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During the year under review the credit
flow in the financial market was much squeezed under the
prevailing monetary policy during the said period. With
the announcement of an expansionary monetary policy by
Bangladesh Bank in the current fiscal year in the back
drop of a lower GDP growth achieved by the country in
2006-07 compared to the previous year, it is expected
that the credit expansion in the financial sector will
boost up and the private sector credit growth will thus
gain a fillip.
Leasing/NBFIs Sector
The non-banking financial institutions
have suffered a setback with the withdrawal by taxation authorities
of the deprecation allowance for the leasing industry
which this sector was enjoying since its inception. It
is feared that it will adversely affect the business and
profitability of the Company as well as the growth of
this sector that was in fact little lower in 2006-07 as
compared to previous year. However, the NBFIs are now
feeling more compelled to aggressively diversify their
business portfolio to overcome the impact of the
government decision.
Review of the Business Activities of
PFIL
The objective of review of the business
activities of the Company is to enable the
shareholders and readers to understand and assess the
results of operations and financial condition of the
Company. The readers are also requested to review the
financial statements presented in the annual
report. (The annual report may also be viewed at the
website: www.phoenixleasing.com.bd)
PFIL being a financial institution is
engaged in providing diversified financial services to
its clients. The Company has earned a substantial profit
from its financial activities during the year under
review but the revenue has been grossly affected because
of the continued high interest rate environment in the
banking sector and the socio-political conditions in the
year 2007. The Company's business is currently focused
on two aspects of business: i) enhancing the financing
business and ii) talking advantages of our strength in
capital market operations.
The investment portfolio of PFIL has
been continuously diversified over the year in important
industrial and service sector of the Company to maintain
a well a balanced mix in the portfolio. The total
outstanding investment of the Company as on 31
December,2007 stood at TK. 532.50 crore with the highest
allocation of 22.06% in the textile sector. The
allocation in order important sectors are garments,
apparels & accessories at 8.55%, real estates &
housing at 8.48%, transport at 8.04%,
pharmaceuticals/medical at 6.51% and the service sector
at 10.86% (Please see graph on page no.14).
The management follows a policy that
encourages the financing of SME projects and women
entrepreneur led business activities by the Company on
priority for taking advantage of the support given by
the Small Enterprise Refinancing Scheme and Women
Entrepreneur Scheme of Bangladesh Bank respectively.
Recently PFIL has stared a special house building loan
program for financing under a Refinance Scheme
participation agreement executed with Bangladesh Bank
for meeting the acute housing loan requirement of the
middle-income group.
To improve the functioning of the
organization through better utilization of the human
resources aimed at achieving the business targets of the
Company, a new organizational structure is under
implementation and several new divisions and department
have been set up at the head office. The newly created
SME Department in one such department working towards
diversification of the client category to generate new
business opportunities for the Company in the highly
promising SME sector of the country's economy. PFIL will
also have separate Investment & Merchant Banking
Division and Treasury Division under the new
reorganization plan being implemented.
PFIL's business income depends upon
many factors such as the volume of its investments and
its quality, interest rates, macro-economic factors,
global economy, etc. As a result, net operating results
vary from period to period. Financial business is
subject to regulations of Bangladesh Bank, the
Securities and Exchange Commission, Dhaka Stock Exchange
Ltd., Chittagong Stock Exchange Ltd. and Changes in
legal, other regulatory, accounting, tax and compliance
requirements. These regulations may have a substantial
impact on financial business and results of operations.
PFIL has to compete with other financial institutions in
order to create its market share. Banking companies have
also started leasing operations which has intensified
the competitions for the Company. As a result, we have
to operate the business in an unfavorable price
situation compared to the Banks.
Risk Management
Risk is the element of uncertainty or
possibility of loss that prevails in any business
transaction in any place, in any mode and at any time.
The Company manages various risks through involvement of
various levels of management. The current of proposed
financing commitments and repayment obligations are
monitored on an on going basis by senior management.
Obtaining collateral securities reduces credit risk
related to various financing activities. The principles
and policies in respect of risk management outlined by
the central bank are strictly followed. For controlling
the various operational risks appropriate internal
control measures are put in place by the management. The
Treasury Division of the Company manages day to day
liquidity requirement to mitigate the liquidity risk.
The recovery of defaulted/overdue rentals/installments
is a strong priority with the management to keep the NPA
to remain at the acceptable level of the financing
industry standards.
The Company is subject to regulations,
inspection, supervision and stringent reporting
requirements of Bangladesh Bank like any other NBFI
which is primarily intended to ensure financial
discipline in its functioning as well as for the
protection of the interest of the depositors. The
Company also complies with the requirements of anti
money laundering regulations. Failure to comply with
these regulations may be considered an unsafe and
unsound practice and may result in imposition of
penalties by the central bank and other regulatory
authorities.
Capital Market Operations
As a part of diversification of its
products range, PFIL has taken keen interest in capital
market operations. PFIL maintains its own portfolio for
a substantial amount of investment in fundamentally
strong securities and has earned a total income of Tk.
37.61 million in the form of dividend and gain from sale
of securities.
PFIL provides securities brokerage
service to its clients through its 25%owned associated
company named Phoenix Securities Limited (from M.
Shamsul Alam & Co. Ltd.) located at Moon Mansion,12
Dilkusha C/A, Dhaka and its Branch Office at Room No.
439 (3rd Floor), DSE building, 9/E, Motijheel C/A,
Dhaka. The associated company has membership of both the
Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange
(CSE). It is expected that PFIL will earn a substantial
amount of profit from the brokerage house in the form of
dividend.
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Company Profile
