LankaBangla Finance Limited, a leading non-banking financial institution (NBFI) is going to launch new Shariah-based products to broaden its business.
"We are going to launch the Islamic shariah-based product on deposit and financing by June next," Mafizuddin Sarker, managing director of LankaBangla Finance Ltd told the FE recently.The company in its drive will also expand the growing businesses in credit cards, SME and factoring in the coming months.
"We are set to expand our network in Sylhet, Jessore, Khulna and Bogra this year," the LankaBangla chief executive added.The company held its 14th annual general meeting March 27 last and approved 55 per cent stock dividend for the shareholders.
"We had only 25 per cent public shareholders out of our total company equity-owners when we went public in 2006, but now it has reached to a whopping 56.6 per cent," Mr Mofiz mentioned.
He said the growing number of general shareholders prove that the company is committed towards maintaining the responsibility and accountability. The company's net profit jumped to Tk 1,700.15 million in 2010 showing a whopping 128.49 per cent rise against the amount of 2009. Total portfolio of LankaBangla reached to Tk 15,064.57 million registering a 40.8 per cent growth.
Mr Mafiz said his company is working hard to expand the secondary market.LankaBangla Finance is one of the recipients of license awarded by Bangladesh Bank to act as primary dealer (PD). "But our efforts will not be fruitful unless the government allows a transparent policy on taxation against the income of bonds," Mr Mafiz clarified.
He mentioned that at present the policy on bonds of Bangladesh is not conducive like the policies of neighbouring countries.He further added that the central bank should not allow participation of non-licensee FIs at the Bangladesh Bank auction.
Emphasising the need for developing the bond market, he said mobilization of internal resources has become a core necessity to reduce the dependence on external resources."We have the opportunity to develop bond market, but the chance should not be missed," he commented.
Established in late-1996, LankaBangla Finance is a joint venture financial institution established with multinational collaboration of foreign equity investment from Sri Lanka and Kingdom of Saudi Arabia.
Reviewing the sectoral performance, Mr Mafizuddin Sarker, also chairman of Bangladesh Leasing and Finance Companies Association (BLFCA) demanded of the government to exempt the financial institutions(FIs) from double taxation in case of booking income by the parent FIs from subsidiary.
"Effective tax liability for the parent company would be 50 per cent against the current rate of 42.5 per cent under a directive of the Securities and Exchange Commission (SEC) on establishing separate subsidiary for stock trading by banks and FIs,"
Currently FIs have been paying 42.5 per cent income tax on its taxable income and upon opening of a subsidiary, income tax payable would be 37.5% on the taxable income of the subsidiary company and the parent company would book the dividend income in its books.
However 20 per cent tax on dividend is required to be imposed on the dividend income to be received by the parent company under the prevailing regulation.
"This is certainly not an encouraging factor to go for opening of subsidiary which was aimed at expanding the businesses of our companies," the BLFCA chief said.
Making a plea for avoiding payment of income tax twice on the same income by the parent company and subsidiary company, the BLFCA chief cited example of India.
"India handled the matter by inserting a special provision in the Finance Act of 2009," he added.In another demand, the BLFCA chief said in order to reduce the dependency on bank borrowing, FIs should be more focused to attract deposit from public in a three-month plus tenor.
Currently FIs can take deposit from institutions and individual with a tenure of not less than 6 months.Many FIs have short term product as well like factoring, credit card, treasury operations etc.The BLFCA chief also demanded that the 'existing exemption on the cumulative exposure in the form of underwriting and portfolio loan of a merchant banker at any time should not exceed five times of its equity' should be applicable in case of subsidiary of FIs as well.
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