Abdul Hassan Mohamed Riyaz

Multi Finance - a successful journey since its inception

Indunil HEWAGE

Multi Finance, a subsidiary of the Entrust Group in Sri Lanka, has been in business for 38 years and is poised to expand its presence in geographically strategic places across the country by further introducing innovative, cutting edge financial solutions for Sri Lankan customers.

In an exclusive interview with the Daily News Business, Multi Finance PLC, Entrust Securities PLC and Entrust Limited, Group Executive Director/Group CEO Abdul Hassan Mohamed Riyaz spoke about the Multi Finance journey since its inception in 1974 and its future growth plans to this column.

Q: What is the Multi Finance position in the context of the current financial sector in Sri Lanka?

A: Multi Finance PLC is a registered finance company with the Central Bank of Sri Lanka and listed on the Diri Savia Board of the Colombo Stock Exchange.

Multi Finance PLC was established in 1974 and has been in business for the past 38 years. Multi Finance PLC provides leasing and hire purchase financing to its customers together with other financial accommodations. The Company further extended its product portfolio with the inclusion of granting business loans and mortgage facilities on a selective basis, together with pawn broking activities. In addition, the Company mobilises funds by way of fixed deposits and savings accounts.

Multi Finance was taken over by the “Entrust” Group four years ago. Initially, they were into the small tickets business, which is a good call. When the “Entrust” Group bought over the Multi Finance, it was put into the registered finance company operation, such as leasing, higher purchase, fixed deposits, pawning and a variety of loan facilities.

We were consolidating our position specially during the period 2010-2011 and started to do real trade leasing recently. Earlier, we did not think of an aggressive expansion plan, However, this year we are going for an aggressive expansion plan. Even though Multi Finance is a relatively small company, we do have an expansion growth. Even though we are a 38-years-old company, we really got into the finance business during the past four years and is growing day-by-day, I am sure that in the near future, Multi Finance will go to a medium trade category.

"However, 2012 is a tough and challenging year. I think during challenging years, you get a lot of opportunities, so this year too, we will be aggressively going ahead.

Multi Finance is in the process of geographically expanding its business activities, whilethe product range would also be expanded. In addition, we will be aggressively getting in to the pawning business, which has been identified with 8-10 pawning centres and will be getting into those areas as well during this financial year.

Q: With the increase in motor vehicle taxes, what will be the impact on higher purchasing and leasing?

A: We have realised sometime back that with the increase and decrease in taxes during different periods when taxes are reduced, there had been a good sale of vehicles.

However, there would be a two way impact on prices; the increase in import duty as well as fluctuation of currency which has been a great impact to a certain extent. However, there is still a potential for finance companies to engage in this business.

Relatively, there will be a drop in leases; while higher purchase business would improve due to increase in taxes and currency and prices of vehicles may increase. In this context, affordability will be somewhat threatened.

However, the second hand market we are talking about, registered vehicles will have a demand, the higher purchase business will increase.

Q: What are the advertising campaigns that Multi Finance has undertaken in Sri Lanka?

A: We do have a relatively better advertising campaign than last year. This year, we had an Avurudhu campaign, where we offered gold coins and various other gifts to depositors who have invested with us.

We are in the process of having another promotional campaign and hope to offer attractive gifts to customers who invest with us for a period of one year. So, this year too, we do have a lot of promotional campaigns which are definitely going to increase the base of Multi Finance.

Q: What were the initial challenges you have faced?

A: When we took over, we were a very much strong company and still is. There had been a requirement for the Central Bank to infuse additional capital to this company, so the former shareholders were unable to meet the requirement and invited us to take over the company. So we infused the necessary capital.

Throughout the crisis, we had adequate funds and were among the few companies to lend the public money during a crisis. As far as Sri Lanka’s finance industry is concerned, there may be stiff competition. But we are very fair and do not undercut anybody. What is important is corporate governance. We believe in total compliance and follow almost all directives of the Central Bank.

Multi Finance has branches in strategic centres such as Kurunegala, Matara, Anuradhapura, Gampaha, Ratnapura , Kandy and Colombo. The next branch we expect to open is in Jaffna, in order to expand our presence across the country.

Q: How has 2012 been so far for Multi Finance; and your views on the finance industry?

A: It is going to be a very challenging year. With these challenges, there would be a lot of opportunities. There is a threat on foreign exchange, while interest is on a rising trend, the economy is suffering.

If you take a finance company, we have noticed when the interest increases, the deposit floor gets much higher, people prefer to have a decent return for their hard earned money.

During the period when interest rates were low, we have seen most of the funds being invested in the equity market where the share market was doing well. Unfortunately, the share market is not doing well, plus the interest rates in finance companies have increased quarterly. The only challenge we have is when interest rate goes up, our lending rates will also increase, which means, there is relatively a high possibility of people taking money by way of lease and higher purchase, where defaulting relatively would be high.

However, if you manage your credit properly, there is still ways and means of mitigating the risk elements. So we are a company who is very concerned about credit. We are also expanding our business, so we have a very balanced approach in granting facilities, because whenever we grant facilities, we ensure that recoverability is safe. For a finance company, what matters, is maintaining the Non Performing Loan (NPL) ratio at the lowest rate. Ours is less than one percent, which is very much below the industry average, which indicates all facilities granted by us is safe. Therefore, depositors need not worry about their investments.

Q: What are the achievements of Multi Finance?

A: There was a mandatory requirement of Central Bank of Sri Lanka that all registered finance companies be listed before the end of June, last year. We managed to get listed before the deadline which was an achievement for Multi Finance.

We have moved into traditional finance businesses, by going for the small ticket business and managed to expand the business areas. We do have a Board of Directors who are very exposed and competent in the field of finance. In time to come, there will be many more achievements qualitatively and quantitatively which the general pubic will get to know.

Q: As the CEO, how are you going to support the future growth aspirations of Multi Finance?

A: Yes. The Sri Lankan GDP growth was supposed to go at 8 percent, which had been revised down to 7.2 percent, which I believe is still a decent growth. With these changes in the micro and macro field of the economy, we do have a lot of challenges as well as opportunities. I believe nothing can go wrong, if we implement proper plans whilst, ensuring that we have proper risk and credit management.

Q: Any diversification plans?

A: Yes, we do have plans. For a finance company. There are various other new areas where we can venture into.

Yes there are two or three areas we have planned and are presently doing the ground work and awaiting the right time to get into new product areas.