The Three-way Merger Has Consolidated The Global IME Bank’

Chandra Prasad Dhakal
Chairman
Global IME Bank


Chandra Prasad Dhakal is the Chairman of Global IME Bank. He is also the President of International Money Express (IME). Born in a middle class family of Baglung district of Nepal, he has by now established himself as a leading entrepreneur of the country in a relatively short span of time. Dhakal is a member of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Executive Committee and the Co-ordinator at Investment Development Forum of FNCCI. He is also a member of the Nepal Investment Board constituted by the Government, besides being an honorary consul for Indonesia. He is currently looking forward to explore business expansion in association with Nepali as well as foreign companies. In an interview with New Business Age, Dhakal talked about recent three-way merger among Global Bank, IME Finance and Lord Buddha Finance creating the Global IME Bank and prescribed measures of bringing remittances through formal banking channels, among a host of other issues. Excerpts:


While mergers in Nepali BFIs are usually between two companies, yours is a three-way merger. How did that become possible?

First, we were convinced with the fact that a merger between banks and financial institutions (BFIs) can certainly add value into the eventual entity as we have seen from the latest merger trend. A merger between two companies is normal but for the first time in the history of Nepali BFIs, Global Bank signed a merger agreement with two other financial institutions. At the beginning of the process, we had Global Bank and IME Financial Institution had signed a memorandum of understanding and later, the promoters of Lord Buddha Financial Institution submitted their merger proposal in a meeting with the Global Bank management. Thus, the successful completion of the process of all three companies led to the formation of Global IME Bank. The amalgamation of the three companies has made Global IME Bank stronger in terms of the capital assets, networking, product diversity and quality of customer services. As the promoters of all three institutions are from different sectors, it has created a synergy for us to explore new business sectors with possible expansion plans. The Global IME Group is strongly committed to provide its banking and other financial services to areas that are thus far deprived of formal financial services.


Where would the Global IME Bank like to focus after becoming such a stronger new entity after the merger?

The Global Bank already had a strong presence in the industry and that has been further fortified in terms of networking following the merger. Now Global IME Bank is the only private sector commercial bank with the most extensive network of 62 branch offices in 13 zones. We are resolute enough to extend financial services through our innovative products in both urban and rural areas. We would be utilizing our potential to explore new areas of investment covering almost every possible productive sectors of Nepal. Along with it, in the medium or long term, we aspire to establish at least one branch office in each district of Nepal. Retail banking is one of the top agendas in our priority list.


The bank has issued debentures worth Rs 400 million as part of a strategy to expand the capital base. Do you have any specific investment plan for that fund?

The paid up capital of Global IME Bank has augmented to Rs 2.18 billion after the merger of the three companies. And with the debentures issued worth Rs 400 million, our overall capital size has reached Rs 2.58 billion. The increased capital base will definitely support our business expansion plans in the future in national as well as international levels. We are planning to aggressively expand our businesses in the areas that other commercial banks in Nepal have not explored so far.

For example, agriculture is a very important sector of our economy. However, the private sector investment in this sector including those of BFIs is very negligible so far. Unlike other commercial banks, we are taking a different approach to increase investment in the agriculture sector. Currently, most commercial banks are focusing on businesses of more organized sector and corporate clients as their main transaction base. Departing from this trend, Global IME Bank has plans to finance agriculture and related productive sectors for their development to the fullest potential.

It is evident by now that the financial services to the agro sector from the state owned banks alone is not enough for developing the agriculture sector so long as it can contribute more to the national economy. By financing for the commercialization of the agriculture, Global IME Bank would also be supporting the government plans and policies to increase the contribution of the agricultural sector to country’s GDP. Besides this, we will soon start to work towards minimizing operational risk of the Bank by focusing more on retail banking. This means our main transaction base for both deposit and lending will be the common people, although we will not shy away from corporate and institutional banking.

Benefits of the merger apart, grievances and disputes too come up in the process among promoters of different institutions as well as at the top-level management and employees. How did you handle the situation?

After the merger, the number of staffs under the Global IME Group has increased for sure. Managing all the employees of the three companies that were in existence before the merger has been indeed a very challenging task for us. However, we have received support from all levels of employees including the Chief Executive Officers of all the three companies, the board of directors and other stakeholders of all three entities. Employees as well as our promoters are aware that after the introduction of comprehensive merger bylaws by the central bank, a class ‘A’ bank has successfully merged with two other class ‘C’ financial institutions for the first time in Nepal’s financial history. This, in fact, is a historical achievement for the entire system. Everyone involved in this process has put his/her priority second to the very goal of merger among these institutions. I am confident that there will be no grievances amongst our promoters and the employees in the future as well.


You also have a very strong presence in Nepal’s inbound remittance business. How is the remittance industry doing at present?

The current fiscal year has witnessed a 36 per cent growth in the inflow of remittances. It is comparatively higher than the growth rate of the previous years. The flow of remittance has grown substantially in recent years due to the increased number of Nepalis going abroad for employment. Likewise, the recent appreciation in the value of dollar is also responsible for growing figures on remittance income. It is sad but true that the existing political instability and constitutional vacuum will continue to create unemployment in the days to come. Hence, the trend of people going to foreign countries seeking employment opportunities is not likely to slow down in the immediate future. This will undoubtedly increase the amount of inbound remittance in the future as well.


It is often alleged that a large amount of workers’ remittances enter the country thorough illegal channels. What is your prescription to control it?

We can control the flow of remittance through informal channels only when we find the reasons behind it. We need to pinpoint the reasons which take people to choose nonbanking channels over the available legal ones. The obvious answer to it is the inability of Nepali financial institutions in providing banking channels to all the people willing to transfer their hard earned money to Nepal. In this regard, IME was the first Nepali financial institution to start its services to bring in remittances through a banking channel, 12 years ago. Prior to it, there was banking or legal channel available to send remittances from abroad and people entirely relied on the ‘hundi’ transactions. The trend of remittance coming in through informal channels has been reduced to a large extent after the establishment of IME. The objective of the Global IME Group is to create an easy mechanism for Nepalis living abroad to transfer their funds conveniently through the banking channels.

But, I must mention here that we also have a fully functional system and products in place that address all the needs of fund transfer. For example, our foreign employment agencies need to pay a certain amount in foreign exchange to the companies in the Gulf countries or Malaysia that place orders to Nepali companies. But that is not possible legally and they are compelled to use ‘hundi’ for this purpose. If we can legally channel the agency commission, the illegal transfer will automatically reduce. Wherever a functional channel exists, there is possibility of both way movements of funds.

The flow of remittance from India is also very nominal. About four million Nepalis are believed to be working in India and a very high majority of them use non-banking channels to transfer funds as they find it hasslesome and uneasy to remit through the banking channels. After the commencement of the Indo- Nepal remittance policy three months ago, the remittance flow from India is gradually increasing. Currently, IME has been networking with United Bank of India (UBI) which has around 1,600 branch offices across India. We do hope to reverse the trend of remitting through informal channels once we are able to make this networking with UBI branches throughout India fully functional.

International Money Express (IME) has its reach in over 25 countries for bringing remittance to Nepal. It has strategic alliances with various exchange companies and commercial banks in Malaysia, the Middle East, Australia, UK and USA. IME Remit has also formed an alliance with companies like Money Gram International, Xpress Money, EZRemit and Instant Cash, for global access. I strongly believe that we can certainly combat the flow of remittance through informal channels in the long run if we can introduce appropriate bylaws and products to meet the needs of all stakeholders of the remittance business.


Both domestic and foreign investors are reluctant to invest in Nepal citing political instability. When do you think the situation will improve?

The political instability has definitely led towards a wait-andwatch situation for everybody, mainly the potential large investors. In spite of it, we should all move ahead with a positive attitude as business is also about taking risks and succeeding in it. Therefore, I think that companies investing during the crisis period can gain in the long term and make profits at a later stage. We are losing enormous opportunities due to the difficult circumstances that we currently face at home. I am sure there will be no looking back once the political issues are sorted out. I hope that it happens sooner than later and Nepal becomes one of the best destinations for investment.


The central bank has recently announced new Monetary Policy for FY 2012/13. Has it addressed issues raised by the banking community?

This Monetary Policy does not seem to have addressed remittance much. However, it has encouraged opening of bank branches and contact offices in countries like India and South Korea which are major remittance originating destinations. It is a positive step towards directing inflow of remittance through legal channels. Another important development is that the Nepalis can now exchange 2,500 dollars every time they go abroad. Earlier, when an individual or an organization submitted the required documents to banks and financial institutions, they could exchange up to 6,000 dollars maximum. This amount has now been increased up to 10,000 dollars. Similarly, the traders could earlier make a maximum payment of 25,000 dollars through Draft/TT while importing goods from countries apart from India. That has now been increased to 30,000 dollars. All these measures are the positive aspects of this policy.


How are different companies in the IME Group fold doing? What are your diversification plans?

From the perspective of a consolidated corporate group, we are involved in Automotives, Energy, Pharmaceuticals, Technology, Trading and Travel & Tours besides Banking & Finance and Remittance. IME Group has its presence in energy sector through Himalayan Power Partner Pvt Ltd, Mountain Energy Nepal Pvt Ltd and IME Oxygen Pvt Ltd. It is also one of the established players in the trading sector of Nepal. IME Group’s trading subsidiary – C M Trading – has been successful in penetrating major European markets with the exports of its Pashmina products for the last oneand- a-half decade now.

The group has also been overseeing real estate and property lending through its trading subsidiary. IME Group has a presence in the tourism sector too, since 1995. It has Across Travels & Tours Pvt Ltd, one of the leading travel agents accredited by IATA that has successfully carved a niche in the tourism industry. As far as the group’s financial services are concerned, there has been a massive transformation in the size of the Global IME Bank after the merger. Its paid-up capital has jumped to Rs 2.18 billion.

It has debentures portfolio of Rs 400 million and lending is at the range of Rs 20 billion against the deposits of Rs 26 billion. The financial structure of the company has thus grown and opened new avenues for investment. In terms of networking, we are the largest amongst the private sector commercial banks. We have a total of 56 ATM counters, 70,000 shareholders, 650 employees, and 255,000 depositors. Currently, we are concentrating to expand our banking facilities in each district of the country and also set our focus on branchless banking.


You are planning to tie up with a foreign joint venture in several other sectors beyond banking and remittance services. Can you please share the developments?

To begin with, we first need to have a strong networking in order to tie up with foreign joint ventures. Our merger has reinforced the networking mechanism we had and it will certainly help us expand our business with the foreign companies in the days ahead. With the increased financial structures and widened networking, we look forward to collaborate with foreign companies in the near future. The process of Global IME Bank’s tie up with a possible foreign joint venture is in the pipeline right now.


You are also involved in the automobile business. How has been your auto venture doing?

We made a foray into this evergrowing sector in 2009 representing some of the renowned international automotive manufacturers as an authorized 3S distributor. Currently, our products from Asian Motor Works (AMW) – an Indian automobile company which produces trucks and trippers – is doing quite good. We have been associated with the company as it manufactures quality automobile products. Initially, the business did not go as well as we had anticipated because the crusher industries were on the verge of shutting down. Therefore, the trucks and trippers were difficult to be sold. However, in view of the improved situation, the products of AMW are gradually finding feet in the Nepali market.


You were planning to develop a fun park. What has been the progress so far?

We have reached almost to the final phase of planning to develop the said fun park which will be set up in the Chandragiri hills in the south west of Kathmandu. As part of our plan, we are working towards setting up a cable car route from Thankot in Kathmandu to the Chandragiri summit. We are consulting with various developers as well as considering different theme parks to make our fun park a complete recreation destination. Given the busy city life of Kathmandu, there is no place for the inhabitants of the capital to spend some quality time with their family and friends. Although, we are working on a new concept, we want to explore new areas of business as part of our expansion plans. We intend to start our project at the soonest possible and develop an affordable fun park for all.