The comparative study on - in which sector the financial institutions are more interested to provide business loans in Bangladesh , reasons of loan default and Risk mitigating process of credit risk management of IDLC Finance Limited.

Abstract

IDLC finance Limited is a major NBFI who is playing vital role for SME financing in Bangladesh. SME plays a very important role in economic advancement of Bangladesh. As major business of IDLC Finance Limited is providing SME loan facilities to the business along with various types of loan to individual and organizations therefore risk is associated with each and every product they are offering. The trend of SME loan disbursement in context of IDLC Financing is highest at trading sector, followed by manufacturing sector and then service sector. The trend of the segment- wise disbursement is same for IDLC. IDLC distribute more than half of their SME portfolio in trading industry because collecting data in the trading sector is easily available and sales verification is simpler than other sectors. Nonperforming loans is common phenomena for banking industry in Bangladesh. A Nonperforming loan is a loan that is in default or close to being in default. Many loans become nonperforming after being in default for 90 days, but this can depend on the contract terms. In the financial arena, enterprise risks can be broadly categorized as Credit Risk, Operational Risk, Market Risk and Other risk. Credit risk is the possibility that a borrower or counter party will fail to meet agreed obligations. Thus managing credit risk for efficient management of a FI has gradually become the most crucial task. IDLC finance has its own process to mitigate credit risk. They make an appraisal report which shows the strength of the borrower and possible risk related to the loan how the risk can be mitigate. Here in this report I tried to analyze the current scenario of the SME loan in the country and its future opportunity. Here my main focus is to describe which sector is in their main focus, reasons of loan default and mitigating risk of loan default of IDLC Finance.