Activities small-ticket deposits to reduce cost of funds and support stable
The principal businesses of the Company are related to finance and sustainable long term growth of the balance sheet. The
and finance associated activities. These areas include deposits increased liquidity arising out of these initiatives enabled the
collection; credit to corporate organizations, retail and SMEs; company to release many high-cost large ticket deposits. Term
factoring finance; project finance; leases; hire purchase; deposits, including deposit taken from individuals, institutions
equity/quasi-equity investments and advisory services. In 2016 and banks and NBFI, stood at BDT 17,179 million in 2016, up by
IPDC penetrated strongly in retail market, renewed its focus on 262% of BDT 4,745 million in 2015. IPDC did not have any net
SME segment and concentrated more on collecting low-ticket bank borrowing during the year as borrowing from banks/FIs
size retail deposit to support long term financing and widening has been less than placement of funds with banks and FIs.
distribution coverage. IPDC offers multiple business services IPDC’s reliance on its term deposits for lending ensures that the
through its 9 branches including head office. The branches are company is well protected from interest rate volatility, liquidity
located at Motijheel, Dhanmondi, Gulshan, Uttara, Chittagong, shock and this approach also allows the company to adopt a
Sylhet, Gazipur, Narayangonj and Bogra and cover the prudent strategy for locking loans for a longer period at a
geographical area of Dhaka, Chittagong, Sylhet and Rajshahi. competitive rate.
Diversified Credit Portfolio Net Interest Income during the year increased to BDT 638
Diversification of credit related products is one of the million in 2016 compared to BDT 431 million in 2015; posting a
Company’s strategic priorities. The well diversified portfolio of solid growth of 48%, which is in alignment with the portfolio
IPDC includes term loan financing that represents 69% of total growth. In contrast, Investment Income amounted to BDT 47
loans, followed by lease financing 13%, mortgage financing 8%, million in 2016 against BDT 55 million in 2015. Commission,
auto loan 4%, factoring financing 4% and other forms of Exchange and Brokerage mainly derived from fees income,
financing 2%. Despite a fairly weak investment climate, IPDC which has jumped to BDT 36 million in 2016 from BDT 8 million
ended the year with fresh credit disbursement of BDT 25,030 in 2015, due to higher disbursement and concentration on
34
Directors’ Report (continued)
IPDC posted Operating Profit of BDT 502 million in 2016 Total capital fund of the company under Basel II has increased
compared to BDT 446 million in 2015, posting a healthy growth by BDT 448 million and stood at BDT 2,922 million in 2016
of 13% over the previous year. IPDC continued to adhere to its against BDT 2,474 million in 2015. Tier-I capital has grown by
rigorous approach in dealing with the non-performing and high BDT 302 million and stood at BDT 2,651 million in 2016 against
risk credit portfolio that resulted in a consistent reduction of BDT 2,348 million in 2015. Total capital fund is equivalent to
classified loan ratio. Consequently, IPDC made a provision for 22.09% of total risk weighted assets. The minimum requirement
loan loss of BDT 34 million in 2016, against BDT 102 million in of this ratio as set by the central bank is 10.00%.
2015. Therefore, Profit Before Tax (PBT) in 2016 have registered
an impressive growth of 36%, taking the figure to BDT 468 More details relating to capital management are given in the
million in 2016 against 344 million in 2015. The company notes to the accounts of this annual report.
recorded a Profit After Tax (PAT) of BDT 303 million in 2016,
posting a healthy growth of 26% over 2015. Shareholders’ Equity and Shareholders’ Value
Shareholders’ equity of IPDC stood at BDT 2,775 million in 2016,
Key Operating and Financial Information
up by 12% from last year. Paid up capital increased to BDT 1,515
Key operating and financial data of the preceding five years and million in 2016 because of issue of bonus shares, posting a
significant deviation as per requirement of BSEC Notification growth of 20% over last year.
No. SEC/CMRRCD/2006-158/134/Admin/44 dated August 07,
2012 are presented in Annexure-I as Key Operating and Share premium remained flat at BDT 167 million in 2016, while
Financial Data. statutory reserve increased to BDT 393 million in 2016, up by
18% over last year for transferring 20% of Profit After Tax in
Proposed Dividend and Appropriations of Profit 2016 to statutory reserve.
In the year 2016, the Company posted Profit After Tax of BDT
303 million which is 26% percent higher than that of the Retained Earnings or distributable profit saw marginal
previous year. Considering the Profit After Tax and the total de-growth of 2% in 2016 because of bonus share issued in
available profit for distribution after complying with the 2016 and making transfer of profit after tax to statutory
regulatory requirement, the Board recommended 20% (twenty reserves.
percent) stock dividend for the year ended 31 December 2016
for the approval of Shareholders in 35th Annual General Meeting The strong capital base, as reflected in growth in shareholders’
scheduled to be held on 02 May 2017. equity, has created opportunity space for the company to
Amount in BDT million expand its business, absorb unexpected loss and withstand any
2016 2015 external shock.
Particulars
Retained Earnings bought forward 333 393 The Earnings Per Share (EPS) increased to BDT 2.00 in 2016
Net Profit after Tax 303 240 against BDT 1.59 in 2015 (after restatement) and return on
Profit available for appropriation 636 633 equity stood at 11.55% during 2016 compared to 10.08% in
2015. Market capitalization stood at BDT 6,469 million as on
Appropriations: closing day of December 2016 vis-à-vis BDT 3,371 million as on
Transfer to Statutory Reserve closing day of December 2015. Market value per share stood at
(20% of PAT) 61 48 42.70 as at 31 December 2016 (DSE) compared to 26.70 at 31
Proposed Stock Dividend @ 20% 303 253 December 2015 (DSE).
Retained Earnings 272 333
35
Directors’ Report (continued)
IPDC remains fully committed to deliver higher shareholder and operations. Moreover, IPDC possesses a detailed risk
value. The steady growth in company’s asset size and management system with procedures in place to support risk
continuous improvement in asset quality and smooth growth in evaluation across the Company. The risks associated with the
profitability underpins the value the shareholders derived from delivery of the business plan and annual work programmers and
investing in the shares of the Company. In 2016 the Company the associated mitigation measures are maintained in asset or
exceeded the expectations in delivering profits, growing project risk matrices and registers.
Balance Sheet and meeting other KPIs and is, therefore,
well-poised to deliver good results in future. IPDC possesses different committees for risk management. The
Management Credit Committee (MCC) and Asset and Liability
Human Resources Management Committee (ALCO) is constituted by the Company’s top level
IPDC's vision envisages the most effective use of our human management team who frequently review issues related to the
resources through the optimum enhancement of knowledge, market, credit and liquidity and accordingly recommend and
skills, abilities and personal attributes of our employees. A implement appropriate measures to proactively identify and
healthy environment has been created where employees take mitigate risks. IPDC has an approved Asset Liability
pride in their works and are aligned to the objectives set by the Management (ALM) Policy, under the responsibility of the
Board and management. Believing that the human resources are ALCO, together with a dedicated ALM desk to generate
main elements for the success and sustainable growth of the necessary MIS for improving ALCO’s decision-making abilities.
Company. IPDC is developing and motivating the workforce with The Company’s Credit Risk Management (CRM) department
contemporary Human Resource policies and attractive independently examines projects from a risk-weighted
employee benefits. The company is not only offering a job but perspective and assists relevant departments in setting
also the opportunity for learning, development, in a challenging business development priorities. These are aligned with the
and rewarding career. In this connection, the company runs Company’s risk appetite while optimizing the risk-return
rigorous performance management program to motivate and trade-off derived from relevant risk exposures. The CRM team
reward people for their good efforts. IPDC endeavours to create also clearly defines exceptionally high-risk sectors and
a vibrant work force who works collectively towards achieving prohibits lending to those projects which the Company does
the common goal. Human resource (permanent) headcount not ascribe to, including those which represent negative
increased to 203 as of December 2016 against 71 as of environmental, social or ethical standards.
December 2015. Additional resources, including some in
leadership roles, were recruited to support expansion of At an individual exposure level, risk grading model is used to
business and distribution network. promote corporate safety and sustainability by facilitating
informed decision-making. At the portfolio level, the Company
Risks and Concerns actively tracks the quality of its loans by analysing risk migration
and trends in non-performing assets. Such indicators prompt
Maintaining a prudent risk management framework is an timely decision-making by the relevant risk management
essential component of business success at IPDC and that is committees in preserving the quality of loans and advances.
why formal and structured approach towards risk management IPDC’s Credit Risk Management Department and Internal Audit
is adopted in the way we do our business. At IPDC we make sure & Compliance Department are responsible for assessing
that company operates within the risk appetite of the operational risks across the Company and also ensuring an
shareholders. The identification, evaluation and management appropriate framework to identify, assess and manage
of risk, together with the way we respond to changes in the operational risks.
external operating environment, are a key to our success and
underpin the robustness of our business plans and strategic At IPDC, we are always committed to managing the risks
objectives, protect our license to operate and our reputation associated with business and delivering high value to our
and help to create long-term competitive advantage. Risk stakeholders by maintaining effective and robust Risk
management is embedded in IPDC’s organizational structure, Management Systems which not only mitigate these risks but
culture, operations, systems and process. Business risks across also provide an appropriate trade-off between risk and return.
the Company are addressed in a structured and systematic way The principal risks associated with IPDC as well as their relevant
through a predefined risk management structure. This ensures governing policies and how they support the risk appetite is
the Board’s assessment of risk is continually updated with the furnished below.
relevant risk factors and mitigating controls originating from
and identified by the Company’s assets, functional departments
36
Directors’ Report (continued)
Credit Risk including Board Approved Credit Policies Exposures to a single or group related counterparties (upper
Concentration Risk including large Credit Exposure and credit limit set is the policy including the coverage of security).
Industry Sector Concentration Polic Industry concentration (exposure and risk adjusted
concentration limit)
Market Risk Board Approved Credit and Interest Rate Risk (Market value sensitivity and Net Interest
ALM Policy Margin Risk Limit)
Liquidity Risk Board Approved Assets Liability Holding of liquid assets as a contingency plan to use at the time
Management (ALM) Policy of liquidity crunch.
Operational Risk Operational Risk covered with A number of risk management policies and comprehensive risk
Company Core Risk assessment and control assurance process.
Management Policies
Compliance Risk Company Core Risk Business unit compliance framework and skill compliance
Management Policies professional.
Reputational Risk Best Practice Corporate Culture Professionalism and leadership, best efforts for customer service
37
Directors’ Report (continued)
at a time when all the banks in Bangladesh remained of new three branches and purchase of vehicles. The details of
nationalized. capital expenditure are reflected in the Property, Plant and
Equipment Schedule in the Notes to the Financial Statements.
Since its inception IPDC has played a pivotal role over the last
three decades in developing the private sector industry in Going Concern
Bangladesh through various landmark projects in partnership Going concern is one of the fundamental assumptions in
with renowned corporate houses. IPDC has made significant accounting on the basis of which financial statements are
contributions in the development of the health, education and prepared. Financial statements are prepared assuming that a
agro-based industries of the country. Since inception IPDC has business entity will continue to operate in the foreseeable
been evolving with innovative and diversified product to meet future without the need or intention on the part of management
the need of diversified customer groups, which has to liquidate the entity or to significantly curtail its operational
distinguished the company from the peers. Empowering activities. Therefore, it is assumed that the entity will realize its
women through financing remains one of the key agenda at assets and settle its obligations in the normal course of the
IPDC and therefore, the company formulated flexible and business. It is the responsibility of the management of a
special schemes for this customer groups. Given the potential company to determine whether the going concern assumption
of SME sector in the economy and opportunity it offers, IPDC is appropriate in the preparation of financial statements. If the
also renewed its focus on SME business. Sustainable going concern assumption is considered by the management to
economic development is the key focus of the Company and be invalid, the financial statements of the entity would need to
corporate social responsibility is woven into the totality of our be prepared on break up basis. This means that assets will be
operations. recognized at amount which is expected to be realized from its
sale (net of selling costs) rather than from its continuing use in
IPDC envisages continuing and expanding its role as catalyst in the ordinary course of the business. Assets are valued for their
inspiring, strengthening and enhancing the financial sector individual worth rather than their value as a combined unit.
development of the country. IPDC always prioritizes sectors Liabilities shall be recognized at amounts that are likely to be
which help the sustainable growth and the economic settled.
development of the country. In general, IPDC avoids investing in The company displays no symptoms (as indicated below) of
projects which are hazardous to the environment. During possible problems of going concern:
project appraisals concerned personnel examine whether the
project is indeed viable and whether it complies with the • Deteriorating liquidity position of the company not backed by
Environment Conservation Act 1995 and Environment sufficient financing arrangements
Conservation Rules 1997 and other rules and regulations • High financial risk arising from increased gearing level
relating the environment. In addition to our mentioned rendering the company vulnerable to delays in payment of
approach, IPDC has taken initiative for in-house environment interest and loan principle
management, compiling a Green Office Guide, incorporation of • Inability of making debt payments when falling due
Environmental Risk in CRM, introducing Green Finance, creating
of Climate Risk Fund, introducing Green Marketing, supporting • Over trading, that is, selling beyond financial capacity of the
Employee Training, Consumer Awareness and Green Event etc. company
in line Bangladesh Bank regulations. • Significant trading losses being incurred for several years
• Profitability of the company is essential for its survival in the
In order to serve the diverse needs of our customers, IPDC long term
offers a range of products and services covering corporate
finance and advisory services, mortgage finance, retail finance, • Aggressive growth strategy not backed by sufficient finance
middle market supply chain finance, retail wealth management • Increasing level of short term borrowing and overdraft not
and retail finances. supported by increase in business
• Inability of the company to maintain liquidity ratios as
During the year 2016, IPDC has deposited a total amount of BDT defined in the loan covenants
223 million, 1.92 times of last year’s figure, to the national
exchequer in form of corporate tax, withholding tax, excise duty • Serious litigations faced by the company or high off-balance
and VAT. sheet liability for which the company does not have the
financial strength to pay the possible Settlement
Statutory Payments • Inability of the company to develop a new range of
The Directors are satisfied that to the best of their knowledge commercially successful products
and belief all statutory payments to all authorities have been • Refusal by finance providers to renew existing facility or make
made on a regular basis. new loans
• Operating in an industry which is no more profitable
Capital Expenditure
• Failure to innovate and respond to the changes in the
In 2016 the company incurred capital expenditure of BDT 52 external environment
million mainly for renovation of existing branches, construction
38
Directors’ Report (continued)
• Failure to adjust high operating gearing (fixed cost to total Mr. ASIF SALEH* - Nominated by BRAC
cost) while industry or company revenue is falling * Mr. ASIF SALEH retires, but he has not been considered for re-election as he will
be resigning and replaced by Ms. TAMARA ABED, who being eligible, offered
• Falling margin with no sign or possibility of increase in sales herself for re-election
volume in future
Status of Compliance on Corporate Governance
A detailed report on the going concern has been furnished in
Corporate Governance status of compliance with the
the subsequent section of the Directors’ Report.
conditions imposed by the Bangladesh Securities and
Exchange Commission's Notification No.
Shareholding Pattern as at 31 December 2016
SEC/CMRRCD/2006-158/134/Admin/44 dated August 07,
Shareholding patterns of the Company as at December 31, 2012 issued under Section 2CC of the Securities and Exchange
2016 is shown in the subsequent section of the Directors’ Commission Ordinance 1969 and DFIM Circular No. 07, dated
Report. September 25, 2007, issued by Bangladesh Bank is enclosed in
the subsequent section of the Directors’ Report.
Corporate and Financial Reporting Framework
The Board of Directors, in accordance with BSEC Notification Statutory Auditors
No. SEC/CMRRCD/2006-158/134/Admin/44 dated August 07, Rahman Rahman Huq, Chartered Accountants (KPMG in
2012 confirms compliance with the financial reporting Bangladesh) were appointed as the statutory Auditors of the
framework for the following: Company in the 34th Annual General Meeting held on March
• The financial statements prepared by the management of 30, 2016 for the year 2016 until conclusion of 35th Annual
IPDC presents fairly its state of affairs, the results of its General Meeting at a remuneration of BDT 440,000 excluding
operations, cash flows and changes in equity. VAT.
• Proper books of accounts of the Company have been
The auditors will retire in the 35th Annual General Meeting as
maintained.
per regulations. They are not eligible for re-appointment as they
• Appropriate accounting policies have been consistently are the Auditors of the Company for last consecutive three
applied in the preparation of financial statements and years. On the basis of the proposal of the Board Audit
accounting estimates are based on reasonable and prudent Committee, the Board recommends to appoint Hoda Vasi
judgment. Chowdhury and Co as the Auditors of the Company for the year
• International Accounting Standards (IAS)/Bangladesh 2017 at a remuneration of BDT 440,000 (Four Hundred and
Accounting Standards (BAS)/International Financial Reporting Forty Thousand only) and plus VAT until completion of the next
Standards (IFRS)/Bangladesh Financial Reporting Standards Annual General Meeting.
(BFRS) as applicable in Bangladesh have been followed in
preparation of the financial statements and any departure there Internal Control System
from has been adequately disclosed. Board of Directors have the responsibility for reviewing and
• The company has designed sound internal sound internal approving the overall business strategies and significant
control and it is being effectively implemented and monitored. policies of the Company; understanding the major risks run by
the Company, setting acceptable levels for these risks and
• There are no significant doubts upon the Company’s ability to
ensuring that senior management takes steps necessary to
continue as a going concern.
identify, measure, monitor and control these risks. Senior
management have the responsibility for implementing
Director’s Meeting, Attendance and Remuneration
strategies and policies approved by the Board; developing
During the year ended 31 December 2016 a total 11 (eleven) processes that identify, measure, monitor and control risks
Board Meetings were held and attendance by the Directors incurred by the Company; maintaining an organizational
along with remuneration paid to them are summarized in the structure that clearly assigns responsibility, authority and
subsequent section of the Directors’ Report. porting relationships; ensuring that delegated responsibilities
are effectively carried out; setting appropriate internal control
Appointment / Re-appointment of Director(s) policies and monitoring the adequacy and effectiveness of the
As per Article 100 and 101 of the Articles of Association of the internal control system.
Company, the following 3 (three) Directors will retire from the
office of the Company in the 35th Annual General Meeting and An effective internal control system also requires that an
2 (two) being eligible to offer themselves for re-election as per appropriate control structure is set up, with control activities
Article 105 of the Articles of Association of the Company. Brief defined at every business level. These include: top level reviews;
resumes of the directors are furnished in the subsequent appropriate activity controls for different departments or
section of the Directors’ Report. divisions; physical controls; checking for compliance with
exposure limits and follow-up on non-compliance; a system of
Mr. SHAMEREN ABED - Nominated by BRAC
approvals and authorizations; and a system of verification and
Mr. MOHAMMAD MAMDUDUR RASHID - Nominated by BRAC reconciliation.
39
Directors’ Report (continued)
Control Environment Revenue collection may fall short of target and public expenditure
Control activities are the policies and procedures which help could be lower than expected and therefore, budget deficit is
ensure that management directives are carried out, and the expected to widen. However, deficit is likely to stay within
necessary actions are taken to minimize the risks of failure to tolerable limits.
meet stated objectives. Policies and procedures are effectively
established within the Company and are continuously reviewed Sustained macroeconomic stability, low rate of inflation, rising
for compliance, adequacy and improvement opportunities. The reserves and declining interest rates will play an important role
Board of Directors sets the tone for an effective control in stabilizing the economy. However, lack of efficiency in
environment through regular reviews of the processes for government expenditures will continue to be a concern.
identifying, evaluating, and managing significant risks. An Structural reforms, energy boost-ups, infrastructure
effective Control environment is set by top management and development and efficiency in government expenditures are
cascades across all business functions. Every year the top team required for a sustained growth.
conducts a self-assessment of key controls that affect the
business and develops up action plans to make the internal In the face of sound macroeconomic environment and stable
control environment more robust. political outlook, private sector investment is expected to speed
up in 2017. Private sector investment is expected to be well
Outlook and Prospects in the year 2017 backed by strong domestic consumption and higher export
volume. Therefore, the economy is expected to remain buoyant
Bangladesh achieved Ba3 (Moody's) and BB- (Standard and in 2017.
Poor's) with stable outlook for the 6th consecutive years. Stable
real GDP growth and strong external balance have helped In addition to the concentration on above areas, policy support
Bangladesh to achieve BB- rating with stable outlook from Fitch for women empowerment needs be strengthened to increase
Ratings for the fourth time. On many fronts, Bangladesh the workforce base and improve productivity. SME remains
economy has outperformed its neighbouring South Asian thrust sector and it needs better access to credit. Other
countries. development initiatives in the areas of health, education, human
capital development, micro credit, environment protectionist
The GDP growth forecast for 2017 is expected to be 6.9%, measures and other livelihood programs must go hand in hand
according to Asian Development Bank. Inflation is expected to with economic policy to ensure an inclusive, balanced and
stay below 6% with the anticipation of lower domestic oil price, sustainable growth of the economy.
good domestic agricultural harvest and low international
commodity price. IPDC will continue to build on the progress made in 2016. IPDC
changed its name and rebranded itself and expanded
Export volume once again expected to grow by double digit with distribution coverage to come closer to mass population and
the hope of continued global economic recovery in the USA envisage to establish itself as a strong financial brand in the
and Eruo zone. The price competitiveness of RMG sector will country.
continue to drive the export volume; however, full potential of
this sector cannot be maximized due to inadequate transport, In order to diversify and grow its credit portfolio, IPDC will
logistics, seaport and shipment facility. In addition, Bangladesh aggressively drive affordable home loans and SME loans across
has not been able to seize further RMG export opportunity the country. The new three branches, opened in Narayangonj,
created by China’s gradual move away from apparel Gazipur, Bogra in late 2016, is expected to operate in full
manufacturing. Trade deficit as usual would persist. This is potential in 2017. In addition, IPDC plans to open few more
mainly for current accounts deficit caused by inelastic demand branches in 2017 to increase its footprints. IPDC has made
for import for the necessities such as raw materials, food grains, some remarkable tie-ups with key strategic partners to leverage
edible oils and petroleum. But challenge would be to keep the distribution channel and gain operating and business synergies.
deficit within a manageable limit. Bangladesh bank’s measures It has revamped its product ranges to reach target customers.
to rebound falling trend of inward remittance flow through The recruitment of human resources and ongoing training
formal banking channel is expected to pay off in 2017. However, programs in both business and support functions will continue
maintaining stability of foreign exchange rate remains in doubt to make sure that business growth is matched with right
with the possibilities that strong currencies may be officially organizational capabilities. In order to ensure sustainable
depreciated by the respective Governments. Foreign exchange growth in Balance Sheet, IPDC will give focus on securing long
reserve would continue to stay healthy which will keep foreign term fund from retail deposit and going for floatation of
investors interested. Real estate sector slowly but gradually long-term debt instruments. In addition, IPDC will continue to
getting its momentum which is expected to continue in 2017. maintain sufficient capital reserve beyond regulatory
The landmark MoU signed between China and Bangladesh on requirement, which will allow the company to grow and absorb
infrastructure development, energy and information technology expected loss in future. While growing, IPDC will continue to
in late 2016 has raised optimisms among investors and opened take prudent approach in assessing and approving credit and
up new horizon of China-Bangladesh bilateral relationship. monitoring portfolio. IPDC will heavily invest in information
technology to handle growing volume of business and bring
40
Directors’ Report (continued)
41
Directors’ Report (continued)
Financial Perfomance
Disbursement - Loans, Leases, Advances etc. 3,316.94 3,492.20 3,523.81 5,524.53 25,029.67 353.06%
Outstanding Loans, Leases and Advances 5,585.64 5,745.51 5,676.79 6,415.78 19,480.60 203.64%
Fixed Assets 76.21 107.83 224.13 207.04 233.61 12.83%
Total Assets 7,114.51 7,758.92 7,743.86 8,202.24 22,576.95 175.25%
Term Deposits 4,208.01 4,427.09 3,997.39 4,744.69 17,179.19 262.07%
Borrowings 29.70 413.98 398.38 27.06 1,141.45 4118.21%
Total Liabilities and Equity 7,114.51 7,758.92 7,743.86 8,202.24 22,576.95 175.25%
Equity Information
Shareholders' Equity 2,027.33 2,064.97 2,291.81 2,474.61 2,775.11 12.14%
Paid up Capital 1,043.39 1,043.39 1,147.73 1,262.50 1,515.01 20.00%
Number of Ordinay Shares 104,339,235 104,339,235 114,773,158 126,250,473 151,500,567 20.00%
Net Asset Value Per Share (NAV) 13.38 13.63 15.13 16.33 18.32 1.98
Earnings per Share (EPS)1 0.85 0.94 1.09 1.59 2.00 0.42
Rate of Dividend 10.00% 15.00% 15.00% 20.00% 20.00% -
Year end Market Price per Share2 18.00 20.00 18.20 26.70 42.70 16.00
Market Capitalization 1,878.11 2,086.78 2,088.87 3,370.89 6,469.07 91.91%
Financial Ratios
Current Ratio (Times) 1.39 1.18 1.25 1.21 1.01 (0.20)
Debt Equity Ratio (Times) 0.23 0.20 0.17 0.09 0.41 0.32
Interest Coverage Ratio (Times) 7.00 11.68 28.50 17.27 14.94 (2.33)
Return on Asset 1.85% 1.91% 2.14% 3.01% 1.97% (1.04%)
Price Earning Ratio (Times) 21.20 21.34 16.66 16.84 21.34 4.50
Rate of NPL 9.66% 5.95% 3.39% 1.98% 0.71% (1.27%)
Rate of net NPL 3.98% 2.37% 0.05% -1.64% -0.62% 1.02%
1
EPS has been restated for the year 2012 - 2015 due to issuance of bonus shares.
2
Year end Market Price per Share reflects closing DSE share price on the last trading day of the respective year
42
Directors’ Report (continued)
Going concern is one of the fundamental assumptions in the and Operating Performance) revealed the sound financial
preparation of financial statements. As per the requirements of strength and prospect of the Company.
International Accounting Standards, Companies Act, Listing
Rules and Bangladesh Securities & Exchange Commission Consistent Payment of Dividend
Guidelines, management and directors should satisfy IPDC Finance Limited has been paying dividend consistently on
themselves about the appropriateness of using going concern a regular basis to the shareholders since 2006 which reflect
assumption in the preparation of the financial statements. The Company’s long term viability in operational existence.
management of an entity therefore has a responsibility to
assess the entity’s ability to continue as a going concern in the Capability in settling of Obligation
foreseeable future. Under the going concern assumption, an
entity is normally viewed as continuing in business for the The Company has strong credibility in terms of settlement of
foreseeable future with neither the intention nor the necessity obligation to the lenders. Company has no default payment
of liquidation, ceasing trading or seeking protection from history for settlement of its obligation.
creditors pursuant to laws or regulations. The management and
directors of the Company has made annual assessment for the Growth in Operating Profit
year ended December 31, 2016 of whether the Company is a In the year 2016, IPDC Finance achieved 12.52 percent growth
going concern involves making appropriate inquiries including of operating profit compared to year 2015 which reflect the
review of budget and future outcome of inherent risk associated operational growth excellency of the Company.
in the business. The management and directors of the Company
are satisfied from the following factors that the preparation of Growth in Quality Lending Portfolio
financial statement for the year ended December 31, 2016 on In the year 2016 the quality performing portfolio of loans, leases
the basis of going concern assumption is appropriate. and advances increased by 208% percent compared to year
2015, whereas classified loan ratio came down to 0.71% at the
Financial Indications end of 2016 from 1.98% in 2015. This represents the positive
indication of sustainable business of the Company.
High Interest Coverage Ratio
During the year 2016, interest coverage ratio stood at 16.9 Other Indications
times, which means the company has strong debt servicing
capacity. Expansion of Business
Company introduced new opportunity of business during the
Less Dependency on Bank Borrowings year 2016. This year Company successfully launched three new
As at December 31, 2016 total bank borrowing of the Company branches in Gazipur, Narayanganj and Bogra indicating
was BDT 1,141 million which is 5.76 percent of the total liabilities. continuous increase of business. Moreover, in retail segment
This indicates that Company has no significant dependency on Company offers different types of deposit products including
bank borrowings. individual deposit.
Continuous Support from the Depositors Employee Satisfaction and Working Environment
The Company has a very good relationship with the depositors IPDC Finance is one of the employee friendly organizations
of the Company and a good track record and reputation in among the financial sector. There exists a very good corporate
settling its obligation to its depositors. As at December 31, 2016 environment in the Company. The Company pays a very
total deposits stood at Tk. 17,179 million. The depositors competitive compensation package with fringe benefits like car
continued to keep strong confidence on us which is reflected in facilities, provident fund, performance bonus, gratuity, group
higher acquisition rate and renewal rates of deposits. This trend insurance, hospitalization insurance, reward and recognition
will continue in coming days. program etc.
43
Directors’ Report (continued)
44
Directors’ Report (continued)
Top Executives
Top Executives other than CEO, CFO, Company Secretary and Head of Internal Audit and Compliance
45
Directors’ Report (continued)
46
Meeting attended by the Directors during 2016
Total BOD Attendence Remuneration Total EC Attendence Remuneration Total EC Attendence Remuneration Total
Meeting as % of paid for Meeting held as % of paid for Meeting held as % of paid for Remuneration Remarks
Meeting Meeting Meeting
held during total attending during total attending during total attending paid in 2016
Attended Attended Attended
Name of Director Director's meeting the Director's meeting the Director's meeting the
Tenure held meeting tenure held meeting tenure held meeting
Note:
Leave of absence was granted in all cases of non attendance
* Ms. Afroza Khan was a nominee director of GoB, She was replaced by Mr. Md. Enamul Hoque on March 22, 2016.
** Mr. Mamtaz-Ala-Shakoor Ahmed was a nominee director of GoB, he was replaced by Mr. Sadaruddin Ahmed on August 18, 2016.
*** Mr. Mohammad Mamdudur Rashid has been appointed as Nominated Director on June 28, 2016.
Directors’ Report (continued)
Dr. Muhammad Musa, Chairman – Nominated by BRAC Director since 29 October 2015
Dr. Musa is a Director nominated by BRAC and Chairman of the Other Interests:
Board of Directors of IPDC. Dr. Musa is also an Executive Director Executive Director: BRAC
of BRAC. Before joining BRAC, he worked for 32 years with CARE
International as one of its senior international management Qualifications:
professionals. MBBS from Chittagong Medical College
MPH from Johns Hopkins University, School of Hygiene and
He has been a successful professional in bringing convergence Public Health, USA
of philanthropic approaches and entrepreneurial methodologies PGD from the Netherlands Universities Foundation for
in creating sustainable development programming for achieving International Development, Wageningen Agriculture University
impact at large scale.
Age: 59 years
In the professional field, he is known for leading complex
organizational change processes in multicultural settings. He is
also an internationally recognized senior management trainer
and an experienced coach.
Mr. Amin H. Manekia, Director - Nominated by AKFED Director since 19 April 2009
Mr. Manekia has a vast and diversified expertise in the field of Other Interests:
marketing, finance, healthcare and banking. He has pioneered Chairman: Aga Khan Health Services India Ltd.
the concept of automatic beverage dispensing machines in President: Prince Aly Khan Hospital
India. He is closely involved with the distribution, import and Director: DCB Bank Ltd., India; IVP Limited, India
marketing of various food products. Mr. Manekia has worked
closely with the Aga Khan Development Network for over 25 Qualifications:
years. He is currently the Chairman of Aga Khan Health Services B. Com Sydenham College of Commerce & Economics , Mumbai,
(India) and president of Prince Aly Khan Hospital, a 200 bed, India
acute care, multi-specialty hospital in Mumbai. He also on the MBA (major in Finance & Marketing), Babson College, Wellesley,
Board of DCB Bank in India. USA.
Age: 55 years
Mr. Salahdin Irshad Imam- Independent Director Director since 01 October 2014
Mr. Imam is the Chairman of Board Audit Committee of IPDC. Other Interests:
Educated at Harvard and MIT, Mr. Imam has had an extensive Independent Financial Consultant
career as an International Banker with assignments in the Middle Chairman: Panigram Resort Ltd., Tropical Conservation
East and Europe. Currently an independent Financial Proprietor: Radius Enterprises
Consultant/Corporate Advisor in Dhaka providing project Shareholder: Tiger Tours Ltd.
finance and investment services to leading multinationals, Member: Executive Committee, Brotee (NGO)
corporate houses and HNWI.
Qualifications:
BA (Hons) Social Studies from Harvard University, Cambridge
MA USA
SPURS Fellow (Business studies) Masachusetts Institute of
Technology (MIT)
Age: 68 years
Mr. Sameer Ahmad, Director – Nominated by RSA Capital Limited Director since 29 October 2015
47
Directors’ Report (continued)
Mr. Sadaruddin Ahmed has been appointed as Director in the Other Interests:
Board of IPDC on August 18, 2016. Since then, he has been Director: Megna Oil Company Ltd,Padma Oil Company Ltd
inducted as member of the Board Audit Committee. Mr. Ahmed Teletalk Bangladesh Ltd
has more than 33 years of service in the Bangladesh Civil
Service (BCS) administrative service, performed Qualifications:
multidisciplinary tasks i.e. from policy planning and policy M. Sc in General Maritime Administration, World Maritime
directions as secretary in change and additional/joint secretary University, MALMO Sweden
of ministries or divisions. Mr. Ahmed also led the National
Emergency Response and disaster management organization as MBA, London Metropolitan University, London UK
Director General of the Department of Relief and Rehabilitation.
He is presently working as Additional Secretary, Finance Division Age: 58 years
in the Ministry of Finance.
Mr. Shameran Abed, Director – Nominated by Ayesha Abed Director since 29 October 2015
Foundation
Age: 35 years
Mr. Asif Saleh, Director – Nominated by BRAC Director since 29 October 2015
Mr. Asif Saleh, is a member of Board Audit Committee of IPDC. Other Interests:
Mr. Saleh is also working as Senior Director of Strategy, Chairman: BRAC IT Services Ltd (BITS)
Communications and Empowerment for BRAC and BRAC Director: BRAC Net
International. He is also director in BRAC IT Services Ltd. (BITS). Member: Institute of Informatics and Development (IID)
Prior to joining BRAC, he was Executive Director at Goldman 1 degree Initiative Foundation
Sachs, and also worked at Glaxo Wellcome, NorTel, IBM. Spreeha
48
Directors’ Report (continued)
Mr. Md. Enamul Hoque - Nominated by GoB Director since 22 March 2016
Mr. Md. Enamul Hoque has been appointed as Director in the Other Interests:
Board of IPDC on 22 March 2016.Since then, he has been Director: Chittagong Dry Dock Limited
inducted as member of the Board Audit Committee. Mr. Hoque Institute of Cost and Management Accountants of Bangladesh
joined Bangladesh Civil Service (BCS) Administrative Cadre in (ICMAB)
1986 and was posted as Assistant Commissioner with Sanofi Bangladesh Limited
magistracy in Netrokona District Collectorate. Apart from his
long and diverse experience in field administration, he has Qualifications:
served in various capacities in different Ministries and Master’s in Bangla Literature from Dhaka University;
Constitutional Offices i.e. Ministry of Public Administration, Diploma in Software Application under collaboration of City &
Office of the President of Bangladesh, Prime Minister’s Office, Guild, London and BIAM.
Bangladesh Parliament Secretariat and Bangladesh Public Balanced Scorecard Professional (BSP) by the Balanced
Service Commission, He is presently working as Additional Scorecard Institute in conjunction with George Washington
Secretary in the Ministry of Industries. University College of Professional Studies
Age: 56 years
Mr. Mohammad Mamdudur Rashid, – Nominated by BRAC Director since 28 June 2016
Mr. Mominul Islam, Managing Director - Ex Officio Managing Director since 04 January 2012
Mr. Islam is holding the position of Managing Director & CEO Other Interests: Nil
since January 2012. Prior to that he was the Deputy Managing
Director of the Company from July 2008 to December 2011. Mr. Qualifications:
Islam joined IPDC in the year 2006 as Head of Operations. BBA from IBA, University of Dhaka.
During his tenure at IPDC, he has played pivotal role in reshaping
the organization through strategic planning, organizational Age: 39 years
49
Directors’ Report (continued)
A S T R A T E G I C B O A R D
HAS A VIEW OF LOOKING AHEAD,
A N I N S I G H T TO LO O K D E E P E R ,
AND COMPETENCY TO LOOK BEYOND.
- Pearl Zhu
50
Directors’ Report (continued)
Status of compliance with the conditions imposed by the Bangladesh Security and Exchange Commission’s Notification No
SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012 issued under section 2CC of the Securities and Exchange
Ordinance, 1969 is presented below:
51
Directors’ Report (continued)
1.3 (iii) In special cases the above qualifications may be relaxed subject to
prior approval of the Commission.
1.4 Chairman of the Board and Chief Executive Officer
1.5 (i) Industry outlook and possible future developments in the industry.
1.5 (ii) Segment-wise or product-wise performance.
1.5 (iii) Risks and concerns.
1.5 (iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit
Margin.
1.5 (v) Discussion on continuity of any Extra-Ordinary gain or loss.
1.5 (vi) Basis for related party transactions-a statement of all related party
transactions should be disclosed in the annual report.
1.5 (vii) Utilization of proceeds from public issues, rights issues and/or through
any others instruments.
1.5 (viii) An explanation if the financial results deteriorate after the company
goes for Initial Public Offering (IP0), Repeat Public Offering (RPO).
Rights Offer, Direct Listing, etc.
1.5 (ix) If significant variance occurs between Quarterly Financial Performance
and Annual Financial Statements the management shall explain about
the variance on their Annual Report.
1.5 (x) Remuneration to directors including independent directors.
1.5 (xi) The financial statements prepared by the management of the issuer
company present fairly its state of affairs, the result of its operations,
cash flows and changes in equity.
1.5 (xii) Proper books of account of the issuer company have been maintained.
1.5 (xiii) Appropriate accounting policies have been consistently applied in
preparation of the financial statements and that the accounting
estimates are based on reasonable and prudent judgment.
1.5 (xiv) International Accounting Standards (IAS)/Bangladesh Accounting
Standards (BAS)/International Financial Reporting Standard
(IFRS)/Bangladesh Financial Reporting Standards (BFRS), as
applicable in Bangladesh, have been followed in preparation of the
financial statements and any departure there-from has been
adequately disclosed.
1.5 (xv) The system of internal control is sound in design and has been
effectively implemented and monitored.
1.5 (xvi) There are no significant doubts upon the issuer company's ability to
continue as a going concern. If the issuer company is not considered to
be a going concern, the fact along with reasons thereof should be
disclosed.
1.5 (xvii) Significant deviations from the last year's operating results of the issuer
company shall be highlighted and the reasons thereof should be
explained.
1.5 (xviii) Key operating and financial data of at least preceding 5 (five) years
shall be summarized.
1.5 (xix) If the issuer company has not declared dividend (cash or stock) for the
year, the reasons thereof shall be given.
1.5 (xx) The number of Board meetings held during the year and attendance by
each director shall be disclosed.
1.5 (xxi) a) Parent/Subsidiary/Associated Companies and other related parties
(name wise details);
1.5 (xxi) b) Directors, Chief Executive Officer, Company Secretary, Chief Financial
Officer, Head of Internal Audit and their spouses and minor children
(name wise details);
1.5 (xxi) c) Executives;
1.5 (xxi) d) Shareholders holding ten percent (10%) or more voting interest in the
company (name wise details).
52
Directors’ Report (continued)
53
Directors’ Report (continued)
54
Directors’ Report (continued)
In terms of DFIM Circular No. 07, dated September 25, 2007 of Bangladesh Bank, Financial Institutions are required to comply with
the policy on role and responsibility of the Board of Director and Chief Executive Officer. The Company has implemented those
guidelines as per the directives of Bangladesh Bank.
Compliance
Sl Particulars
Status
ii. The Board shall have its analytical review incorporated in the Annual report as regard the Complied
success/failure in achieving the business and other targets as set out in its annual work-plan and shall
apprise the shareholders of its opinions/recommendations on future plans and strategies.
iii. The Board will set the Key Performance Indicator (KPI)s for the CEO and other senior executives and will Complied
evaluate half yearly / yearly basis.
B Formation of sub-committee
To expedite the process of decision making, (e.g. approval of loan/lease, write off, rescheduling etc.) Complied
Board may form Executive Committee with the Director (excluding any alternate director)
C Financial Management
i. Annual budget and statutory financial statements shall be adopted finally with the approval of the Complied
Board.
ii. Board shall review and examine in quarterly basis various statutory financial statements such as Complied
statement of income-expenses, statement of loan/lease, statement of liquidity, adequacy of capital,
maintenance of provision, legal affairs including actions taken to recovery of overdue loan/lease.
iii. Board shall approve the procurement policy and shall accordingly the delegation of power for making Complied
such expenditure. The maximum delegation of power shall rest on the CEO and top management.
However, decision relating to purchase of land, building and vehicles shall remain with the Board.
iv. The Board shall adopt the operation of bank accounts. Groups maybe formed among the management Complied
to operate bank accounts under joint signatures.
D Management of loan/lease/investments
i. Policy on evaluation of loan/lease/investment proposal, sanction and disbursement and its regular Complied
collection and monitoring shall be adopted and reviewed by the Board regularly based on prevailing
laws and regulations. Board shall delegate the authority of loan/lease/investment specifically to
management preferably on Managing Director and other top executives.
ii. No director shall interfere on the approval of loan proposal associated with him. The director concerned Complied
shall not give any opinion on that loan proposal.
iii. Any syndicated loan/lease/investment proposal must be approved by the Board. Complied
55
Directors’ Report (continued)
Compliance
Sl Particulars
Status
E. Risk Management
Risk Management Guideline framed in the light of Core Risk Management Guideline shall be approved Complied
by the Board and reviewed by the Board regularly.
ii. Only the authority for the appointment and promotion of the Managing Director/Deputy Managing Complied
Director/ General Manager and other equivalent position shall lie with the Board incompliance with the
policy and Service Rule. No director shall be included in any Executive Committee formed for the
purpose of appointment and promotion of others.
H. Appointment of CEO
The Board shall appoint a competent CEO for the Company with the approval of the Bangladesh Bank Complied
and shall approve any increment of his salary and allowances.
ii. The minutes of the Board meetings shall be signed by the Chairman; Complied
iii. Chairman shall sign-off the proposal for appointment of Managing Director and increment of his Complied
salaries & allowances;
ii. Managing Director shall ensure compliance of Financial Institutions Act 1993 and other relevant Complied
circulars of Bangladesh Bank and other regulatory authorities;
v. Managing Director may take disciplinary actions against the employees except DMD and General Complied
Manager;
vi. Managing Director shall sign all the letters/statements relating to compliance of polices and guidelines. Complied
However, Departmental/Unit Heads may sign daily letters/statements as set out in DFIM circular no. 2
dated 06 January 2009 if so authorized by the Managing Director.
56
Snehasish Mahmud & Co.
Chartered Accountants
Plot 10 (3rd Floor), Road 9
Block J, Baridhara, Dhaka 1212
Phone: +88-02-8834063
info@smac-bd.com
www.smac-bd.com
Certificate on
Compliance of conditions of Corporate Governance guidelines to the
Shareholders of
IPDC FINANCE LIMITED
We have examined compliance to the BSEC guidelines on Corporate Governance by IPDC Finance Limited for the year ended on 31
December 2016. These guidelines relate to the Notification no. SEC/CMRRCD/2006-158/134/Admin/44 dated 7th August 2012 of
Bangladesh Securities and Exchange Commission (BSEC) on Corporate Governance.
Such compliance to the codes of Corporate Governance is the responsibility of those charged with governance and management of
the company.
Our examination was limited to the procedures and implementation thereof as adopted by the Management in ensuring compliance
to the conditions of Corporate Governance. This is a scrutiny and verification only and not an expression of opinion or audit on the
financial statements of the Company.
In our opinion and to the best of our information and according to the explanations provided to us, the Company has complied with
the conditions of Corporate Governance as stipulated in the above mentioned guidelines issued by BSEC.
We also state that such compliance is neither an assurance as to the future viability of the Company nor a certification on the
efficiency or effectiveness with which the Management has conducted the affairs of the Company.
57
Report of the Audit Committee
58
itself about the consistency and coverage of the risk Major activities of the Audit Committee:
management framework of the Company. The Committee The Committee met five times during the year 2016 to carry out
reviews the following activities: the following major activities:
• Review and satisfy itself that the Internal Audit department • Reviewed and recommended to the Board on approval of the
has the competency and qualifications to maintain its Annual Financial Statements for the year ended December
mandates; 31, 2015;
• Reviewed the Management Letter from external auditors for
• Review the status report from the Internal Audit department the year 2015 together with Management’s responses to the
and ensure that appropriate actions have been taken to findings;
implement its recommendations; • Reviewed the Auditors’ Certificate on Corporate Governance
• Recommend any broader review deemed necessary as a compliance under sec 2CC of the Securities and Exchange
consequence of any issues that may have been identified; Ordinance 1969 for the year ended December 31, 2015;
• Request and review any special audit when deemed • Reviewed and ascertained that the internal control system
necessary; including financial and operational controls, accounting
system, and reporting structure are adequate and effective;
External Auditor • Reviewed the periodical inspection reports of the Company
Rahman Rahman Huq (RRH/ KPMG in Bangladesh), a conducted and submitted by the Internal Auditors and
Bangladeshi partnership, and a Member Firm of KPMG recommended necessary instructions to the Management
International, were appointed as statutory external auditors of for proper and prompt resolution of the
the Company at the 34th Annual General Meeting held on irregularities/objections stated therein;
March 30, 2016. As a part of ensuring highest level of corporate • Reviewed the actions taken by the Management for
governance, the Committee prohibits the external auditors from implementation of audit committee observations on issues
performing any work that they may subsequently need to audit, deliberated in audit committee reports;
or which might otherwise create a conflict of interest. The • The Committee placed its reports regularly to the Board of
Committee has ascertained that the external auditors of the the Company for review and monitoring the activities with
Company have not been engaged in any one of the following recommendations on internal control system, compliance
material non-audit services: with rules and regulation of the regulatory bodies;
• Appraisal or valuation services or fairness opinions; • The Committee reviewed the Inspection Report issued by
• Financial information system design and implementation; Bangladesh Bank for the year ended December 31, 2015;
• Book-Keeping or other services related to the accounting • The Committee reviewed first quarter, half-year and third
records or Financial Statements; quarter ended Financial Statements for the year 2016 and
• Broker-dealer services; recommended to the Board for its approval;
• Actuarial services; and • Reviewed statement of significant related party transactions
• Internal Audit Services. submitted by the Management;
• Reviewed issues within the following areas. However, no
The Committee has also ascertained the following: such instances were identified for report to the Board of
• None of the partners or employees of the external audit firm Directors;
possesses any share of IPDC at least during the tenure of - Report on conflicts of interests.
their audit assignment. - Suspected or presumed fraud or irregularity or material
• The external audit firm is not receiving any fee which is defects in the internal control systems.
contingent upon such factors like achieving targeted - Suspected infringement of laws, including securities
non-performing loan ratio by the Company, loan related laws, rules and regulations.
disbursement target etc.
Based on the above review and discussions, the Audit
The Audit Committee evaluated the expertise, resources, Committee is of the view that the internal control and
independence and objectivity of the external auditors and compliance procedures are adequate to present a true and fair
reviewed their effectiveness as external auditor before view of the activities and financial status of the Company.
recommending their appointment to the Board.
59
Report of the CEO & Managing Director and the Chief Financial Officer to the Board of Directors of
IPDC Finance Limited
In accordance with the notification of Bangladesh Securities and Exchange Commission No. SEC/
CMRRCD/2006-158/134/Admin/44 dated 07, August, 2012 we declare that-
We have reviewed accompanying financial statements of IPDC Finance Limited which comprise the Balance Sheet as at December
31, 2016, Profit and Loss account, Statement of Changes in Equity, Cash Flow Statement for the year then ended and notes to the
financial statements.
These financial statements have been prepared and presented fairly in accordance with Bangladesh Accounting Standards(BASs)
and Bangladesh Financial Reporting Standards (BFRSs), the Financial Institutions Act 1993, the rules and regulations issued by the
Bangladesh Bank, the Companies Act 1994 and other applicable laws and regulations.
The Company has taken proper and sufficient care in establishing a system of internal control, which is reviewed, evaluated and
updated on an ongoing basis. The Internal Audit & Compliance Department of the Company conducts periodic audits to provide
reasonable assurance that the established policies and procedures of the Company were consistently followed.
Based on the internal control system of the Company and our review of these financial statements, we certify that to the best of our
knowledge and belief:
i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that mightbe
misleading;
ii) these statements present a true and fair view of the company’s affairs and complies with existing accounting standards and
applicable laws;
iii) no transactions entered into by the Company during the year which are fraudulent, illegal or violation of the Company’s code of
conduct.
iv) proper books of account as required by law have been kept by the Company;
60
Statement of Ethics and Compliance
IPDC promotes a positive and productive corporate culture that places high value on quality service, merit based performance,
accountability, responsiveness, teamwork, diversity and inclusion and equal employment opportunity. IPDC places strict practices
for streamlining employee conduct inside the workplace in relation to other employees, customers, vendors or any other
stakeholders or groups association with the company in order to ensure that the guidelines for integrity and ethics are complied
with. All employees are expected to carry out their duties honestly, conscientiously and serve the company according to the best of
his/her ability and promote the business interests of the company. As such, employees of IPDC must not misbehave with colleagues
and/or superiors, get involved with any kind of monetary transaction from with colleagues and/or superiors, falsify, tamper, damage
or cause loss of IPDC’s official records and neglect any government law or office rule/regulations. Such behavior is considered as
breach of the Code of Conduct and may result in disciplinary action.
IPDC has an active National Integrity Strategy (NIS) Committee that works under the directive of the Integrity Strategy
Implementation Cell under the central bank. It focuses on creating awareness on improved customer service, data security,
transparency and integrity.
Overall our business ethics means, “Choosing the good over the bad, the right over the wrong, the fair over the unfair and the truth
over the untruth”.
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Monitoring Compliance
Compliance with our Code of Conduct and Ethics is embedded in our employment contracts, recruitment and performance
management activities. All new employees joining IPDC as well as existing employees are required to read the Code of Conduct and
duly sign a statement of compliance attesting that they have read and understood the aforementioned and provide their personal
commitment to comply with the applicable laws, regulations And corporate ethics, be held accountable for carrying out the
compliance responsibilities, and acknowledge that ignorance of the rules and regulations outlined in the Code cannot be an excuse
for Non-compliance. Employees of IPDC are required to comply with the Code of Conduct; any breach of this code may lead to
disciplinary action. IPDC practices a reward and recognition program which is designed to reward employees who demonstrate
ethical principles and uphold the core values of integrity and morality in the Code of Conduct. This type of recognition serves to
validate the ethical actions of the concerned employee, encourages repeat behavior and thus helps sustain a culture of
transparency, accountability and integrity.
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Statement of Human Capital
IPDC believes that employees are critical to the success of the Growth Through Training and Development
organization through delivering delightful customer experience. We aim to create a learning culture and provide opportunities
Therefore, it is important that employees remain motivated, for our employees to refresh and update their knowledge and
competent, skilled and committed to deliver highest level of skills so that they stay relevant to the current and future needs
performance. of the organization. In addition, opportunity of continuous
learning creates good options for their career progression.
Our Human Resource Priorities IPDC arranges both in-house and external training for the
Promoting a culture of employee engagement employees. Total training hours has increased to 3,817 in 2016
Ensuring diversity and creating vibrant work force against 560 in 2015.
Enabling growth through training and development
Providing Equal Opportunity Employment IPDC is continually working to increase efficiency and
Rewarding and recognizing the high-achievers effectiveness on the resources spent on employment
development activities: ranging from more informal and brief
A Culture of Employee Engagement ‘IPDC Talk’ to developing e-learning modules to building an
IPDC nurtures an atmosphere where people work with joy, which extensive curriculum for various functions. The organization is
in turn enhance the productivity of the people. So, the company relentless in its pursuits of knowledge.
provides ample opportunities to the employees for their
refreshment through sports facilities, celebration of festive Equal Opportunity Employment
occasions such as Pohela Baishakh, International Women’s Day IPDC believes in equal employment opportunities to attract,
and Puja. The company conducts town hall meetings in every retain, develop and promote the most qualified employees
month where CEO gives performance and business update of regardless of race, color origin, religion, gender, age, disability,
the company and shares the company’s vision, mission and veteran status or any other characteristic. This policy applies to
strategies. Every employee is given opportunity to share their recruitment and placement, promotion, training, transfer,
views and opinions to help create a constructive dialogue retention, rate of pay and other benefits, financial assistance as
session and foster employee engagement. In addition, IPDC well as the details and conditions of employment.
conducts two-day Employee Recreation Night, which is held
away from Dhaka City. In that event employees are grouped in Equal opportunity employment prohibits gender biasness and
different teams and each team competes on various sports and leads to the creation of a diverse workforce. Employment,
cultural events. IPDC organizes three-day orientation program transfer and promotion decisions are based on merit and the
for the new joiners to introduce them with the senior principle of furthering equal opportunity. The requirements for a
management, organization process, strategy, values, vision and job is rightfully related to the job performance required for the
mission. The session also includes sessions on Anti-Money position.
Laundering, IT security and Green Banking Awareness.
Rewards and Recognition
Diversity and Vibrant Work Force The company promotes the use of an effective employee
IPDC strongly values diversity. Employees come from different recognition system which is simple, yet powerfully reinforcing.
ethnic communities, geographical locations, universities, Realizing the importance of reward and recognition, IPDC
educational background, genders and age brackets. The acknowledges the performance of employees in many ways i.e.
similarities and differences of employees are brought together written, verbal, monetary, public acknowledgement,
to bring in diverse skills, perspectives, knowledge and appreciation etc. There are individual and group based formal
competence in a single basket. This makes our human resource reward programs that recognize and motivate employees for
unique in the industry, which are able break new ground and their good works. The programs are categorized as:
continue to win in the market. Employees in remote locations
connect through video conferencing. Excellence Award: Employees who have excelled in their
respective arenas receive this award along with a certificate.
We believe in creating environment where employees stay
vigilant and responsive to the ever-changing need of the Achievement Award: This award is provided in recognition of
organization. We endeavor to create an environment where great achievements by individuals as well as teams.
each employee can feel valued, respected, connected and
supported – a place where employees can realize their Chairman’s Award: This is specially recognized performances
aspirations. All this is driven by the core values of the by an individual employee or a team during a year is rewarded by
organization. the Chairman.
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Champion of the Innovation Award: Every year IPDC celebrates performers and they become a part of the High Performers
an ‘Innovation Week’ whereby individuals are rewarded for their Club.
creative ideas in the areas of new product and services,
productivity, cost reduction, control and compliances, Integrity & Honesty Award: Employees who show exemplary
employee issues and good citizenship. integrity in the work place are awarded.
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Statement Of Risk Management
66
Strategic risk involves Work process and procedural risk, 2. Risk Management Process:
Personnel risk, Technology risk, Information risks and project 2.1 Integrated Risk Management:
risks.
At IPDC, we used the most integrated and holistic approach of
Compliance Risk: risk management. Identification of the risk is the most important
Compliance risk defined as the current or prospective risk of and critical part for us to fit in the strategic decision making
legal sanction and material financial loss the Company may process. Another part of the integrated risk management
suffer as a result of its failure to comply with laws, its own strategy is to manage the risks, inherent in different business
regulations, code of conduct, and standards of the best units, in a more integrated manner. At IPDC, Credit Risk
practices as well as from the possibility of incorrect Management is responsible for managing the credit risk,
interpretation of effective laws or regulations. Compliance risk is Treasury department is responsible for managing the market
also sometimes referred to the risk adherence to principles of risk and liquidity risk. Operational risk management is the
integrity and fair dealing. responsibility Internal Control and Compliance team. These
teams are coordinated with the senior management team,
Historically, IPDC is an organization that fostered a compliance corporate affairs and finance department responsible to
oriented culture throughout the organization. This has been manage the legal, compliance and the strategic risk.
armored through strong communications, proper training,
signing and declaration of the IPDC’s code of conduct, repeated 2.2 Control activities:
communication of the senior management and of course IPDC ensures the risk management by inputting appropriate
continuous monitoring. In general, compliance risk control in place. This is important to improve financial and
management is embedded in the day to day business processes operating performance of the Company. The Company
and practices of the Company. manages appropriate risk and return in a control environment,
ensures the long-term sustainability of the Company.
Money Laundering Risk: Independent control functions are the biggest strength of the
Money Laundering risk is the obvious risk in the financial sector. Company that monitor the effectiveness of the risk
At IPDC, Money laundering risk can be talked on three management framework.
dimensions. First, the business risk associated with the money
laundering and terrorist financing, next the IPDC’s risk of failure 2.3 Periodic review of policies and guidelines:
to meet the regulatory obligations and finally the reputational At IPDC, policies and procedures are reviewed on intervals.
risk. IPDC always focus on managing the money laundering risk Necessary modifications is done on the policies based on the
from its inceptions. In this regard the Company follows the market practices and the changes in the regulations subject to
regulatory guidelines laid down by the BFIU from time to time. the approval of the Board of Directors. At first, Management
approaches the changes made in the policies forwarded to the
Robust KYC procedures had been used and followed properly. sub-committee of the Board (Executive Committee & Audit
IPDC introduced robust self-assessment procedure in 2015, as Committee) for review. Management have to show the
part of Money laundering risk management. The CCU and its justifications of the changes before the sub-committee of the
members ensure that money laundering and terrorist financing Board. Subject to the recommendations of the sub-committee,
issues are raised and escalated to the appropriate level of the Board ultimately approved the policies or the revision of the
Management timely while the internal audit & compliance policies. IPDC’s Product program Guidelines (PPGs) for different
department performed independent testing to ensure that the products are analyzed every year to incorporate the changes in
policy have been followed accurately. In 2016, IPDC introduced the market dynamics. Such changes helps the Company to
two level of AML & TF training for the employees. One at the adopt the best practices and changes in the industry. A monthly
foundation level and the other on the advance level training overdue meeting is held between the CRM, SAM and business
aiming to ensure that employees are properly aware of the anti- units to identify the problem clients and highlighting the
money laundering and terrorist financing activities. learning. This helps to formulate the better policies to improve
the quality of the assets and provides the early warnings to the
Environmental risk: Company.
The concept of Environmental Governance is becoming very
important phenomenon now-a-days. IPDC believes that the 2.4 Monitoring and Review:
effective handling of environmental issues and management of Monitoring and review is the integral part of the risk
natural resources are significant for the survival of the humanity. management decision making process. Monitoring and review
For this reason, IPDC always considers the environmental issues part is actually the glue that binds the whole of the risk
while financing. Environmental risk is facilitating element of management process together and make sure that it continues
credit risk arising from environmental issues. These increase to function and that is continuous to add value to the
risks as they bring an element of uncertainty or possibility of organization. At IPDC, we have a strong monitoring and review
loss in the context of financial transactions. process that encompasses all aspects of the risk management
67
process for the following purposes: appropriately reviewed and approved by the Board of Directors.
- Ensuring that controls are effective and efficient in both design 3.1.2 Organizational structure:
and operation; IPDC designs its organizational structure for CRM by
- Obtaining further information to improve risk assessment; considering the size, complexity and diversification of its credit
- Analyzing and learning lessons from risk events, including activities. To facilitate effective management oversight and
success and failures; proper execution of CRM control process IPDC has the
- Detecting changes in the external and internal context, following committees and departments:
including changes to risk criteria and to the risks, which may
require revision of risk treatments and priorities; 3.1.2.1 Credit Risk Management Committee:
- Identifying the emerging risks.
IPDC has a credit risk management committee empowered to
IPDC risk management committee drives to identify the oversee overall credit risk taking activities and overall credit risk
organizational wide risks and suggests the relevant control to management function. The Credit Risk Management Committee
mitigate those risks considering the risk criteria, magnitude and reports to the risk management committee on regular interval.
the appetite of the risk management that is aligned with the This committee is responsible for implementation of the credit
overall organizational strategy. risk strategy approved by the Board. The Committee is also
responsible for monitoring the credit risk throughout the
3. Credit Risk Management: Company and ensure compliance.
3.1 Credit Risk Management Framework: 3.1.2.2 Credit Risk Management Department:
Credit Risk Management is the most robust and critical process To maintain credit discipline and to enunciate credit risk
which is applied in conjunction with the assessment of the management and credit process, IPDC has a separate
quality of the assets, adequacy of provisions and reserves and functional unit independent of loan origination functions. This
disclosures of credit risk. Credit Risk Management framework department is responsible on formulating the credit policy,
includes the followings: credit limit setting and monitoring the credit exceptions/
a | Establishing an appropriate credit risk environment exposures and review/monitoring the required documentations.
b | Setting up the organizational structure for credit risk This department is also responsible to ensure that business
management lines comply with the risk parameters and prudential limits
established by the Board.
c | Formulating policies and procedures
d | Monitoring credit performance 3.1.2.3 Credit administration:
e | Reporting of credit exposures to the senior management The credit administration function is critical at IPDC to ensure
and the Board of Directors that proper documentation and approvals are in place prior to
f | Measuring of credit risk the disbursement of financial facilities. Credit administration
department ensures the completeness of the documentation in
3.1.1 Establishing the appropriate Credit Risk environment: accordance with the approved terms and conditions. This
function monitors the borrower’s compliance with covenants
The Board of Directors at IPDC is responsible for approving and and agreed terms and conditions and monitor the performance
periodically reviewing (at least annually) the credit risk strategy of the client.
and credit risk policy of IPDC considering the risk appetite and
the level of profitability it expects to achieve over the periods. 3.1.2.4 Special Asset Management Department:
The strategy includes the statement of willingness to grant
credit based on the exposure type, economic sector, This is the recovery department that directly manage accounts
geographical location, maturity and anticipated profitability. The with sustained deterioration. At IPDC, while there is a sustained
board is also responsible to define and review the delegation of deterioration of any particular loan account, the account is
credit approvals. Senior Management of IPDC is also transfer to the SAM department to ensure the recovery of the
responsible for implementing the credit risk strategy approved loan account. SAM department determine the specific strategy
by the Board and developing the policies for identifying, for the particular loan for recovery. They pursue all options to
measuring, monitoring and controlling the credit risk in all maximize the recovery, including placing customers into
activities along with individual borrower and portfolio as a receivership or liquidation as appropriate.
whole. The Management of IPDC always focus on establishing
the internal controls and setting clear lines of accountability 3.1.2.5 Reporting of credit exposures:
and authority. Respective business units is also responsible for Establishing the robust credit policy and monitoring process
identifying and managing credit risk inherent in the products helps the Company to manage the credit risk. Detail reporting of
and activities. The Management always ensures that the the systems to the senior managements and the Board helps
products introduced to the business units by ensuring adequate them to formulate the decision timely. At IPDC, we maintains a
risk management procedures and controls that had been robust bunch of MIS on performing and non-performing loans,
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daily disbursement, overdue reporting, classification status, business condition of large borrowers, and large fluctuations in
geographical performance of the credit etc. These reports helps risk components. Stress test are regularly conducted jointly with
the senior management and the Board to take credit decisions the firm’s market and liquidity risk functions and are reported
based on the performance as well as the risk appetite of the quarterly to Bangladesh Bank. The suggested recommendation
Company. from the test are in implementations and are monitored
regularly.
3.1.3 Formulating policies and procedures:
IPDC has a separate credit policy as part of its overall risk 4. Liquidity Risk Management:
management framework approved by the Board of Directors. An important aspect of liquidity risk management system is
This policy clearly define the Company’s view of business assessing future funding requirement. By ensuring effective
development priorities along with the terms and conditions liquidity risk management system IPDC reduces the probability
appropriate for credit decisions. This policy includes the of an adverse situation. At IPDC, we uses both the top-down
detailed and formalized credit evaluation and approval process, and bottom-up approach for liquidity risk management.
credit origination, administration and documentation Principles and objectives are set at Board and senior
procedures, formal credit approval process, Risk identification, management levels but the data necessary to feed the risk
measurement, monitoring and control techniques, periodic dashboard and analytics has to be obtained from funding desk.
review/monitoring process, Risk acceptance criteria etc. In particular, intra-day liquidity management is an integral part
of an improved liquidity risk management. Funding desk
3.1.4 Monitoring credit performance: prepares the measurement reports on daily fund management
Credit monitoring is the integral part of credit risk management. and associated money market dealings for further use in an
At IPDC, Credit Manual properly define the criteria for agreed format (Liquidity Statement) to support the strategic
identifying and reporting potential problem credits and other liquidity risk metrics.
transactions to ensure that they are subject to more frequent
monitoring as well as possible corrective actions, classifications While calculating expected cash inflows and outflows, treasury
and provisioning. Effective monitoring system help senior department of IPDC also estimate future liquidity needs and
management to monitor the overall quality of the credit prospective investment decisions both in the short and long
portfolio & its trends. It also helps to reassess credit time periods. Asset Liquidity Management (ALM)s desk that
strategy/policy accordingly before encountering any major plays a big role in this regard. ALM desk tracks, analyzes and
setback at IPDC. reports balance sheet movements of the Company. In addition,
its also monitors the economic outlooks and market movement.
3.1.5 Measurement of Risk: ALM desk reports and recommends policies and procedures
and provides all elements for decision making purposes in the
To serve the purpose of credit risk measurement, IPDC used the ALCO meeting. IPDC has a very organized ALCO with the
several methods that had been evolved over time. The outcome combinations of treasury, business units, finance, credit risk
of the evaluation process is generally a rating/grade/scores departments. Liquidity risk management is the main
that depicts the degree of credit risk associated with the responsibility of the ALCO.
borrower. Continuous updating of these grades helps the
Company to focus attention on deteriorating credits well before 5. Operational Risk Management:
they become impaired. The assessment is done both is
pre-sanction and post-sanction stages. At IPDC, we use Credit IPDC believes that Complete and accurate information as well
Risk Grading system and Internal Risk Rating systems as as strong control culture is the prerequisite of managing
pre-sanction assessment tool. operational risk. At IPDC, we pursue to manage operational risk
through:
In the post-sanction stage, we perform several analysis both in 1. Ensuring effective and integrated operational risk
Micro and macro level. In the Macro level we perform risk management procedures;
analysis on sector wise, product wise, region wise as well as
concentration wise. In this level we analyse the credit growth, 2. Through training, supervision and developments;
concentration metrics, large loans etc. 3. Proactive communication between the cross functional
department groups;
3.1.5.1 Stress testing: 4. Independent control and support functions that
Uncertainties always remains in the calculated risk. This is due monitor operational risk on daily basis;
to the fact that risk calculation is an estimation that requires 5. Well segregated dual control mechanism (maker and
certain prerequisites. In this regard stress test is a good tool to checker concept) to minimize the error and prevent the fraud;
deal with these uncertainties. At IPDC, we deploy stress test in a
way of evaluating the sufficiency of portfolio management 6. Building a network of systems throughout the Company
policy and financial strength against a certain assumed but to facilitate the collection of information of data on analyzing
probable stress situation. Stress scenario include a decline in and assessing our operational risk exposure.
credit growth, a drop in stock prices, deterioration in the
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From Q4 2016 IPDC has started to implement operational risk c | Perform health checking of the compliance procedure and
management framework. Separate forum at mid-management notify the non-compliance to the senior manager on monthly
and senior management level have been created for discussion basis;
and resolution of operational level risks. Under the new d | Advice the best practices in the market in terms of policy
framework, Internal Compliance will act as a separate line of formulation and regulatory compliance.
defense against operational risks. In line with the regulatory
requirements, internal compliance department is responsible At IPDC, proper credit administration is in place to ensure the
for the following: effective and efficient operations related to the monitoring,
a | Assess the compliance with applicable laws and documentation, contractual requirements, legal covenants and
regulations, code and guidelines, internal procedures and collateral among others; accurate and timely report to the
policies; management and compliance with management policies and
b | Act as a contact point with IPDC and deliver timely advice procedures in accordance with applicable laws and regulations.
in relation to compliance queries within the Company;
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Economic Value Added Statement
Economic Value Added (EVA) is the financial performance Amount in BDT (million)
measure that attempts to measure the true economic profit of
Economic Value Added
an organization. It provides a measurement of a company's
ecomomic success (or failure) over a period of time. The
250.0
measure is useful for the investors who wish to determine how
215.6
well a company has added value during the period. EVA is 200.0
calculated by taking a company's NOPAT (Net Operatin Profit 170.2
After Tax) and capital charges are then deducted from NOPAT 143.2
150.0
to get the real economic performance of the company for the
reporting year. This measure is closely linked with shareholders' 100.0
value creation.
50.0
NOPAT
-
NOPAT for FIs is arrived at by taking Operating Profit then make 2016 2015 2014
adjustments for some expenses and income, assets, liabilities
and movement in some balance sheet items and finally
The company has posted an EVA figure of BDT 215.6 million in
deducting tax payments.
2016, an increase by 50.6% from the base year 2014 and up by
Amount in BDT (million) 26.7% from 2015 . The trend is improving over the years.
2016 2015 2014
Year
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VALUE ADDED STATEMENT
72
The value added statement provides a detailed account of total value addition and the distribution of the value created by the organization. IPDC contributes positively to socio economic
development by empowering employees through the payment of salaries and allowances by paying attractive and consistent dividend to the providers of capital, by assisting the regulatory
capacities through paying taxes and setting aside rest amount of money as reserve for company's future growth.
Amount in BDT
Provider of Capital
Cash Dividends to shareholders* 104,339,235 48% 52,169,617 15% 57,386,579 13% - 0% - 0%
Government
As taxes 5,392,583 2% 99,793,663 29% 179,300,019 39% 104,009,807 22% 164,911,104 26%
23% 31%
51% 25%
0%
Employees Employees
Provider of Capital Provider of Capital
Government Government
Expansion & Growth Expansion & Growth
15%
26%
29%
2015 2012
0% 2%
Employees Employees
Provider of Capital Provider of Capital
Government Government
Expansion & Growth Expansion & Growth
48%
22%
2014
28% 20%
13%
Employees
Provider of Capital
Government
Expansion & Growth
39%
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9 & 5 Mohakhali C/A Email dhaka@kpmg.com
Dhaka 1212
Bangladesh
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2016,
and of its financial performance and its cash flows for the year then ended in accordance with Bangladesh Financial Reporting
Standards as explained in note 2.1.
Email chittagong@kpmg.com
75
f | adequate provisions have been made for loans, advances, leases, investment and other assets which are, in our opinion,
doubtful of recovery and Bangladesh Bank’s instructions in this regard have been followed properly;
g | the financial statements of the Company conform to the prescribed standards set in the accounting regulations which were
issued by Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh;
h | the records and statements which were submitted by the Company/branches has/have been properly maintained and
recorded in the financial statements;
i | statements sent to Bangladesh Bank have been checked on sample basis and no inaccuracy has come to our attention;
j | taxes and other duties were collected and deposited in the Government treasury by the Company as per Government
instructions found satisfactory;
k | nothing has come to our attention that the Company has adopted any unethical means i.e. ‘window dressing’ to inflate the
profit and mismatch between the maturity of assets and liabilities;
l | proper measures have been taken to eliminate the irregularities mentioned in the inspection report of Bangladesh Bank and
the instructions which were issued by Bangladesh Bank and other regulatory authorities have been complied properly;
m | the internal control and the compliance of the Company is satisfactory, and effective measures have been taken to prevent
possible fraud, forgery and internal policies are being followed appropriately;
n | the Company has complied with relevant laws pertaining to capital, reserve and net worth, cash and liquid assets and
procedure for sanctioning and disbursing loans/leases found satisfactory;
o | we have reviewed over 80% of the risk weighted assets of the Company and we have spent around 850 person hours for the
audit of the books and accounts of the Company;
p | the Company has complied with relevant instructions which were issued by Bangladesh Bank relevant to classification,
provisioning and calculation of interest suspense;
q | the Company has complied with the 'First Schedule' of Bank Companies Act, 1991 in preparing these financial statements; and
r | all other issues which are important for the stakeholders of the Company have been disclosed in the audit report adequately.
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IPDC Finance Limited
Balance Sheet
as at 31 December 2016
Amount in BDT
Note 2016 2015
Property and assets
Cash 5
In hand (including foreign currencies) 270,000 150,000
Balance with Bangladesh Bank and its agent bank(s) 226,125,597 82,047,426
(including foreign currencies)
226,395,597 82,197,426
Balance with other banks and financial institutions 6
In Bangladesh 1,632,372,469 1,063,034,059
Outside Bangladesh - -
1,632,372,469 1,063,034,059
Money at call and short notice - -
Investments 7
Government securities - -
Other investments 565,732,580 187,048,680
565,732,580 187,048,680
Fixed assets including land, building, furniture and fixture 9 233,614,078 207,043,649
Other assets 10 434,487,396 243,385,260
Non financial institutional assets 11 3,752,405 3,752,405
Total assets 22,576,949,615 8,202,238,448
Shareholders' equity
Paid up capital 15 1,515,005,670 1,262,504,730
Share premium 16 167,014,000 167,014,000
Statutory reserve 17 393,375,601 332,758,289
Assets revaluation reserve 18 124,501,939 127,086,739
Retained earnings 19 575,216,409 585,248,100
Total shareholders' equity 2,775,113,619 2,474,611,858
Total liabilities and shareholders' equity 22,576,949,615 8,202,238,448
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Balance Sheet (continued)
Amount in BDT
Note 2016 2015
Other commitments
Documentary credits and short term trade-related transactions - -
Forward assets purchased and forward deposits placed - -
Undrawn note issuance and revolving underwriting facilities - -
Undrawn formal standby facilities, credit lines and other commitments - -
Total other commitments - -
Total off-balance sheet items including contingent liabilities 30,046,913 11,612,000
The annexed notes from 1 to 46 and Annexures A and B are an integral part of these financial statements.
Auditor
Rahman Rahman Huq
Chartared Accountant
Dhaka, 19 February 2017
78
IPDC Finance Limited
Profit and Loss Account
for the year ended 31 December 2016
Amount in BDT
Note 2016 2015
Particulars
Interest income 22 1,482,385,809 804,863,230
Less: Interest paid on deposits, borrowings, etc. 23 844,243,048 373,422,243
Net interest income 638,142,761 431,440,987
Investment income 24 47,231,755 55,405,731
Commission, exchange and brokerage 25 36,184,345 7,577,541
Other operating income 26 119,839,040 145,480,822
Total operating income 841,397,901 639,905,081
Appropriations
Statutory reserve 17 60,617,312 48,038,070
General reserve - -
Proposed dividend - -
60,617,312 48,038,070
Retained surplus 242,469,249 192,152,279
Earnings per share (EPS) 41 2.00 1.59
The annexed notes from 1 to 46 and Annexures A and B are an integral part of these financial statements.
Auditor
Rahman Rahman Huq
Chartared Accountant
79
IPDC Finance Limited
Cash Flow Statement
for the year ended 31 December 2016
Amount in BDT
2016 2015
80
IPDC Finance Limited
81
Statement of Changes in Equity
for the year ended 31 December 2016
Amount in BDT
Statutory Share Assets Retained
Paid up capital reserve premium revaluation earnings Total
reserve
Particulars
82
Liquidity Statement
(Assets and liabilities maturity analysis)
as at 31 December 2016
Amount in BDT
Up to 1 1-3 3-12 1-5 Above 5
Particulars Total
month months months years years
Assets
Cash in hand (including balance with Bangladesh Bank) 226,395,597 - - - - 226,395,597
Balance with other banks and financial institutions 727,647,394 494,394,995 410,330,080 - - 1,632,372,469
Money at call and short notice - - - - - -
Investments - - 75,000,000 284,467,234 206,265,346 565,732,580
Loans and advances 1,696,675,474 5,917,449,931 1,960,261,278 8,595,956,504 1,310,251,903 19,480,595,090
Fixed assets including land, building, furniture and fixture 2,105,710 4,211,420 18,951,390 59,577,888 148,767,670 233,614,078
Other assets 23,064,051 19,791,602 9,162,000 3,555,739 378,914,004 434,487,396
Non financial institutional assets - - 3,752,405 - - 3,752,405
Total assets 2,675,888,226 6,435,847,948 2,477,457,153 8,943,557,365 2,044,198,923 22,576,949,615
Liabilities
Borrowings from Bangladesh Bank, other banks, financial institutions and agents 1,135,580,191 512,500 2,206,250 3,150,000 - 1,141,448,941
Deposits 1,644,517,908 6,526,274,660 1,960,611,679 4,997,162,015 2,050,624,154 17,179,190,416
Other accounts - - - - - -
Provision and other liabilities 80,536,194 53,411,590 135,511,106 34,470,590 1,177,267,159 1,481,196,639
Total liabilities 2,860,634,293 6,580,198,750 2,098,329,035 5,034,782,605 3,227,891,313 19,801,835,996
Net liquidity gap (184,746,067) (144,350,802) 379,128,118 3,908,774,760 (1,183,692,390) 2,775,113,619
IPDC Finance Limited
Notes to the financial statements
as at and for the year ended 31 December 2016
2.1 Statement of compliance BFRS: As per BAS 39 an entity should start the impairment
assessment by considering whether objective evidence of
The Financial Reporting Act, 2015 (FRA) has been enacted
impairment exists for financial assets that are individually
during the year 2015. Under the FRA, the Financial Reporting
significant. For financial assets that are not individually
Council (FRC) is to be formed and it is empowered to issue
significant, the assessment can be performed on an individual
financial reporting standards for public interest entities such as
or collective (portfolio) basis.
Financial Institutions (FIs). The Financial Institutions Act, 1993
has been amended as required to comply for the preparation of Bangladesh Bank: As per FID circular no. 08 dated 3 August
their financial statements under such financial reporting 2002, FID circular no. 03 dated 3 May 2006 and Department of
standards. Financial Institutions and Markets (DFIM) circular no. 03 dated
29 April 2013 issued by Bangladesh Bank, a general provision of
The FRC is yet to be formed and as such no financial reporting
0.25% to 5% under different categories of unclassified loans
standards have been issued as per the provisions of the FRA.
(Standard/Special Mention Account loans) has to be
Hence, the financial statements of the Company are prepared in
maintained. Also provision for sub-standard loans, doubtful
accordance with Bangladesh Financial Reporting Standards
loans and bad/loss has to be provided at 20%, 50% and 100%
(BFRSs) and the requirements of the Financial Institutions Act,
respectively for loans and advances depending on the duration
1993, the rules and regulations issued by Bangladesh Bank, the
of overdue.
Companies Act, 1994, the Securities and Exchange Rules 1987.
In case of any requirement of the Financial Institutions Act, iii | Other comprehensive income
1993, and circulars issued by Bangladesh Bank, which differ with
BFRS: As per BAS 1: Other Comprehensive Income (OCI) is a
those of BFRSs, the requirements of the Financial Institutions
component of financial statements or the elements of OCI are
Act, 1993, and circulars issued by Bangladesh Bank shall prevail.
to be included in a single OCI statement.
The financial statements have been prepared on historical cost
basis except for land and building which are presented/stated Bangladesh Bank: Bangladesh Bank has issued templates for
at revalued amount. The Board of Directors has authorised financial statements which will strictly be followed by financial
these financial statements on 19 February 2017. Material institutions. The templates of financial statements issued by
83
Bangladesh Bank do not include Other Comprehensive Income ix | Balance with Bangladesh Bank: (Cash Reserve
(OCI) nor are the elements of OCI allowed to be included in a Requirement)
single OCI statement. As such the financial institution does not
BFRS: Balance with Bangladesh Bank should be treated as other
prepare the other comprehensive income statement. However,
asset as it is not available for use in day to day operations as per
elements of OCI, if any, are shown in the statements of changes
BAS 7.
in equity.
Bangladesh Bank: Balance with Bangladesh Bank is treated as
iv | Financial instruments – presentation and disclosure cash and cash equivalents.
In several cases Bangladesh Bank guidelines categorise,
x | Presentation of intangible asset
recognise, measure and present financial instruments
differently from those prescribed in BAS 39. As such full BFRS: An intangible asset must be identified and recognised,
disclosure and presentation requirements of BFRS 7 and BAS 32 and the disclosure must be given as per BAS 38.
cannot be made in the financial statements. Bangladesh Bank: There is no regulation for intangible assets in
DFIM circular no. 11 dated 23 December 2009.
v | Recognition of interest in suspense
BFRS: Loans and advances to customers are generally classified xi | Off-balance sheet items
as 'loans and receivables' as per BAS 39 and interest income is BFRS: There is no concept of off-balance sheet items in any
recognised through effective interest rate method over the term BFRS; hence there is no requirement for disclosure of
of the loan. Once a loan is impaired, interest income is off-balance sheet items on the face of the balance sheet.
recognised in profit and loss account on the same basis based
on revised carrying amount. Bangladesh Bank: As per DFIM circular no. 11 dated 23
December 2009, off balance sheet items (e.g. Letter of credit,
Bangladesh Bank: As per FID circular no. 08 dated 3 August Letter of guarantee etc.) must be disclosed separately on the
2002 and FID circular No. 03 dated 3 May 2006, once a loan is face of the balance sheet.
categorised as SMA, Substandard, Doubtful, Bad/loss, interest
on such loans are not allowed to be recognised as income, xii | Loans, advances and leases/Investments net of provision
rather the corresponding amount needs to be credited to an
BFRS: Loans, advances and leases/Investments should be
interest in suspense account, which is presented as liability in
presented net of provision.
the balance sheet.
Bangladesh Bank: As per DFIM circular no. 11 dated 23
vi | Cash and cash equivalent December 2009, provision on loans, advances and
BFRS: Cash and cash equivalent items should be reported as leases/investments are presented separately as liability and can
cash item as per BAS 7. not be netted off against loans and advances.
Bangladesh Bank: Some cash and cash equivalent items such xiii | Financial guarantees
as ‘money at call and short notice’, treasury bills, Bangladesh
BFRS: As per BAS 39, financial guarantees are contracts that
Bank bills and prize bond are not shown as cash and cash
require an entity to make specified payments to reimburse the
equivalents. Money at call and short notice presented on the
holder for a loss it incurs because a specified debtor fails to
face of the balance sheet, and treasury bills, prize bonds are
make payment when due in accordance with the terms of a debt
shown in investments.
instrument. Financial guarantee liabilities are recognized initially
vii | Non financial institutional assets at their fair value, and the initial fair value is amortized over the
life of the financial guarantee. The financial guarantee liability is
BFRS: No indication of non financial institutional assets is found subsequently carried at the higher of this amortized amount
in any BFRS. and the present value of any expected payment when a
Bangladesh Bank: As per DFIM circular no. 11 dated 23 payment under the guarantee has become probable. Financial
December 2009, there must exist a face item named non guarantees are included within other liabilities.
financial institutional assets. Bangladesh Bank: As per DFIM circular no 11 dated 23
December 2009, financial guarantees such as L/C, L/G will be
viii | Cash flow statement
treated as Off-Balance Sheet items.
BFRS: The Cash flow statement can be prepared using either
the direct method or the indirect method. The presentation is xiv | Disclosure of presentation of profit
selected to present these cash flows in a manner that is most BFRS: There is no requirement to show appropriation of profit in
appropriate for the business or industry. The method selected is the face of statement of comprehensive income.
applied consistently.
Bangladesh Bank: As per DFIM circular no 11 dated 23
Bangladesh Bank: As per DFIM circular no. 11 dated 23 December 2009, an appropriation of profit should be disclosed
December 2009, cash flow is the mixture of direct and indirect in the face of profit and loss account.
methods.
84
2.2 Functional and presentation currency at 31 December 2016. Accounts of the branches are maintained
at the head office from which these financial statements are
The financial statements are presented in Bangladesh Taka
drawn up.
(BDT/Taka/Tk.) currency which is the Company's functional
currency. All financial information presented in BDT has been 2.7 Reporting period
rounded off to the nearest integer.
The financial period of the Company was determined from 1
2.3 Use of estimates and judgments January to 31 December each year and is followed consistently.
The preparation of these financial statements in conformity with 2.8 Directors’ responsibility statement
Bangladesh Financial Reporting Standards (BFRSs) requires
management to make judgments, estimates and assumptions The Board of Directors is responsible for the preparation and
that affect the application of accounting policies and the presentation of the financial statements under section 183 of
reported amounts of assets, liabilities, income and expenses. the Companies Act, 1994 and as per the provision of 'The
Actual results may differ from these estimates. Framework for the Preparation and Presentation of Financial
Statements'.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are 2.9 Consistency
recognised in the period in which the estimates are revised and
In accordance with the BFRS framework for the presentation of
in any future periods affected.
the financial statements together with BAS 1: Presentation of
Information about significant areas of estimation, uncertainty Financial Statements and BAS 8 Accounting Policies, Changes
and critical judgments in applying accounting policies that have in Accounting Estimates and Errors, the Company applies the
the most significant effect in the year ending 31 December 2016 disclosure principles consistently from one period to the next.
is included in the following notes: Where selecting and applying new accounting policies,
changes in accounting policies applied, correction of errors, the
a) Note 10.1.2 Deferred tax assets
amounts involved are accounted for and disclosed in
b) Note 14.9 Deferred tax liabilities accordance with the requirement of BAS 8. The Company has
c) Note 14.1 Cumulative provision for loans, applied the same accounting and valuation principles for the
advances and investments year 2016 as in financial statements for 2015.
d) Note 14.3 Measurement of defined benefit Figures of previous year have been rearranged, whenever
obligation (provision for gratuity) necessary, to conform the current year's presentation.
85
3.2 Direct finance probable that the economic benefits associated with the
transaction will flow to the Company and the amount of revenue
Direct finance operation consists of short-term finance and
and the cost incurred or to be incurred in respect of the
long-term finance, accounts for which are maintained based on
transaction can be measured reliably.
accrual method of accounting. Outstanding loans for
short-term finance and unrealised principal for long-term 3.4.2 Lease income
finance, auto loan, home loan and other finances are accounted
for as direct finance assets of the Company. Interest earnings The excess of aggregate rentals receivable over the cost of the
are recognised as operational revenue periodically. leased asset constitutes the total unearned lease income. The
unearned lease income is recognised as revenue on accrual
3.3 Investments basis over the terms of the lease. However, lease income
against classified and Special Mention Account (SMA) is not
Investment comprises of investment in equity, corporate bond
recognised as revenue but transferred to interest suspense
and government securities. Investment in equity is classified
account as per Bangladesh Bank circulars and directives.
broadly in three categories and investment in government
securities is classified into held for trading and held to maturity. 3.4.3 Dividend income
3.3.1 Investment in equity 3.4.3.1 Listed and unlisted shares
3.3.1.1 Unlisted shares Dividend income against listed and unlisted equity investment is
recognised when the shareholders' legal right to receive
Equity finance consists of equity participation in the form of
payments has been established i.e. during the period in which
unlisted ordinary shares recognised at cost. Adequate provision
dividend is declared in the Annual General Meeting.
is maintained, if required, for diminution in value of shares as per
the latest available audited financial statements as on the 3.4.3.2 Preference shares
closing of the period on an individual investment basis.
Dividend income on cumulative preference shares is recognised
3.3.1.2 Listed shares on accrual basis.
Investments in cumulative marketable ordinary shares held for 3.4.3.3 Gain on sale of shares
trading or held for dividend income are shown under other
Capital gain on sale of shares listed in the stock exchanges is
assets. These are reported at cost and adequate provision is
recognised only when such gain is realised through the shares
made for excess of cost over market value of the shares.
selling in the market.
Unrealised gains are not recognised in the profit and loss
account. 3.4.4 Interest on long term finance and short term finance
3.3.1.3 Preference shares Interest on long term finance and short term finance is
Investment in cumulative preference shares has been reported recognised as revenue on accrual basis. However, interest
at cost and dividend income is recognised in the profit and loss income on Special Mention Account (SMA) and classified
account on accrual basis and considered as operational finance is not recognised as income but credited to interest
revenue. suspense account as per Bangladesh Bank circulars and
directives.
3.3.2 Investment in Government securities
3.4.5 Interest on secured lending
3.3.2.1 Held to maturity
Interest on secured lending is recognised as revenue on accrual
Investments classified as 'held to maturity' are non-derivative basis.
financial assets with fixed or determinable payments and fixed
maturities that the management has the intention and ability to 3.4.6 Fee based revenue
hold to maturity. Where the Company want to sell other than an
Fee based revenue is recognised as income on cash basis.
insignificant amount of such assets, the entire category would
be reclassified as held for trading. 3.5 Interest suspense
3.3.2.2 Held for trading Lease income as well as interest income on long term finance,
Investments classified in this category are acquired principally short term finance, lease finance, channel finance, auto loan
for the purpose of selling or repurchasing in short term trading etc. under category of classified and Special Mention Account
or if designated as such by the management. After initial (SMA) are not recognised as revenue but credited to interest
recognition, investments are measured at fair value and any suspense account.
changes in fair value is recognised in the profit and loss account
3.6 Fixed assets including land, building, furniture and fixture
for the period in which it arises.
3.6.1 Own assets
3.4 Revenue recognition
Fixed assets except land and building are stated at cost
3.4.1 General less accumulated depreciation and accumulated impairment
As per BAS 18 Revenue, revenue is recognised when it is losses, if any. On the other hand, land and building are stated
86
under revaluation model. The cost of an asset comprises its Operations.
purchase price and any directly attributable costs of bringing
the assets to its working condition for its intended use inclusive 3.7 Intangible assets
of inward freight, duties and non-refundable taxes as per BAS 16 The intangible assets comprise the value of accounting
Property, plant and equipment. software licensed for the Company, other than software applied
to the operating systems of computers. An intangible asset is
3.6.2 Subsequent expenditure on fixed assets including land,
recognised if it is probable that future economic benefits that
building, furniture and fixture
are attributable to the asset will flow to the Company over a
Subsequent expenditure is capitalised only when it increases period of time and the cost of the asset can be measured
the future economic benefit from the assets. All other reliably as per BAS 38: Intangible Assets. Intangible assets
expenditures are recognised as expense as and when they are acquired separately are recorded on initial recognition at costs
incurred. and are carried at cost less accumulated amortisation and
accumulated impairment losses, if any.
3.6.3 Depreciation/amortisation on fixed assets including
land, building, furniture and fixture 3.7.1 Subsequent expenditure on intangible assets
Depreciation is provided to allocate the cost of the assets after Subsequent expenditure on intangible asset is capitalised only
commissioning over the period of their expected useful life, in when it increases the future economic benefit from the assets.
accordance with the provisions of BAS 16: Property, plant and All other expenditures are recognised as expense as and when
equipment. Full month's depreciation is charged on additions they are incurred.
irrespective of date when the related assets are put into use and
no depreciation is charged on the month of disposal. 3.7.2 Amortisation of intangible assets
Depreciation is calculated on the cost of assets in order to write Intangible assets are amortised on straight line basis to the
off such cost over the estimated useful life of such asset. profit and loss account from the date when the asset is available
Depreciation/amortisation has been provided at the following for use over its estimated useful life. Intangible assets i.e.
rates on straight line basis for current and comparative period: acquisition cost of the accounting software is amortised within
five years of acquisition.
Particulars Useful life (years)
3.8 Borrowing costs
Building 15* All borrowing costs are recognised as expense in the period in
Motor vehicles 5 which they are incurred in accordance with the BAS 23:
Furniture and fixture 8 Borrowing Costs.
Equipment and appliances 5
Accounting software 5 3.9 Foreign currency translation
*The remaining useful life of building after revaluation. Transactions in foreign currencies are translated to BDT at the
exchange rates ruling at the date of the transactions. Monetary
Depreciation methods, useful lives and residual values are
assets and liabilities denominated in foreign currencies are
reviewed at each reporting date.
translated at rates of exchange ruling at the end of the period.
3.6.4 Impairment Resulting exchange differences are recognised in the profit and
loss account.
The carrying amount of the entity's non financial assets, other
than deferred tax assets, are reviewed at each reporting date to 3.10 Income tax expenses
determine whether there is any indication of impairment. If any
Income tax expense comprise current and deferred tax.
such indication exists, the asset's recoverable amount is
estimated. However, no such conditions that might be 3.10.1 Current tax
suggestive of a heightened risk of impairment existed at the
Provision for current tax has been made on the basis of the
reporting date.
profit of the year as adjusted for taxation purposes in
3.6.5 Disposal of fixed assets including land, building, accordance with the provisions of Income Tax Ordinance, 1984
furniture and fixture and amendments made thereto from time to time. The
Company's current tax liability is calculated using tax rate
On disposal of item of fixed assets including land, building,
(current tax rate is 40%) that is applicable on the reporting
furniture and fixture, gain or loss on such disposal is reflected in
date, and any adjustments to tax payable in respect of previous
the profit and loss account as non-operating income or loss.
years.
3.6.6 Non-current assets held for sale
3.10.2 Deferred tax
Non-current assets that are expected to be recovered primarily
Deferred tax is recognised in respect of temporary differences
through sale rather than through continuing use are classified
between the carrying amounts of assets and liabilities for
as held for sale. Such assets are measured at the lower of their
financial reporting purposes and the amounts used for taxation
carrying amount and fair value less cost to sell, as per BFRS: 5
purposes. Deferred tax is not recognised for:
Non-current Assets Held for Sale and Discontinued
87
a | temporary differences on the initial recognition of assets or securities/properties or advances there against or are
liabilities in a transaction that is not a business combination and considered recoverable.
that affects neither accounting nor taxable profit or loss;
3.12 Employee benefits
b | temporary differences related to investments in subsidiaries
to the extent that it is probable that they will not reverse in the 3.12.1 Defined contribution plan
foreseeable future; and
The Company operates a contributory provident fund scheme
c | taxable temporary differences arising on the initial for its permanent employees. Provident Fund is administered by
recognition of goodwill. a Board of Trustees and is funded by contributions equally from
the permanent employees and from the Company @ 10% of
Deferred tax assets are recognised for unused tax losses,
basic salary of the employees. The contributions are invested to
unused tax credits and deductible temporary differences to the
ensure optimum return to the employees.
extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets 3.12.2 Defined benefit plan
are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit The Company operates an funded gratuity scheme for its
will be realised. permanent employees. Employees are entitled to gratuity
benefit after completion of six month continuous service with
Unrecognised deferred tax assets are reassessed at each the Company from the date of joining. The gratuity is calculated
reporting date and recognised to the extent that it has become on the last basic pay and is payable at the rate of one month's
probable that future taxable profits will be available against basic pay for every completed year of service up to ten year and
which they can be used. one & half month basic pay for more than ten years. The
Deferred tax is measured at the tax rates that are expected to be Company has provided for the same in the financial statements
applied to temporary differences when they reverse, using tax accordingly.
rates enacted or substantively enacted at the reporting date.
3.12.3 Short-term benefit
The measurement of deferred tax reflects the tax consequences
Short-term employee benefit (salary, bonus etc.) obligations
that would follow the manner in which the Company expects, at
are measured on an undiscounted basis and are expensed as
the reporting date, to recover or settle the carrying amount of
the related service is provided.
its assets and liabilities. For this purpose, the carrying amount of
investment property measured at fair value is presumed to be 3.12.4 Other employee benefit obligation
recovered through sale, and the Company has not rebutted this
presumption. The Company operates a group life insurance and
hospitalisation insurance schemes for its permanent
3.11 Provision for loans, advances and investments employees.
Provision for loans, advances and investments is an estimate of 3.13 Accrued expenses, provisions and payables
the losses that may be sustained in the investment portfolio.
The provision is based on two principles (1) BAS 37: Provision, Liabilities are recognised for goods and services received,
Contingent Liabilities and Contingent Assets and (2) whether paid or not, for those goods and services. Payables are
Bangladesh Bank guidelines. The methodology for measuring not interest bearing and are stated at their actual value.
the appropriate level of the provision relies on several key Provisions and accrued expenses are recognised in the financial
elements, which include both quantitative and qualitative statements when the Company has a legal or constructive
factors as set forth in the Bangladesh Bank guidelines. FID obligation as a result of past event and it is probable that an
circular no. 08 dated 3 August 2002 and FID circular no. 03 outflow of economic benefit will be probable to settle the
dated 3 May 2006 as the bases for calculating the provision for obligation and a reliable estimate can be made of the amount of
loans, advances and investments. the obligation.
3.11.1 Write off of loans, advances and investments 3.14 Cash and cash equivalents
In compliance with Bangladesh Bank FID circular no. 3 dated 15 Cash and cash equivalents comprises cash in hand, cash at
March 2007 and DFIM circular no. 11 dated 21 November 2013, bank and term deposits that are readily convertible to a known
loans, advances and investment are written off to the extent amount of cash and that are subject to an insignificant risk of
that (i) there is no realistic probability of recovery, (ii) against change in value.
which legal cases are pending and (iii) full provision has been
maintained. The item's potential return is thus cancelled and 3.15 Cash flow statement
removed ("written off") from the Company's balance sheet. Cash flow statement has been prepared in accordance with the
However, these write off will not undermine or affect the claim BAS 7: Statement of Cash Flows under direct method as
amount against the borrower. Recovery against the written off is recommended in the DFIM circular no. 11 dated 23 December
credited to other operational income. Income is recognised 2009 issued by the Department of Financial Institutions and
where amounts are either recovered and/or adjusted against Markets (DFIM) of Bangladesh Bank.
88
3.16 Earnings per share (EPS) amounts outstanding on the reporting date. Interest expense on
these borrowings is charged to the profit and loss account on
The Company presents basic and diluted EPS data for its
accrual basis.
ordinary shares. Basic EPS is calculated by dividing the profit or
loss that is attributable to ordinary shareholders of the 4.6 Dividend payments
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by Proposed dividends are not recognised as a liability in the
adjusting the profit or loss that is attributable to ordinary balance sheet in accordance with BAS 10: Events After the
shareholders and the weighted-average number of ordinary Reporting Period.
shares outstanding for the effects of all dilutive potential
4.7 Risk management
ordinary shares, if any.
Risk is defined as uncertainties resulting in adverse variation of
4. General profitability or in losses, financial or otherwise. The risk
management of the Company covers core risk areas of credit
4.1 Related party disclosure risk, liquidity risk, market risk that includes foreign exchange risk,
As per BAS 24: Related Party Disclosures, parties are interest rate risk, equity risk, operational risk and reputation risk.
considered to be related if one of the parties has the ability to The objective of the risk management is that the Company
control the other party or exercise significant influence over the evaluates and takes well calculative business risks and thereby
other party in making financial and operating decisions. The safeguarding the Company's capital, its financial resources and
Company carried out transactions in the ordinary course of profitability from various risks.
business on an arm’s length basis at commercial rates with
4.7.1 Credit risk
related parties.
Credit risk is defined as the potential loss arising from the failure of a
4.2 Litigation counter party to perform as per contractual agreement with the
The Company is not a party to any material law suits except those Company. The Company has separate Credit Risk Management
arising in the normal course of business. The Company has filed Department and Credit Administration to carry out risk
necessary law suits against some of the default clients assessment in lending to a customer, sanctioning credit and
for non-performance in loans and advances repayment. The maintaining asset quality.
Company, however, has made adequate provision against such
4.7.2 Operational risk
doubtful finances.
Operational risk addresses the risk associated with fraud,
4.3 Guarantees, commitments and contingencies forgery, unauthorised activities, error, omission, system failure
Financial guarantees are contracts that require the Company to and external events among others. The Company is managing
make specified payments to reimburse the holder for a loss that these risk through written procedures, regular training,
it incurs because a specified debtor fails to make payment when awareness programs and monitoring of the implementation of
it is due in accordance with the terms of a debt instrument. Loan these procedures.
commitments are commitments to provide credit under
4.7.3 Interest rate risk
pre-specified terms and conditions.
Interest rate risk may arise from trading portfolio and
Liabilities arising from financial guarantees or commitments to
non-trading portfolio. The trading portfolio of the Company
provide a loan at a below-market interest rate are initially
consists of government treasury bills, bond, etc. Interest rate
measured at fair value and the initial fair value is amortised over
risk of non-trading business arises from mismatches between
the life of the guarantee or the commitment. The liability is
the future yield of an asset and its funding cost. Asset Liability
subsequently carried at the higher of this amortised amount
Committee (ALCO) of the Company monitors the interest rate
and the present value of any expected payment to settle the
movement on a regular basis.
liability when a payment under the contract has become
probable. Financial guarantees and commitments to provide a 4.7.4 Liquidity risk
loan at a below-market interest rate are included within other
The objective of liquidity risk management is to ensure that all
liabilities.
foreseeable funding commitments and deposit withdrawals can
4.4 Statutory reserve be met when due. To this end, the Company is maintaining a
diversified and stable funding base comprising of core retail and
As per Financial Institution Regulations 1994, Non-Bank
corporate deposits and institutional balance. The liquidity
Financial Institutions (NBFIs) are required to transfer 20% of its
management is monitored by Asset Liability Committee (ALCO)
post tax profit to statutory reserve before declaration of
on a regular basis.
dividend. This requirement has been properly complied with.
4.8 Contingent liabilities and contingent assets
4.5 Borrowings from other banks, financial institutions
and agents Any possible obligation that arises from past events and the
existence of which will be confirmed only by the occurrence or
Borrowings include short term and long term borrowings from
non-occurrence of one or more uncertain future events not
banks and non-bank financial institutions. These are stated at
89
wholly within the control of the Company; or Any present based on the past behavioral analysis of the customers.
obligation that arises from past events but is not recognised
because: h | Other long term liability on the basis of their maturity
term.
a | it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; or i | Provisions and other liabilities are on the basis of their
payment/adjustments schedule.
b | the amount of the obligation cannot be measured with
sufficient reliability. 4.10 Events after the balance sheet date
Contingent liabilities are not recognised but disclosed in the All material events occurring after the balance sheet date have
financial statements unless the possibility of an outflow of been considered and where necessary, adjusted for or
resources embodying economic benefits can reliably be disclosed in note no. 43 of these financial statements.
estimated.
4.11 Comparatives and reclassification
Contingent assets are not recognised in the financial
Comparative information have been disclosed in respect of
statements as this may result in the recognition of income
2015 for all numerical information in the financial statements
which may never be realised.
and also the narrative and descriptive information when it is
4.9 Liquidity statement relevant for understanding of the current period's financial
statements.
The Liquidity Statement of assets and liabilities as on the
reporting date has been prepared on residual maturity term in To facilitate comparison, certain relevant balances pertaining to
accordance with DFIM Circular no. 06 dated 26 July 2011, as per the comparatives have been rearranged/restated/reclassified
following bases: whenever considered necessary to conform to current period's
presentation.
a | Balance with other banks and financial institutions,
money at call and short notice etc. are on the basis of their term. 4.12 Integral component of financial statements
The financial statements of the Company include the following
b | Investments are on the basis of their residual maturity
components:
term.
i | Balance sheet as at 31 December 2016
c | Loans and advances are on the basis of their
repayment/maturity schedule. ii | Profit and loss account for the year ended period
ended 2016
d | Fixed assets are on the basis of their useful lives.
iii | Cash flow statement for the year ended 31 December
e | Other assets are on the basis of their
2016
realisation/amortisation.
iv | Statement of changes in equity for the year ended 31
f | Borrowings from other banks and financial institutions
December 2016
as per their maturity/repayment term.
v | Notes to the financial statements as at and for the year
g | Deposits and other accounts are on the basis of their
ended 31 December 2016
residual maturity period and expected attrition rate which is
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4.13 Compliance of Bangladesh Financial Reporting Standard (BFRS)
Ref. Status
Name of the standards
First-time Adoption of Bangladesh Financial Reporting Standards BFRS-1 Not applicable
Share Based Payment BFRS-2 Not applicable
Business Combinations BFRS-3 Not applicable
Insurance Contracts BFRS-4 Not applicable
Non-current Assets Held for Sale and Discontinued Operations BFRS-5 Not applicable
Exploration for and Evaluation of Mineral Resources BFRS-6 Not applicable
Financial Instruments: Disclosures BFRS-7 Applied with some departures (note 2.1)
Operating Segments BFRS-8 Applied with some departures (note 2.1)
Consolidated Financial Statements BFRS-10 Not applicable
Joint Arrangements BFRS-11 Not applicable
Disclosure of Interests in Other Entities BFRS-12 Not applicable
Fair Value Measurement BFRS-13 Applied with some departures (note 2.1)
Regulatory Deferral Accounts BFRS-14 Not applicable
Presentation of Financial Statements BAS-1 Applied with some departures (note 2.1)
Inventories BAS-2 Not applicable
Statement of Cash Flows BAS-7 Applied with some departures (note 2.1)
Accounting Policies, Changes in Accounting Estimates and Errors BAS-8 Applied
Events After the Reporting Period BAS-10 Applied
Construction Contracts BAS-11 Not applicable
Income Taxes BAS-12 Applied with some departures (note 2.1)
Property, Plant and Equipment BAS-16 Applied
Leases BAS-17 Applied
Revenues BAS-18 Applied
Employee Benefits BAS-19 Applied
Accounting for Government Grants and Disclosure
of Government Assistance BAS-20 Not applicable
The Effects of Changes in Foreign Exchange Rates BAS-21 Applied
Borrowing Cost BAS-23 Applied
Related Party Disclosures BAS-24 Applied
Accounting and Reporting by Retirement Benefit Plans BAS-26 Not applicable
Separate Financial Statements BAS-27 Not applicable
Investments in Associates BAS-28 Not applicable
Financial Reporting in Hyperinflationary Economies BAS-29 Not applicable
Financial Instruments: Presentation BAS-32 Applied with some departures (note 2.1)
Earnings per Share BAS-33 Applied
Interim Financial Reporting BAS-34 Applied
Impairments of Assets BAS-36 Applied
Provisions, Contingent Liabilities and Contingent Assets BAS-37 Applied
Intangible Assets BAS-38 Applied
Financial Instruments: Recognition and Measurement BAS-39 Applied with some departures (note 2.1)
Investment Property BAS-40 Not applicable
Agriculture BAS-41 Not applicable
91
Amount in BDT
Note 2016 2015
5. Cash
Cash in hand 5.1 270,000 150,000
Balance with Bangladesh Bank and its agent bank(s) 5.2 226,125,597 82,047,426
(including foreign currencies)
226,395,597 82,197,426
5.1 Cash in hand
In local currency 270,000 150,000
In foreign currency - -
270,000 150,000
5.2 Balance with Bangladesh Bank and its agent bank(s)
(including foreign currencies)
Bangladesh Bank
In local currency 226,125,597 82,047,426
In foreign currency - -
226,125,597 82,047,426
Sonali Bank Limited (as an agent of Bangladesh Bank) - -
226,125,597 82,047,426
5.3 Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR)
Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR) have been calculated and maintained in accordance with
the section 19 of the Financial Institutions Act, 1993 and of instructions contained in FID circular no. 02 dated 10 November 2004
and FID circular no. 06 dated 06 November 2003 issued by Bangladesh Bank.
Cash Reserve Requirement (CRR) required on the term deposits at the rate of 2.5% has been calculated and maintained with
Bangladesh Bank in the form of current account and 5% Statutory Liquidity Reserve (SLR) including Cash Reserve Requirement has
been maintained against total liabilities excluding shareholders' equity, borrowings from Bangladesh Bank and other Banks and
NBFIs in the form of treasury bills, bonds, balance with Bangladesh Bank and other banks and financial institutions. Both the reserves
as maintained by the Company are shown below:
92
Amount in BDT
Note 2016 2015
6.2 Maturity grouping of balance with other banks and financial institutions
Repayable:
On demand 81,098,524 201,310
Within one month 646,548,870 114,575,468
Within one to three months 494,394,995 765,810,001
Within three months to one year 410,330,080 182,447,280
Within one to five years - -
More than five years - -
1,632,372,469 1,063,034,059
7. Investments
Government securities - -
Other investments 7.2 565,732,580 187,048,680
565,732,580 187,048,680
93
Amount in BDT
Note 2016 2015
Amount in BDT
2016 2015
Cost Market value Cost Market value
Details of other investments are as follows:
In ordinary shares - quoted
Bangladesh Electric Meter Ltd. 7,000,000 4,305,000 7,000,000 4,305,000
7,000,000 4,305,000 7,000,000 4,305,000
In ordinary shares - unquoted
Quality Feeds Ltd. 1,500,000 1,500,000 1,500,000 1,500,000
Alliance Bags Ltd. 3,000,000 3,000,000 3,000,000 3,000,000
4,500,000 4,500,000 4,500,000 4,500,000
In redeemable preference shares
Premium Seed Ltd. 4,000,000 4,000,000 4,000,000 4,000,000
Confidence Salt Ltd. 2,265,346 2,265,346 5,715,346 5,715,346
Summit Power Company Ltd. - - 20,000,000 20,000,000
ACI Godrej Agrovet Private Ltd. - - 33,333,334 33,333,334
Summit Barisal Power Ltd. 100,000,000 100,000,000 - -
Summit Narayanganj Power Unit II Ltd. 100,000,000 100,000,000 - -
Star Ceramics Ltd. 75,000,000 75,000,000 - -
281,265,346 281,265,346 63,048,680 63,048,680
In corporate bonds
Impress Newtex Composite Textiles Ltd. 197,967,234 197,967,234 - -
Mutual Trust Bank Ltd. 75,000,000 75,000,000 112,500,000 112,500,000
272,967,234 272,967,234 112,500,000 112,500,000
565,732,580 563,037,580 187,048,680 184,353,680
Unquoted shares are primarily recognised at cost. Adequate provision has been maintained against the unquoted shares whose book value is lower than the cost.
Amount in BDT
Note 2016 2015
94
Amount in BDT
Note 2016 2015
8.2 a | Net loans and advances including bills purchased and discounted
Total loans and advances receivables 8 19,480,595,090 6,415,776,969
Less: Provision against loans and advances (specific and general) 8.9(b) 226,492,285 199,098,264
Less: Cumulative balance of interest suspense 14.2 31,508,082 33,169,046
19,222,594,723 6,183,509,659
b | Rate of net classified loans and advances
Gross loans and advances 19,480,595,090 6,415,776,969
Classified loans and advances 137,508,216 126,982,039
Unclassified loans and advances 19,343,086,874 6,288,794,930
Total provision 226,492,285 199,098,264
Interest suspense 31,508,082 33,169,046
Total provision and interest suspense 258,000,367 232,267,310
Net classified loans and advances (120,492,151) (105,285,271)
Rate of classified loans and advances 0.71% 1.98%
Rate of net classified loans and advances -0.62% -1.64%
95
Amount in BDT
Note 2016 2015
96
Amount in BDT
Note 2016 2015
8.6 Industry-wise loans and advances including bills purchased and discounted
Agro-based industries 1,721,041,566 833,959,200
Banks and non-banking financial institutions 128,067,380 210,170,907
Chemicals, pharmaceuticals and allied products 861,683,227 160,577,931
Engineering and building materials 2,571,294,338 1,063,785,412
Food and allied products 2,273,996,759 237,489,187
Glass, ceramic and other non-metallic products 1,408,746 1,788,228
Hotel, tourism and leisure 28,076,681 52,688,219
Information and communication technologies 279,154,502 23,866,107
Paper converting and packaging, printing and publishing 538,802,757 307,696,915
Ready made garments and knitwear 2,021,719,001 354,772,417
Social sector 540,754,177 291,935,549
Tannery, leather and rubber products 785,866,009 342,378,583
Textile 842,539,127 634,740,003
Transport and aviation 702,580,501 191,649,831
Others 6,183,610,319 1,708,278,480
19,480,595,090 6,415,776,969
8.7 Geographical location-wise loans and advances
including bills purchased and discounted
Dhaka Division 17,594,807,582 5,683,938,558
Chittagong Division 1,616,724,066 704,216,304
Khulna Division 2,635,995 -
Rangpur Division - -
Rajshahi Division 19,519,317 10,190,569
Sylhet Division 130,233,107 17,431,538
Barisal Division - -
Mymensingh Division 116,675,023 -
19,480,595,090 6,415,776,969
8.8 Broad economic sector-wise segregation of loans and advances
including bills purchased and discounted
Government and autonomous bodies - -
Bank and non-banking financial institutions 128,067,380 210,170,907
Other public sector - -
Private sector 19,352,527,710 6,205,606,062
19,480,595,090 6,415,776,969
97
Amount in BDT
Note 2016 2015
98
Amount in BDT
Note 2016 2015
Amount of loan and advances written off during the year 2,176,354 139,038,588
Amount realised against loans and advances previously written off 119,081,509 144,185,099
Interest creditable to the interest suspense account during the year 34,614,613 9,699,289
99
Amount in BDT
Note 2016 2015
b | Amount of written off loan for which lawsuit has been filed
for its recovery 492,134,190 609,039,345
100
10.1.2 Deferred tax assets
Deferred tax assets have been recognised in accordance with the provision of BAS 12 Income Taxes based on temporary difference
arising due to difference in the carrying amount of the assets and liabilities in the financial statements and its tax base. Calculation
of deferred tax assets is as follows:
Amount in BDT
Note 2016 2015
This represents the mortgaged property (land) acquired from a default client by virtue of verdict given by the competent court and
ownership has been transferred in favor of the Company. The land is mutated in the name of the Company.
Secured
Bank overdraft
Prime Bank Limited 12,662,335 10,273,385
Dhaka Bank Limited 258,516,572 10,492,446
AB Bank Limited 244,027,534 -
Woori Bank Limited 149,990,000 -
Bank Alfalah Limited 179,990,000 -
845,186,441 20,765,831
101
Amount in BDT
Note 2016 2015
102
Amount in BDT
Note 2016 2015
103
Income tax return for the year 2009, 2010, 2011, 2012, 2013, 2014 and 2015 have been duly submitted under section 82BB
(Universal Self Assessment) of Income Tax Ordinance 1984. Out of which, assessment against year 2012 is pending at the second
appeal with Taxes Appellate Tribunal.
Purpose of taking lease deposits is to secure the finance provided to the clients. No interest is payable on lease deposits.
104
Amount in BDT
Note 2016 2015
Paid up capital as at 31 December 2016 is made up of 25,701,400 ordinary shares paid up in cash and 125,799,167 ordinary shares
through issuance of bonus shares.
2016 2015
Number % of holding Number % of holding
Foreign
AKFED 16,744,132 11.05 13,953,444 11.05
16,744,132 11.05 13,953,444 11.05
Domestic
BRAC 37,875,141 25.00 31,562,618 25.00
Ayesha Abed Foundation 15,150,057 10.00 12,625,048 10.00
RSA Capital Limited 7,575,028 5.00 6,312,524 5.00
GoB 33,147,664 21.88 27,623,054 21.88
General shareholders 41,008,545 27.07 34,173,785 27.07
134,756,435 88.95 112,297,029 88.95
151,500,567 100.00 126,250,473 100.00
105
No. of shareholders No. of shares % of holdings
15.4 Classification of shareholders by holding
Number of shares
1 to 500 shares 3,503 486,328 0.32%
501 to 5,000 shares 2,313 3,972,317 2.62%
5,001 to 10,000 shares 279 2,108,021 1.39%
10,001 to 20,000 shares 146 2,162,358 1.43%
20,001 to 30,000 shares 58 1,464,175 0.97%
30,001 to 40,000 shares 25 879,160 0.58%
40,001 to 50,000 shares 18 866,592 0.57%
50,001 to 1,00,000 shares 50 3,624,339 2.39%
1,00,001 to 1,000,000 shares 48 14,075,231 9.29%
over 1,000,000 9 121,862,046 80.44%
Total 6,449 151,500,567 100.00%
The shares are listed in both Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. since 3 December 2006 and traded at
Tk. 42.7 and Tk. 42.3 at the close of 29 December 2016 at Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd
respectively.
In accordance with Bangladesh Bank's DFIM Circular no. 14 dated 28 December 2011, financial institutions are required to maintain
at least 10% Capital Adequacy Ratio (CAR) in line with the guidelines on Capital Adequacy and Market Discipline (CAMD) for
financial institutions, which has come fully into force from 1 January 2012. As of 31 December 2016, the CAR of the Company is
22.09% against the required CAR of 10%. Details are as follows:
Amount in BDT
Note 2016 2015
106
Amount in BDT
Note 2016 2015
IPDC Finance Limited owns real estate property (commercial space including car parking) for its own use as office premises situated
at Hosna Center (4th floor), 106 Gulshan Avenue, Dhaka. This property was revalued at fair value in accordance with BAS 16:
Property, Plant and Equipment which requires regular valuation of property to ensure that the value reflects current market
condition.
The property was first revalued in 2005 and since then significant changes took place in local real estate market, as a result with the
consent of the Board of Directors of IPDC Finance Limited, Hoda Vasi Chowdhury & Co (HVC) as professionally qualified valuer had
conducted the assignment of valuation for determining the fair value of the property, which has subsequently conveyed to
management for incorporating in the financials of 2014 after being adopted in the Board.
Expenses
Expenses related to deposits, fee, commission etc. 23 844,243,048 373,422,243
Charges on loan loss - -
Administrative expenses 27 318,271,799 172,772,431
Other operating expenses - -
Depreciation and amortisation 36.1 21,515,695 21,346,994
1,184,030,542 567,541,668
Profit before provision 501,610,407 445,785,656
107
Amount in BDT
Note 2016 2015
108
Amount in BDT
Note 2016 2015
25.1 Brokerage
Appraisal, feasibility study fees and documentation fees 36,136,852 7,380,695
Restructuring/renewal fees - -
36,136,852 7,380,695
109
Amount in BDT
Note 2016 2015
Directors' fees include fees for attending the meetings of the Board, Executive Committee and Audit Committee. Each director was
remunerated Tk. 8,000 per meeting in accordance with Bangladesh Bank's DFIM circulars number 13 and 03 dated 30 November
2015. In addition, as per policy the Company also bears travelling, accommodation and other related costs of directors who attend
Board Meeting from overseas.
110
Amount in BDT
Note 2016 2015
No DEPS is required to be calculated since there was no scope for dilution of share during the period under review.
111
44. Disclosure on Audit Committee of the Board
The Audit Committee of the Board was duly constituted by the Board of Directors of the Company in accordance with the FID Circular
No. 10 dated 18 September 2005 and DFIM Circular No. 13 dated 26 October 2011 of Bangladesh Bank as well as Bangladesh
Securities and Exchange Commission Notification no. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012. The
committee was formed comprising 5 (five) members of the Board.
Independent
i Mr. Salahdin Irshad Imam Chairman BA Hons, Harvard University.
Director
The Audit Committee of the Board conducted 5 (five) meetings from 1 January 2016 to 31 December 2016 in which among others,
the following salient issues were discussed:
a | The Committee reviewed of the periodical inspection reports on credit assessment, operational, financial procedure and
branch operations of the Company conducted and submitted by the Internal Auditors and gave necessary instructions to the
management for proper and prompt resolution of the irregularities/objections stated therein;
b | The Committee reviewed internal audit plan for the year 2016;
c | The Committee reviewed the draft financial statements for the year 2016 and after discussion with the external auditors,
recommended it to the Board of Directors for its approval;
d | The Committee reviewed the management letter issued by the external auditors and management’s responses thereto;
e | The Committee also reviewed the first quarter, half-year and third quarter ended financial statements for the year 2016 and
recommended them to the Board of Directors for their approvals;
f | The Committee reviewed and ascertained that the internal control system including financial and operational controls,
accounting system, and reporting structure are adequate and effective;
g | The Committee reviewed the actions taken by the Management for implementation of Audit Committee observations on
issues deliberated in Audit Committee meetings;
h | The Committee reviewed the inspection report of Bangladesh Bank with responses from the management for the year ended
31 December 2015;
112
i | The Committee recommended regarding re-appointment of external auditors of the Company considering suitability and
global acceptability; and
j | The Committee placed its report regularly to the Board of the Company for review and monitoring the activities with
recommendations on internal control system, compliance of rules and regulation of the regulatory bodies.
Amounts in BDT
Sufia Khatun Foundation Related concern of BRAC Term deposit receipt 23,800,000 -
Education Trust Fund Related concern of BRAC Term deposit receipt 597,000,000 -
Mother in law of
Fauzia Binte Ahmed Term deposit receipt 1,281,437 -
Managing Director & CEO
113
Nature of Outstanding balance
Related party Relationship
transaction 2016 2015
Spouse of
Benazir Huq Term deposit receipt 619,596 -
Managing Director & CEO
Sl. Status with the IPDC Firms/companies in which they have interest
Name
no. Position Nominated by Name Position
Executive
i Dr. Muhammad Musa Chairman BRAC BRAC
Director
ii Mr. Md. Enamul Hoque Director GoB Sanofi Bangladesh Limited Director
iii Mr. Sadaruddin Ahmed Director GoB Teletalk Bangladesh Ltd. Director
Independent
iv Ms. Nasreen Sattar N/A Consumark Limited Chairman
Director
Member of
Brotee (NGO) Executive
Committe
114
Sl. Status with the IPDC Firms/companies in which they have interest
Name
no. Position Nominated by Name Position
Ayesha Abed
viii Mr. Shameran Abed Director bKash Ltd. Director
Foundation
Guardian Life Insurance Director
RSA
ix Mr. Sameer Ahmad Director RSA Capital Ltd. Director
Capital Ltd.
RSA Advisory Ltd. Director
Additional
BRAC Bank Limited Managing
Mr. Mohammad
x Director BRAC Director
Mamdudur Rashid
Managing
xi Mr. Mominul Islam Ex-officio None N/A
Director & CEO
46.2 Significant contracts in which the Company, its subsidiary or any fellow subsidiary company was a party None
and wherein the Directors have interest that subsisted at any time during the year or at the end of the year.
46.3 Shares issued to Directors and Executives without consideration or exercisable at discount None
46.4 Nature, type and elements of transactions with the related party Note: 45
46.6 Investments in securities of the Directors and their related concerns None
115
Annexure A
116
Fixed Assets Including Land, Building, Furniture and Fixture
Amount in BDT
Cost/valuation Depreciation/amortisation
Carrying
Addition Adjustment Disposal Charged Adjustment
Balance as at Revaluation Balance as at Balance as at Balance as at amount as at
during during during during during
1 January 2016 reserve 31 December 2016 1 January 2016 31 December 2016 31 December 2016
the period the period the period the period the period
Category of asset
Amount in BDT
Cost/valuation Depreciation/amortisation
Carrying
Addition Adjustment Disposal Charged Adjustment
Balance as at Revaluation Balance as at Balance as at Balance as at amount as at
during during during during during
1 January 2015 reserve 31 December 2015 1 January 2015 31 December 2015 31 December 2015
the period the period the period the period the period
Category of asset
Highlights on the Overall Activities of the Company as at and for the Periods 2016 and 2015
2016 2015
Sl. no. Particulars
117
Horizontal Analysis
118
Amount in BDT
Percentage Percentage Percentage Percentage Percentage
Changes in Changes in Changes in Changes in Changes in
2011 2012 2013 2014 2015 2016
YoY YoY YoY YoY YoY
2012-11 2013-12 2014-13 2015-14 2016-15
119
Amount in BDT
2012 Percentage 2013 Percentage 2014 Percentage 2015 Percentage 2016 Percentage
120
Amount in BDT
2012 2013 2014 2015 2016
Years
Stock Performance
Year end Market Price per Share* 18.00 20.00 18.20 26.70 42.70
Market Capitalization 1,878.11 2,086.78 2,088.87 3,370.89 6,469.07
Shareholders’ Funds 2,027.33 2,064.97 2,291.81 2,474.61 2,775.11
Profit After Tax 128.60 141.98 165.51 240.19 303.09
Operating Profit 207.50 325.11 395.12 445.79 501.61
Price Earning Ratio 14.63 14.71 12.64 14.05 21.34
Return on Assets (ROA) 1.85% 1.91% 2.14% 3.01% 1.97%
Interest Coverage Ratio (Times) 7.00 11.68 28.50 17.27 14.94
Current Ratios 1.39 1.18 1.25 1.21 1.01
Return on Capital Employed 6.55% 6.94% 7.60% 10.08% 11.55%
Debt Equity Ratio 0.23 0.20 0.17 0.09 0.41
Net Interest Income as a Percentage of Working Funds 4.42% 5.27% 6.49% 6.11% 4.45%
Cost to Income Ratio 38.81% 32.03% 31.88% 30.34% 40.38%
Capital Adequacy Ratio (CAR) 24.31% 24.36% 26.39% 49.15% 22.09%
Operating Profit as a percentage of Total Assets 2.92% 4.19% 5.10% 5.43% 2.22%
Dividend Cover (Times) 1.23 0.91 0.96 0.95 1.00
Non-Performing Loans to Total Loans 9.66% 5.95% 3.39% 1.98% 0.71%
CRR Ratio Maintained (Required 2.5%) 2.53% 2.52% 2.70% 2.76% 2.52%
SLR Ratio Maintained (Required 5.0% ) 5.04% 6.31% 5.25% 5.13% 16.32%
* Year end market price per share is taken from DSE's last trading day
Price Earning Ratio Net Asset Value Per Share (BDT)
25.00 20.00
21.34 18.00 18.32
20.00 16.00 16.33
15.13
14.00 13.38 13.63
15.00
TImes
BDT
10.00
10.00
8.00
5.00 6.00
4.00
- 2.00
2012 2013 2014 2015 2016 -
2012 2013 2014 2015 2016
Years
Years
1.60
7,000.00
6,469.07
1.40 1.39
6,000.00
1.20 1.25 1.21
1.18
5,000.00
Millions (BDT)
1.00 1.01
4,000.00
Times
3,370.89 0.80
3,000.00
2,086.78 2,088.87 0.60
1,878.11
2,000.00
0.40
1,000.00 0.20
- 0.00
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
Years
Years
20.00 400.00
17.27 325.11
Times
14.94 300.00
15.00
11.68 207.50
10.00 200.00
7.00
5.00 100.00
0.00 -
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Years Years
45.00% 12.00%
40.38%
40.00% 38.81% 10.00%
35.00% 9.66%
32.03% 31.88% 8.00%
30.00% 30.34%
Percentage
Percentage
25.00%
6.00%
20.00% 5.95%
15.00% 4.00%
3.39%
10.00% 2.00% 1.98%
5.00% 0.71%
0.00% 0.00%
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Years Years
121
Operating Profit as a percentage of Total Assets CRR Ratio Maintained (Required 2.5%)
6.00% 2.80%
5.43% 2.75% 2.76%
5.00% 5.10%
2.70%
4.00% 4.19% 2.70%
Percentage
2.65%
Percentage
3.00% 2.92% 2.60%
2.00% 2.22% 2.55%
2.53% 2.52% 2.52%
2.50%
1.00%
2.45%
0.00%
2.40%
2012 2013 2014 2015 2016
Years 2.35%
2012 2013 2014 2015 2016
Years
18.00% 60.00%
16.00% 16.32%
50.00% 49.15%
14.00%
12.00% 40.00%
Percentage
Percentage
10.00%
30.00%
8.00% 26.39%
24.31% 24.36%
6.00% 6.31% 20.00% 22.09%
5.04% 5.25% 5.13%
4.00%
10.00%
2.00%
0.00% 0.00%
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Years Years
3.50% 3,000.00
2,775.11
2,474.61
3.00% 3.01% 2,500.00
2,291.81
2,027.33 2,064.97
2.50%
2,000.00
Millions (BDT)
Percentage
2.14%
2.00% 1.91%
1.85% 1.97% 1,500.00
1.50%
1,000.00
1.00%
0.50% 500.00
0.00% -
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Years Years
122
Return on Capital Employed Debt Equity Ratio
14.00% 0.45
0.41
0.40
12.00%
11.55%
0.35
10.00% 10.08%
0.30
Percentage
8.00% 0.23
0.25
TImes
7.60% 0.20
6.55% 6.94% 0.17
6.00% 0.20
0.15
4.00% 0.09
0.10
2.00% 0.05
0.00% 0.00
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Years Years
Earnings per Share (BDT) Year end Market Price per Share*
2.50 45.00
42.70
2.00 40.00
2.00
35.00
1.59
1.50 30.00
BDT
26.70
1.09 25.00
BDT
1.00 0.94
0.85 20.00 20.00
18.00 18.20
0.50 15.00
10.00
-
2012 2013 2014 2015 2016 5.00
YEARS
-
2012 2013 2014 2015 2016
Net Interest Income as a Percentage of Working Funds Years
7.00%
6.49%
6.00% 6.11%
5.00% 5.27%
Percentage
4.42% 4.45%
4.00%
3.00%
2.00%
1.00%
0.00%
2012 2013 2014 2015 2016
Years
123
Sustainability Report: challenges faced by society. First and foremost, however, we
Our corporate vision “To become the most passionate financial need to get the basics right for our customers.
brand in the country with special focus on youth, women and
underserved areas, thereby, JAGO UCCHASE” is the foundation In the year 2016, we have continued to build a sustainable
of our sustainability vision. Sustainability is therefore an integral business in which our clients have confidence, our employees
component of the business model we pursue. can take pride and our neighboring community get better
livelihood. We remain committed to provide our customers
Our sustainability thinking encompasses socially, economically superior and unparalleled experience in the financial industry in
and environmentally beneficial approach to growth, the triple Bangladesh. IPDC is developing and offering financial products
bottom line of sustainability. Sustainable development is an and services that directly or indirectly lead to long-term
area of continuous concern in strategic discussions which is environmental benefit and social development. We are
highlighted and prioritized when objectives and goals are set, at committed to provide financial services to a wider section of
IPDC Finance Limited. This is incorporated with governance and population. Within a short span of time our operational branch
accountability arrangements and risk management. network have reached 9 and we are moving ahead with further
expansion plan. In 2017, another 3 new branches would be
Sustainability is now the primary moral and economic opened in four important townships for better customer reach.
imperative and it is one of the most important sources of both
opportunities and risks for businesses. Nature, society and Striking the right balance between the financial wellbeing of our
business are interconnected in complex ways that need to be different stakeholder groups is at times, quite challenging. That
understood by decision makers. Incremental changes towards is why we are committed to maintaining an honest and
sustainability are not sufficient, we need a fundamental shift in transparent dialogue with all of our stakeholders, to continually
the way companies and directors act and organize themselves. revisit our policies and practices in light of the company’s
Some companies have figured out how to benefit from the trend environment, social and economic impacts. With an increasing
and some companies have not. Sustainability scholars argue focus on ethics and sustainability, the priority of the Board of
that sustainability issues will force a fundamental change for Directors is to assess and encourage the work of the executive
business as did globalization and information technology. team in building an institution that puts customers’ interests
Those companies that are not able to adapt, will not survive. The first and embeds sustainable banking into everything that we
year started with promises and ended with even more but the are acting with integrity is imperative to everything we do. It
system is still in recovery. We know that IPDC exists in a sector underpins our work, our relationships and the products and
that faces challenges, but we are committed to playing a services we provide. Everyone in the company is expected to
leadership role.We are encouraged that we have always behave with integrity and we have comprehensive policies/
structured our business practices to make dealings fairer for our frameworks and compliance measures as well. In addition to
customers and our communities. Our strategy is simple, the that, we have education programs to support our people in
company’s success is dependent on the success and fortune of maintaining the highest professional standards. The institution
our customers and the communities we live and work in. We is committed to a stance of zero tolerance to bribery and
only succeed when they do. corruption, including facilitation payments across all areas of
the business, regardless of jurisdiction.
We always agree in building prosperity by supporting a broad
range of causes through donation, sponsorship and supporting The 262 employees of IPDC organization wide are our greatest
helpless peoples. We encourage our employees to participate asset, we say it often and with good reason. It is only with their
in social and charitable programs. As a part of its social determination and dedication that we can serve our clients,
responsibility, the Company contributes to various funds, flood generate long-term value for our shareholders and make lasting
affected people, to hospitals and to the people who were contributions to our communities. At the core of our efforts is a
affected by the natural calamities. We believe that sustainable focus on nurturing and sustaining a diverse workplace, because
economic growth and a healthy environment are inter-linked. we have experienced the power of bringing different
We take supportive role in terms of providing financial services perspectives to address the complex and diverse situations our
by restricting and discouraging those projects that cause clients face. We recognize the significance of employee
pollution for environment and health hazard. engagement and have continued to work towards creating a
culture of trust and team spirit. The company’s commitment to
At the outset, it can be demonstrated that as corporate diversity, inclusion and excellence is pivotal to success and
participant, we recognize that, we have responsibilities to the contributes to our culture of innovation. We encourage our
development of the society and the country as a whole. We people to participate in development programs to ensure that
aspire to be known as an institution that builds enduring they are equipped with the tools they need to succeed. At IPDC,
relationship with and delivers value for our clients, shareholders, we pursue to instill the values in our people that will encourage
employees and the community where we work, where we live. At them to respect and abide by the social, economic and
IPDC, we define sustainability in the broadest possible terms. It environmental commitment of the institution. A total of 49
is about conducting our day-to- day business the right way and training programs involving 3,817 man-hours of training were
continuing to play a part in addressing some of the biggest executed during the year. These programs were categorized as
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in-house, external and overseas training. Given the company’s hazardous waste disposal plants, Effluent Treatment Plants,
strong commitment towards developing a learning culture. Bio-gas plants, Bio-fertilizer plants and energy efficient/low
carbon emission projects like Auto Bricks using Hybrid Hoffman
At IPDC, we have long acknowledged that a healthy Kiln, Vertical Kiln, Zig-Zag Kiln etc. are encouraged in our credit
environment is the foundation for economic progress and the policy and we will finance in these projects with top priority.
well-being of society. As a leading financial institution, we are
committed to finding market solutions that benefit the We at IPDC Finance Limited recognize our capacity to achieve
environment. As per our long-term commitment to our the ultimate goal of creating both social and business value by
community we continued to invest both in nurturing incorporating social and environmental responsibility into our
underprivileged people of our society and in the environment, fundamental business operations and stakeholder
we breathe. We provide loans to customers carrying out management. Like the outgoing years, we are strongly
environmental and social due diligence. In all credit delivery motivated to deliver to all sub-divisions of society and through
points, we have instructed to go for financing in eco-friendly careful customer segmentation provide financial access and
and environmentally sustainable business activities and energy services across the continuum of socio demographic groups.
efficient industries. Environmental infrastructures projects i.e.
clean water supply, waste water treatment plants, solid and
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Corporate Social Responsibility
IPDC bears significant corporate social responsibility (CSR). The company produces the measures of CSR disclosure and explores
the determinants of CSR disclosure practices in various fields. IPDC is strongly committed to CSR practices and these form an
integral part of the Company’s overall activities. Regardless of the depth in the consciousness, all of us orchestrate with the idea of
reciprocating to the society in terms of our Corporate Social Responsibility but IPDC Finance takes this in high esteem. Its
contribution to social sector development includes several pioneering interventions to pro-actively support meaningful
socio-economic development in Bangladesh and enables a larger number of people to participate in and benefit from the country’s
economic progress. These contributions are based on the hope of achieving social wealth and prosperity. Taking from the vision,
IPDC yearns to be the most passionate financial brand in the country which itself redefines our notion to grow with the vibrant youth,
women and underserved areas. It understands the imperativeness of a growing youth population for the prosperity of a country as
only solid seed sowed can reap the fruits that a nation can enjoy for unbound years to come. IPDC believes to take a 360-angle care
from the very birth of a child to its nutrition, education, entertainment and convenience.
Focus Area:
IPDC Finance Limited’s CSR activities reflect the company’s mission, vision and values. It initiates a variety of welfare activities in
various fields such as healthcare, education, environment, economic empowerment, critical human needs and supply chain standard
through community services, funds, tree plantation and other philanthropic initiatives. IPDC focuses on inclusive growth and
improving social capital through its health and education initiatives. It creates access to opportunities and resources through
economic development and infrastructure and environment support initiatives. The company is also constantly working to come up
with innovative CSR programs, partnerships and business practices to serve the people, communities and the planet. These
activities lead to a better lifestyle of the people living in society as well as a safe and healthy-living environment. It also makes IPDC
even more powerful as a company.
Spent in
Sl. No. Sector percentage
of total budget
1 Emergency disaster relief and capacity building of emergency rescue services 51%
2 Education 27%
3 Preventive and curative health care 12%
4 Cultural welfare and others 10%
Total 100%
Notable Initiatives:
• "Inaugurating Porua" Library
“The journey of a lifetime starts with the turning of a page”. A
library is a treasure-house of knowledge. IPDC acknowledges the
fact that library in the villages can contribute enormously in the
educational development. So, the company initiated this program
to provide children with the resources of education. IPDC made
significant donations to establish libraries in 9 schools with the
help of Light and Hope for the better education of around 300
underprivileged children. It helps a good deal in spreading
knowledge and education. A well-stocked library is an asset. By
establishing libraries in the underserved areas and distributing
books to the children, it also contributes towards encouraging
children to build themselves a brighter future and henceforth,
serve the community. The unity, empathy, serving mind and
generous heart of the people at IPDC to satisfy the poor children’s
need was prevalent. With much willingness and co-operation, the company was able to establish a Rural Library triumphantly. This
Porua Library will hold an immense part in the educational development and embellishment of the poor students’ life.These books
are open to all students of Agargaon Alok Shikkhaloy School. Nousheen Rahman, Head of Marketing and Corporate
Communications, IPDC, Walsiullah Bhuiyan, President, Light of Hope and senior officials from both sides were present at this event.
The goal of the program is to enlighten children with the light of education and hope as well as empower them with the boldness and
strength to plan and live a better life.
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• Handing over books to Primary Schools and Colleges
“Quality education needs to be imparted to school-going children
before any country can dream of achieving sustainable
development”. On 16 November 2016, realizing its importance,
IPDC handed over books to Nandipara Primary School with the
help of Light of Hope’s library project “Porua”. The project also
made donations regarding establishment of libraries in 9 schools
which are Mojar School, Spreeha Bangladesh (After School
Program), Apon Pathshala, Kodom Ali Primary School, Moddho
Narshingpur Govt Primary School, Poriborton School, Baluata
Sorkari Prathomik Biddaloy, 52 No. Fulkocha Govt. Primary School,
and BG Press High School. This was another project that was
undertaken with the aim of expanding educational opportunities.
With the help of Light and Hope, this project contributed towards
the better education of around 300 underprivileged children. The
new books enriched their libraries and boosted the culture of reading among the children due to availability of resources. The
donated books accelerated the learning process in schools. All of these 9 schools were highly benefitted from this initiative. Besides,
Poroshmoni Somaj Kallyan has been funded for Purchasing books for Jhenaidah Cadet College Library. AFM Barkatullah, Deputy
Managing Director; Rizwan Dawood Shams, General Manager; Nousheen Rahman, Head of Marketing and Corporate
Communications and Waliullah Bhuiyan, Chairman, Light of hope; Maruf Islam, Executive Director; Mukul Alam, Director (Corporate
Relations) were present at the event.
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provide the basic yet indispensable rights of the distressed children in our society which we often take for granted but are no less
than an inaccessible dream to them.
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• Planting trees in Kurigram and Barguna Upazilas
IPDC takes the custody of any initiative only with an avowal of its
sustainability. Because it reckons that every little footfall taken by
IPDC commits the prosperity in the coming years. IPDC Finance
Limited with the cooperation of Terre des hommes’ (TDH) could
finance the promotion and plantation of 100,000 Moringa trees in
Kurigram and Barguna Upazilas. These 100,000 trees planted in
northern district of Bangladesh vowed to save the salvaged planet
for a sustainable tomorrow. IPDC cautiously chose Moringa for its
heavenly benefits. The leaves of Moringa Oleifera are nature's
multi-vitamin providing 7 x the vitamin C of oranges, 4 x the
calcium of milk, 4 x the vitamin A of carrots, 3 x the potassium of
bananas, and 2 x the protein of yogurt. Cooking demonstrations
on Moringa khichuri were held in 47 Community Clinics and 5
Family Welfare Centers. A total of 4,800 children and their
mother/caregivers attended the sessions. Field staff conducted awareness sessions on benefits of Moringa leaves for improvement
of nutritional status. Apart from the cooking demonstrations, Moringa cutting were planted in 47 community clinics from 31 unions
(in Kurigram and Barguna districts). 446 families received three pieces Moringa cutting to plant in their home.
• Sponsorship for Aga Khan Golf Tournament to Aga Khan Shia Imami Ismaili Council of BD
IPDC took heavy interest in the Aga Khan Golf Tournament as such games brings are a fun and relatively easy way to get people
involved in a cause and out socializing. The game brought together players from all ages and genders and IPDC made sure the
tournament is carried the most sophisticated to spur out its inherent spirit.
• Sponsorship for Aga Khan Cricket Team participating in the Jubilee Games
The sprouting field and craze of the nation is cricket at the moment. And IPDC, boosts the budding players by providing them with
the cricket equipment in the Jubilee Games 2016 so they can go forward with their interest without any kind of hindrance in the way.
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• Sponsorship for "Rajuk National NaturEnlight 2016 to Rajuk Uttara Model College Private Fund
Just as importantly, nature enriches our lives, from inspiring views of landscapes to spotting a busy bee at work. There is plenty of
evidence to show that contact with nature benefits us and considering it IPDC funded the Rajuk National NaturEnlight 2016. A
well-organized Nature Wellness Program along with the plantation of several trees on the event day promised to save the savaged
planet.
• Ticket Chai Ltd. Sponsorship for grand global get together of EX cadet
Undoubtedly Cadet is the ne the strongest forum because of its own diversity as it is a pool of the most talented individual from
corners of the nation. The discipline and aura of these pool has taken by example by many and eventually all the leading position
happens to be taken by them. Therefore, IPDC takes pride to be associated with a such a forum.
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Environmental Related Initiative and Obligation
Work Environment:
IPDC is more like a hub of warm professionals than a workplace IPDC has included Environmental Risk Policy with its regular
going by the unconventional ways of getting work done. We Credit Manual in line with Credit Risk Management (CRM)
amalgamate the synergies from our diversified workforce guideline. Environmental risk, an innate element of credit risk,
budding from different background, organization, race and needs to be managed properly. With this end in view and in line
religion. We believe that strength lies in differences not with the guidelines of Bangladesh Bank (BB), Environmental
similarities. IPDC ensures the maintenance of a safe and friendly Risk Management (ERM) Policy of IPDC has been prepared and
atmosphere in the office. Several actions are implemented included in ‘Credit Manual’ version: 5 dated 19 July 2014,
within the company to motivate everyone to work as a team and contents of which are to be followed and abided by all
to make it at home. For instance, motivational speeches are concerned and reviewed under Environmental Due Diligence
often given by the senior officials. (EDD) checklists.
Natural Environment: As per the "Policy Guideline for Green Banking" issued by the GB
& CSR Department of Bangladesh Bank on August 11, 2013, the
IPDC Finance Limited is committed to comply with
Board of Directors of IPDC adopted the 'Green Banking Policy' in
environmental regulation for maintaining ecological as well as
its 137th Meeting held on 14 May 2014.
social balance and retaining the globe safe habitable for all
living beings and their future generation. Sustainability is the
IPDC has already formulated Green Banking Unit (GBU) headed
key aspect in driving the strategy making process of the
by the Head of Corporate Investment.
business fraternity. Holding this ideology in high regard, IPDC go
all-out to preserve a habitable globe for generations to come.
IPDC has formulated and circulated the 'Green Office Guide' for
the employee of IPDC. The purpose of this policy is to outline
Green Banking:
guidelines for more efficient management of resources and
IPDC is not only the pioneer financial institutions in the country encourage IPDC employees to embrace “green” values by
to implement Bangladesh Bank’s Green Banking Guidelines in promoting a more environmentally friendly corporate culture,
phases but has also embraced new opportunities for financing identifying steps for positive environmental action, developing
and investment policies as well as portfolio management that sustainable procurement practices and conservation policies,
work towards the creation of a strong and successful yet the low and facilitating shifts towards a green mindset.
carbon economy. IPDC has maintained an entirely Green
Banking Unit solely dedicated in establishing, designing,
evaluating and administrating activities related to green
banking issues.
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Disclosure on Green Banking 2016
Climate change is a significant issue for Bangladesh. But while - Beside the Green Office Guide, the Company has an unique
the effects of climate change are increasingly a risk to the and very effective intranet system which is one of the best
health, economy and the environment of the country, solutions for internal communication, information sharing,
economists are also recognizing that there are financial rewards employee education and database management. It has features
from controlling climate change and developing a low carbon like e-notice board, online leave management facility,
economy. e-attendance for the employees. Most of the communications
within the Company has become absolutely online. To further
Recently, there has been a growing interest in the development reduce the proportion of paper consumption, various
of sustainable and green financial regulations globally. The communications are posted on the intranet with the aim to
interest is based on the increasing climate change risks for the increase employee awareness on the subject. They include
financial sector on the one hand and on the other, a need to information on efficient and economic use of paper, such as
integrate the financial sector into a transition to a green both-side printing and reusing paper as much as possible. All of
economy. these are significantly saving the usage of paper and thus
enabling IPDC to become a more environment friendly
Bank & Financial Institutions can provide important leadership organization.
for the required economic transformation that will provide new
opportunities for financing and investment policies as well as - IPDC is utilizing modern facilities with a view to establishing
portfolio management for the creation of a strong and fully IT-based Green Marketing System. As part of this, it has
successful low carbon economy. The bank's green banking created SMS banking service. IPDC encourages its clients to
activities cover multidimensional areas which include both communicate and to send documents through e-mail with a
in-house environment management and undertaking green view to avoid printing and paper use.
financing to support green economy.
- IPDC has included Environmental Risk Policy with its regular
IPDC committed to complying with environmental regulation for Credit Manual in line with Credit Risk Management (CRM)
maintaining ecological as well as social balance and retaining guideline. Environmental risk, an innate element of credit risk,
the globe safe habitable for all living beings and their future needs to be managed properly. With this end in view and in line
generation. with the guidelines of Bangladesh Bank (BB), Environmental
Risk Management (ERM) Policy of IPDC has been prepared and
IPDC is one of the pioneer Financial Institutions in the country included in ‘Credit Manual’ version: 5 dated 19 July 2014,
in implementing Bangladesh Bank’s (BB) Green Banking contents of which are to be followed and abided by all
Guidelines in phases. Actions taken by IPDC are given below: concerned and reviewed under Environmental Due Diligence
(EDD) checklists.
- As per Bangladesh Bank SFD (Sustainable Finance
Department) Circular number 02 dated December 01, 2016, - There were some sessions on Green Banking activities by IPDC
management of IPDC Finance Limited has already initiated to to create awareness among the employees.
form a “Sustainable Finance Unit” and a “Sustainable Finance
Committee” as per prescribed format of Bangladesh Bank and - The Company instructed to its branches to initiate workshop,
have fixed the scope of work of these units. seminar and customer get together to make aware them
regarding their participation towards protection of the
- As per the "Policy Guideline for Green Banking" issued by the environment from different pollution and hazards.
GB & CSR Department of Bangladesh Bank on August 11, 2013,
the Board of Directors of IPDC adopted the ‘Green Banking - IPDC has been regularly reporting its green Banking activities
Policy’ in its 137th Meeting held on 14 May 2014. to the Bangladesh Bank on quarterly basis since 2013. In view of
highlighting our Green Banking activities and creating aware-
- IPDC has already formulated Green Banking Unit (GBU) ness amongst the stakeholders, a separate section has been
headed by the Head of Corporate Investment. incorporated in our Annual Report, website and other
internal Publication for disclosing our Green Banking activities.
- IPDC has formulated and circulated the ‘Green Office Guide’ for
the employee of IPDC. The purpose of this policy is to outline
guidelines for more efficient management of resources and IPDC’s Green Motto:
encourage IPDC employees to embrace “green” values by Reduce, Reuse & Recycle!
promoting a more environmentally friendly corporate culture,
identifying steps for positive environmental action, developing
sustainable procurement practices and conservation policies,
and facilitating shifts towards a green mindset.
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Disclosure on 'Capital Adequacy and Market Discipline (CAMD)
In accordance with Bangladesh Bank's DFIM Circular no. 14 instruments eligible for inclusion in Tier I or in Tier II
dated 28 December 2011, the disclosures on capital adequacy
and market discipline have been made in line with same circular, As per the guidelines of Bangladesh Bank, Tier - I and Tier - II
which consists of the following three mutually reinforcing pillars: Capital of the Company consists of as per following
Tier - I Tier - II
Pillar I: This prescribes the minimum capital requirements for
Credit Risk, Market Risk and Operational Risk. Fully Paid-up Capital General provision
Non repayable share premium account Revaluation reserves -
Pillar II: This prescribes the Supervisory Review Process which is Statutory Reserve - 50% of revaluation reserve of fixed assets
based on the principle that the Company assesses the overall Retained Earnings - 45% of revaluation reserve on securities
adequacy of its capital and set targets for capital that All other preference shares
commensurate with the Company's specific risk profile and
control environment.
Quantitative Disclosures
Pillar III: This depicts Market Discipline and comprises as set of The amount of Tier I capital, with separate disclosure of:
disclosures on the capital adequacy and risk management Particulars Amount in BDT million
framework on the Company to ensure that market participants Paid-up capital 1,515.01
can better understand the Company's risk profile and the Non repayable share premium account 167.01
adequacy of its capital. Statutory Reserve 393.38
General Reserve -
A) Scope of Application Retained Earnings 575.22
Total Tier - I capital 2,650.61
Qualitative Disclosures Total amount of Tier - II Capital 271.23
The name of the top corporate entity in the group to which this Other deductions from capital -
guidelines apply: IPDC Finance Limited. Total eligible capital 2,921.84
B) Capital Structure Total and Tier I capital ratio - For stand alone
CAR on Total Capital basis (%) 22.09
Qualitative Disclosures CAR on Tier - I Capital basis (%) 46.63
Summary information on the terms and conditions of the main
features of al capital instruments, specially in the case of capital
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D) Credit Risk
Rate
Quantitative Disclosures Particulars
The general qualitative disclosure requirement with respect to General provision on unclassified loan, leases 1%
credit risk, including: General provision on unclassified SME loan, leases 0.25%
General provision on special mention account 5%
• Definition of past due and impaired (for accounting purposes); Specific provision on substandard loan, leases 20%
Specific provision on doubtful loan, leases 50%
With a view to strengthening credit discipline, the Company Specific provision on bad/loss loan, leases 100%
classifies loan, leases and advances and maintains provision in
line with Bangladesh Bank's FID Circular no. 08 dated 03
• Discussion of the Company's credit risk management policy
October 2002 and FID Circular no. 03 dated 03 May 2006 as
follows:
Definition of Credit Risk: Credit risk is the risk of loss that occur
from the failure of any counterparty to make required payments
Fixed term loan (repayable within maximum 5 years of time) are
in accordance with agreed terms and conditions and/or
classified as:
deterioration of credit worthiness. Credit risk is managed
through a framework set by policies and procedures established
Substandard - if defaulted installment is equal to or more than
by the Board. The responsibility is clearly segregated between
the amount of installment(s) due within 6 (six) months, the
originator of business transaction and approver in the risk
entire loans are classified as 'Sub-standard'.
function.
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alerts are raised, remedial actions are agreed and monitored. Particulars Amount in BDT million
Agro-based industries 1,721.04
Credit Risk Mitigation: Potential credit losses from any given Banks and non-banking financial institutions 128.07
account, customer or portfolio are mitigated using a range of Chemicals, pharmaceuticals and allied products 861.68
tools such as collateral, netting agreement and other Engineering and building materials 2,571.29
guarantees. The reliance that can be placed on these mitigates Food and allied products 2,274.00
is carefully assessed in light with issues such as legal certainty Glass, ceramic and other non-metallic products 1.41
and enforceability, market valuation, and counterparty risk of Hotel, tourism and leisure 28.08
the guarantor. Collateral is valued by independent third party Information and communication technologies 279.15
surveyor in accordance with the Company's credit policy and Paper converting and packaging, printing and publishing 538.80
procedures. Ready made garments and knitwear 2,021.72
Social sector 540.75
Credit Approval: Board of Directors of the Company has the Tannery, leather and rubber products 785.87
sole authority to approve any credit exposure and to sub Textile 842.54
delegate to such authority the 'Executive Committee', a Transport and aviation 702.58
sub-committee of the Board, with no approval authority to the Others 6,183.61
Managing Director & CEO and other Departmental Heads. Total 19,480.60
Problem Credit Management: The Company has a separate Residual contractual maturity breakdown of the whole portfolio,
'Special Asset Management (SAM)' department, dedicated for broken down by major types of credit exposure.
management, settlement and recovery of problem credits.
Major responsibility of this department is to formulate strategy Particulars Amount in BDT million
137
Particulars Amount in BDT million Particulars Amount in BDT million
Opening balance 126.98 Total unrealized gains (losses) -
Additions 88.07 Total latent revaluation gains (losses) -
Reductions 77.54 Any amounts of the above included in Tier II capital. -
Closing balance 137.51
Capital requirements broken down by appropriate equity
groupings, consistent with the Company's methodology, as well
Movement of specific provisions for NPAs
as the aggregate amounts and the type of equity investments
subject to any supervisory provisions regarding regulatory
Particulars Amount in BDT million
capital requirements.
Opening balance 75.73
Provisions made during the period (58.50)
• Specific Market Risk: Market value of the investment in equity
Write-off 2.18
is Tk. 4.50 million against which capital requirement @ 10% is
Write-back of excess provisions -
Tk. 0.45 million
Closing balance 15.06
Particulars Amount in BDT million Total Rate Sensitive Liabilities 772.00 728.20 459.20 821.70 1,593.20
Quoted shares 7.00 Total Rate Sensitive Assets 2,243.20 2,937.60 3,374.30 1,449.50 1,121.10
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Amount in BDT million Qualitative Disclosures
Minor Moderate Major Views of Board of Directors (BoD) on system to reduce
Particulars
2% 4% 6% Operational Risk:
The operational risk is defined as the risk of loss resulting from
Change in the Value of Bond Portfolio - - -
inadequacy or failure of internal processes, people and systems
Net Interest Income 135.00 270.10 405.10
or from external events. The Board of Directors (BoD) of the
Revised Regulatory Capital 3,055.90 3,191.00 3,326.00
Company and its Management firmly believe that this risk
Risk Weighted Assets 13,217.40 13,217.40 13,217.40
through a control based environment in which processes are
Revised CAR (in %) 23.12% 24.14% 25.16%
documented, authorized as independent and transactions are
reconciled and monitored. This is supported by an independent
G) Market Risk
program of periodic reviews undertaken by internal audit. All the
Qualitative Disclosures operational policies and guidelines are duly approved by the
Views of Board of Directors on trading/investment activities: BoD and reviewed on a regular basis.
Market risk is the possibility of losses of assets in balance sheet
and off-balance sheet positions arising out of volatility in Performance gap of executives and staffs
market variables i.e., interest rate, exchange rate and price. The Company always strives to ensure a great place to work by
Allocation of capital is required in respect of the exposure to hiring and retaining the most suitable people at all levels of the
risks deriving from changes in interest rates and market prices. business. We want to be the preferred employer in the industry
within the year 2017. The Company affirms that there exists no
Methods used to measure the Market Risk performance gap of the executives and staffs.
Bangladesh Bank suggested the FIs for using Standardized
Approach (rule based) in order to calculate the market risk for Potential external events
banking book where the capital charge for interest rate risk, External events like general business and political situation,
price and foreign exchange risk is determined separately. change in credit quality of the borrowers, change in market
conditions etc. can affect the business of the Company. IPDC is
Market Risk Management system proceeding with its strategic plan and its successful
Policies and processes for mitigating market risk implementation for its future performance.
To mitigate the several market risks the Company formed Asset
Liability Management Committee (ALCO) that monitors the Policies and procedures for mitigating operational risk
Treasury Division’s activities to minimize the market risk. ALCO is IPDC mitigates operational risk by virtue of designing the
primarily responsible for establishing the market risk organizational structure by clearly defining roles and
management and asset liability management of the Company, responsibilities of individuals involved in risk taking as well as
procedures thereof, implementing core risk management managing it, formulating overall risk assessment and
framework issued by the regulator, best risk management management policies, methodologies, guidelines and
practices followed by globally and ensuring that internal procedures for risk identification, risk measurement, risk
parameters, procedures, practices/policies and risk monitoring, defining an acceptable level of risk, mitigating all the
management prudential limits are adhere to. core risks in line with their respective guidelines provided by
Bangladesh Bank.
The ALCO reviews the risk of changes in income of the
Company as a result of movement in the market interest rates. Approach for calculating capital charge for operation risk
The Company always try to follow Bangladesh Bank's guidelines
As suggested by the guideline, the Company has computed the
to minimize mismatches between the duration of interest rate
capital requirements for operational risk under the 'Basic
sensitive assets and liabilities.
Indicator Approach (BIA)'. Under BIA, the capital charge for
operational risk is a fixed percentage, currently 15% of average
In addition, ALCO holds monthly meetings on a regular basis for
positive annual gross income of the Company over the past
controlling day-to-day trading activities, to perform market
three years.
analysis over interest rate and manage & monitor the level of
mismatch for assessing the market risk.
Quantitative Disclosures
Capital requirements for operational risk
Quantitative Disclosures
Capital requirements for Market Risk
Particulars Amount in BDT million
H) Operational Risk Capital requirements for operational risk 848.87
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Operating Segment Perforamnce
Amount in BDT
Corporate SME Retail Treasury Total
For the year ended December 31, 2016
Net Interest Income* 264,775,342 59,579,086 100,341,581 260,678,506 685,374,516
Fees and Other Income 126,967,192 10,114,961 18,181,639 759,592 156,023,385
Net Operating Revenue 391,742,534 69,694,048 118,523,221 261,438,098 841,397,901
Operating Expenses** 121,872,801 33,140,106 144,828,001 39,946,586 339,787,494
Operating Profit 269,869,734 36,553,941 (26,304,780) 221,491,512 501,610,407
* Fund Transfer Pricing under single pool method has been applied in arriving at Segment Net Interest Income.
** Support and common Operating Expenses are allocated to business lines.
*** There are some non-interest bearing assets and liabalities which are not attached with operating segment. These are included in treasury.
IPDC has been rated as AA2 (Pronounced as Double A 2) long CRAB considered financial performance, capital base, asset
term credit rating and ST-2 short term credit rating by Credit quality, liquidity position, management experience and
Rating Agency of Bangladesh Limited (CRAB) based on prospect of the industry while assigning the rating. The
financials and other available information up to the date of assigned rating reflects the strengths of the company which is
rating declaration. The outlook on the rating is "Stable" in last backed by a strong team of management, growth in the
two Consecutive years. non-interest income, deposits and investments, adequate
capital coverage with high Tier-1 capital, improved asset quality
and well controlled liquidity position.
Long Term Short Term Date of
Outlook
Rating Rating Validity
Date of Issue
141
Maturity Pattern of Key Assets and Liabilities (ALM)
In financial institutions, asset and liability management is the practice of managing liquidity and interest rate risks arising out from
maturity mismatch between asset and liability. The company should ideally match tenor wise asset and liability to make sure that the
company has sufficient cash inflow to meet its outflow. Interest rate structure varies with respect to different maturity buckets;
therefore, a match between asset and liability is also required which allows the company to adjust its spread due to the movement in
market interest rates. In 2016 IPDC has improved its gap in asset and liability (detail can be found in financial statement) as depicted
in the graphs below:
10,000
8,944
8,000
6,436 6,580
6,000
BDT mn
5,035
4,000
3,228
2,676 2,861 2,477 2,098 2,044
2,000
0
up to 1 month 1-3 months 3-12 months 1-5 years above 5 years
2016
Asset Liability
3,500
3,188
3,000
2,500
1,798 1,888
BDT mn
2,000 1,735
1,533
1,500
904 1,071
1,000 734
613 466
500
-
up to 1 month 1-3 months 3-12 months 1-5 years above 5 years
2015
Asset Liability
Liquidity Gap
5,000
3,909
4,000
3,000
2,000 1,453
BDT mn
1,000 628
379 337
147
(185) (144) (90)
-
up to 1 month 1-3 months 3-12 months 1-5 years above 5 years
(1,000) (1,184)
(2,000)
Axis Title
2016 2015
142
Classification and Impairment of Investments in Shares
Impairment of Investment: At the end of December 2016, we did an impairment exercise for
According to the BAS 36 impairment of assets seeks to ensure both quoted and unquoted shares. We found no significant
that an organization are not carried at more than their indication for doing impairment in our books.
recoverable amount. As per BAS 39 an entity should start the
impairment assessment by considering whether objective Investment Classification
evidence of impairment exists for financial assets that are
individually significant. For financial assets that are not 2013
individually significant, the assessment can be performed on an In ordinary shares -quoted1%
individual or collective (portfolio) basis. As per FID circular No. In ordinary shares
08, dated 03 August 2002, FID circular No. 03, dated 03 May -unquoted1% In ordinary shares
2006 and FID circular No.03, dated 29 April 2013 , a general - quoted
provision at 0.25% to 5% under different categories of In ordinary shares
unclassified loans (good/standard loans) has to be maintained - unquoted
irrespective of objective evidence of impairment on lease, loans In redeemable
and advances. Moreover, according to the Bangladesh Bank preference shares
Circular DFIM circular no.11, date-23 December 2009, all Investment in
investment in shares and securities has to be revaluated after a In redeemable corporate bonds
year end. preference shares 50%
Investment in corporate bonds 48%
The carrying amount of the entity's non-financial assets, other
than deferred tax assets, are reviewed at year end reporting
Details of Investments in shares are scheduled can be found in
date to determine whether there is any indication of impairment.
Note-7 to the Financial Statement.
If any such indication exists, the asset's recoverable amount is
estimated. However, no such conditions that might be
suggestive of a heightened risk of impairment existed at the
reporting date.
143
Non-performing Loan (NPL)
During the year 2016, there was improvement in NPL status of the Company which is represented in its NPL ratio being decreased to
0.71% from the previous year’s 1.98%.
NPL Movement:
The movement in NPL portfolio during the year 2016 is given below:
Amount in BDT
Opening balance 126.98
Add: Addition during the year 52.70
Less: Collection during the year 40.00
Less: Write offs 2.18
Closing balance 137.51
Write offs:
The movement in write-offs portfolio during the year 2016 is given below:
144
Sector wise NPL Portfolio
64.25
70
62.2
60
50
BDT mn
40
30
20
5.08 5.98
10
0
Trade and Industry Housing Others
commerce
145
Statement of Sector Wise Exposure:
146
Credit risk concentrations exist in lending to single customer groups, borrowers engaged in similar activities, or diverse groups of borrowers that could be affected by similar economic or other
factors. To manage these concentrations, exposure limits are established for single borrowing groups, counter parties, industry segments, countries, and cross border transfer risks. Limits are
aligned with the Company’s business strategy and resources, and take into account the credit quality of the borrower, available collateral and regulatory requirements, Limits are typically set
taking account of the factors such as impact on earnings and capital as well as regulatory constraints.
The Company is in compliance with Section 14 of the Financial Institutions Act, 1993 which limits its exposure to any single client in Bangladesh to not more than 30% of our Equity.
Amount in BDT
2012 % 2013 % 2014 % 2015 % 2016 %
Name of Sector
Agro-based industries 496,826,670 8.89% 549,096,157 9.56% 598,927,138 10.55% 833,959,200 13.00% 1,721,041,566 8.83%
Banks and non-banking financial institutions 172,169,249 3.08% 346,317,849 6.03% 301,892,379 5.32% 210,170,907 3.28% 128,067,380 0.66%
Chemicals, pharmaceuticals and allied products 582,602,717 10.43% 438,050,385 7.62% 213,641,556 3.76% 160,577,931 2.50% 861,683,227 4.42%
Engineering and building materials 488,259,153 8.74% 454,562,960 7.91% 444,118,342 7.82% 1,063,785,412 16.58% 2,571,294,338 13.20%
Food and allied products 225,993,182 4.05% 524,530,074 9.13% 414,268,180 7.30% 237,489,187 3.70% 2,273,996,759 11.67%
Glass, ceramic and other non-metallic products 166,994,679 2.99% 7,419,664 0.13% 48,669,702 0.86% 1,788,228 0.03% 1,408,746 0.01%
Hotel, tourism and leisure 15,885,566 0.28% 86,030,634 1.50% 70,782,502 1.25% 52,688,219 0.82% 28,076,681 0.14%
Information and communication technologies 238,140,221 4.26% 91,497,508 1.59% 37,218,224 0.66% 23,866,107 0.37% 279,154,502 1.43%
Paper converting and packaging, printing and publishing 158,239,795 2.83% 242,107,323 4.21% 323,881,651 5.71% 307,696,915 4.80% 538,802,757 2.77%
Ready made garments and knitwear 123,245,070 2.21% 151,952,371 2.64% 528,212,939 9.30% 354,772,417 5.53% 2,021,719,001 10.38%
Social sector 53,953,056 0.97% 386,908,940 6.73% 225,502,442 3.97% 291,935,549 4.55% 540,754,177 2.78%
Tannery, leather and rubber products 101,111,556 1.81% 73,678,868 1.28% - 0.00% 342,378,583 5.34% 785,866,009 4.03%
Textile 854,483,927 15.30% 759,544,830 13.22% 624,141,861 10.99% 634,740,003 9.89% 842,539,127 4.33%
Transport and aviation 168,328,503 3.01% 185,674,526 3.23% 212,305,658 3.74% 191,649,831 2.99% 702,580,501 3.61%
Others 1,739,410,667 31.14% 1,448,138,654 25.20% 1,633,228,219 28.77% 1,708,278,480 26.63% 6,183,610,319 31.74%
Total 5,585,644,010 100.00% 5,745,510,743 100% 5,676,790,793 100% 6,415,776,969 100% 19,480,595,090 100%
9%
32% 1%
4% Agro-based industries Paper converting and packaging, printing and publishing
Banks and non-banking financial institutions Ready-made garments and knitwear
13%
Chemicals, pharmaceuticals and allied products Social sector
Engineering and building materials Tannery, leather and rubber products
Food and allied products Textile
Glass, ceramic and other non-metallic products Transport and aviation
Hotel, tourism and leisure Others
12%
0% Information and communication technologies
4% 0%
1%
4% 3%
4% 10%
3%
Human Resource Accounting (HRA)
Human resource accounting is the process of identifying and Most of the employee falls under the age bracket of 30-40,
reporting investments made in the human resources of an which is far from their retirement age and hence it has been
organization that are presently unaccounted for in the assumed that present set of employees is expected to be highly
conventional accounting practices. It is an extension of productive and serve the company longer.
standard accounting principles. Measuring the value of human
resources can assist organizations in accurately documenting Gender Distribution of Employees
their assets. However, There is no straight-forward widely
recognized tools for measuring the value of Human Resource in Full Time Outsourced
the Balance Sheet. Sub Sub Total
Male Female Male Female
Year -total -total
Objectives and Benefits
2016 165 38 203 49 10 59 262
The human resource accounting process was established to 2015 56 15 71 20 9 29 100
fulfill a number of objectives within the organisation. These
include: Net addition of 162 head counts in 2016 was done in business
and support function to facilitate the growth of current and
To furnish cost value information for making proper and
future year.
effective management decisions about acquiring, allocating,
developing, and maintaining human resources in order to
Accounting Standard for Human Resource
achieve cost effective organizational objectives.
While the IFRS do not currently have standards requiring HRA, it
To monitor effectively the use of human resources by the could be argued that they are moving closer to providing more
management. flexible approaches to accounting measurements and
reporting. For example, the international standards IAS 38
To have an analysis of the Human Asset, i.e. whether such Intangible Assets and IFRS 3 on Business Combinations allows
assets are conserved, depleted, or appreciated. for the recognition of the intangible asset goodwill, which
indicates a willingness to allow for valuation of assets that are
To aid in the development of management principles and not traditional tangible assets, such as human resources.
proper decision making for the future, by classifying
financial consequences of various practices.
Some Indicators
2016 2015
Particulars
2016
120
109
100
No. of employees
82
80
60
40
20
9 3
0
18-30 30-40 40-50 50-60
Age Group
147
Classification of leases, loans and advances with provisions and interest suspenses
148
As per guidelines of Bangladesh Bank
As on 31 December 2016
1. Lease Finance ( FICL -2A ) 2,539,580 2,299,879 207,752 952 11,208 4,291 15,497 652 3,777 3,486 14,587 40,636 - 300 7,607 7,908
3. Term Loans ( FICL - 3A ) 12,896,575 12,274,605 562,941 14,242 38,526 185 6,076 13,364 3,060 39 347 125,800 2,652 878 12,138 15,669
6. Housing Finance ( FICL -4B ) 1,461,449 1,458,119 - - 3,330 - - - 632 - - 14,708 - 521 - 521
TOTAL 20,046,328 18,368,210 959,682 15,194 53,064 4,475 79,969 14,016 7,468 3,524 14,934 221,825 2,652 1,699 27,157 31,508
* Segregation of outstanding (Unclassified and Classified), base for provision and interest suspense have been calculated based on Bangladesh Bank guidelines
* Base for provision for SMA has been calculated according to total outstanding minus interest suspense
* Base for provision for SS, DF and BL have been calculated according to total outstanding minus interest suspense minus eligible securities
* Provision has been calculated according to below rates of Bangladesh Bank guidelines
Percentage
Particulars
Standard except SME Standard (UC*) 1.00%
Standard-SME (UC) 0.25%
Special Mention Account (SMA) 5.00%
Sub Standard (SS) 20.00%
Doubtful (DF) 50.00%
Bad/Loss (BL 100.00%
4% 6%
149
Glossary
Terms Meaning
Accrual Basis Recognizing the effects of transactions and events when they occur, without waiting for receipt or
payment of cash or cash equivalent.
Amortization Amortization is the systematic allocation of the depreciable amount of an intangible asset over its
useful life.
Cash Basis Recognizing the effects of transactions and events when receipt or payment of cash or cash
equivalent occurs.
Cash Equivalents Short-term highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk in change in value.
Depreciation Depreciation is the allocation of the depreciable amount of an asset over its estimated useful life.
Depreciation for the accounting period is charged to net profit or loss for the period either directly or
indirectly.
Executions Advances granted to clients under leasing, hire purchase, installment sales and loan facilities.
Fair Value Fair value is the amount for which an asset could be exchanged or a liability settled between
knowledgeable, willing parties in an arm’s length transaction.
Finance Lease A lease that transfers substantially all the risk and rewards incident to ownership of the asset to the
lessee. Title may or may not eventually be transferred.
Gross Dividend The proportion of profit distributed to shareholders inclusive of tax withheld.
Gross Portfolio Total rental receivable of the advances granted to clients under leasing, hire purchase, installment
sales and loan facilities.
Intangible Asset An intangible asset is an identifiable non-monetary asset without physical substance held for use in
the production or supply of goods or services, for rental to others, or for administrative purposes.
Interest Cost The sum of monies accrued and payable to the sources of borrowed working capital.
Interest in Suspense Interest income of non-performing portfolio; these interests are accrued but not considered as part of
income.
Investment Property Investment property is property (land or a building - or part of a building - or both) held (by the owner
or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than
for use in the production or supply of goods or services or for administrative purposes; or sale in the
ordinary course of business.
Lease A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of
payments the right to use an asset for an agreed period of time.
Net Portfolio Total rental receivable excluding interest of the advances granted to clients under leasing, hire
purchase, installment sales and loan facilities.
Non-Performing Portfolio Facilities granted to clients which are in default for more than the period recommended by Bangladesh
Bank.
Paid up Capital All amounts received by the Company or due and payable to the Company (a) in respect of the issue
of shares (b) in respect of calls on shares.
Provision Amounts set aside against possible losses on net receivable of facilities granted to clients, as a result
of them becoming partly or wholly uncollectible.
Related Parties Parties are considered to be related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial or operating decisions.
Related Party Transactions A transfer of resources or obligations between related parties, regardless of whether a price is
charged.
Shareholders’ Funds (Equity) Total of issued and fully paid ordinary share capital and reserves.
Value Addition Value of wealth created by providing leasing and other related services considering the cost of
providing such services.
151
Notes
152
IPDC Finance Limited
Proxy Form
I……………………………………………………………………………of …………………………………………………..
……………………………………………………………………………………………………..being member of IPDC of
Bangladesh Limited, hereby appoint Mr/ Ms………………………………………………………………………………… of
…………………………………………………………………………………………………………………………………...
as my proxy to attend and vote for me and on my behalf at the 35th Annual General Meeting of the Company to be held on
Tuesday, May 02, 2017 at 9:00 a.m. in Trust Milonayaton, 545, Old Air Port Road, Jahangir Gate, Dhaka Cantonment, Dhaka-1206
or at any adjustment thereof.
BO ID:
No. of Shares…………………………….
N.B. Important
1. This Proxy Form, duly completed, must be deposited at least 48 hours before the meeting at the Company’s Registered
....Office. Proxy is invalid if not signed and stamped as explained above.
2. Signature of the shareholders should agree with the specimen signature registered with the Company.
Attendance Slip
I hereby record my attendance at the 35th Annual General Meeting of the Company being held on Tuesday, May 02, 2017 at 9:00
a.m. in Trust Milonayaton, 545, Old Air Port Road, Jahangir Gate, Dhaka Cantonment, Dhaka-1206.
Name of Member/Proxy....………………………………………………………………………………………………………
BO ID:
Signature…………………………………
Date…………………………………........
N.B. Shareholders attending the meeting in person or by proxy are requested to complete the attendance slip and deposit the
same at the registration counter on the day of the meeting.