Irteza Ahmed Khan, CEO & Managing Director, Meridian Finance & Investment Limited

How has the demand for Meridian Home Loan changed over the years? What are the challenges and how are you tackling those problems?
Meridian Finance has emerged within a short span of time as a growing multi-product financial institution in the country having equal focus in Corporate Finance, Retail Finance, SME Finance and Corporate Advisory Services. We offer complete ranges of home loan solution to the customer starting from purchase of apartment, residential and commercial building, construction, extension, renovation of a residential and commercial building, construction of a dormitory for RMG workers, the creation of corporate office buildings and so on. We are continually increasing our coverage across the country through our branch and sales channel networks.
The demand for housing is increasing at a much faster pace in line with the steady growth of the economy, rising purchase power of consumers, and stable remittance flow. At Meridian Finance, we have observed the significant increase in demand for a home loan in construction and extension of residential and commercial buildings, purchase of apartments in metropolitan and district level city area. Demand for construction of semi-built buildings for RMG workers has increased by many folds over the years in the areas adjacent or close to the factory.
Thanks to the excess liquidity in the money market, which has driven the rate of interest on all loans to single digit and home loan is no exception. As a result, there is fierce competition on interest rate among the financial institutions, which has eventually, made the home loan market a buyer’s paradise. The cost of fund has become a significant challenge for many financial institutions over Banks in offering low-interest rate to its existing clients as well as to book new home loan clients. Due to the advantage of lower cost of fund, commercial banks are aggressively taking over home loan portfolio from financial institutions and booking new clients offering lower interest rate. This is a severe challenge to the non-bank financial institutions.
Despite stiff competition, Meridian Finance has successfully reached out to the home loan customers with firm commitment to give a faster decision and excellent service experience. Our portfolio of home loans has significantly grown over these years, and a significant part of the business came from the outside the metropolitan areas of the country. We will continue to focus on increasing our reach out to untapped markets where demand for a home loan is on the rise but not well served by existing competitions. Our tailor-made solution supported by the latest technologies and dynamic sales channels have become a good name among those customers.
Which demography are the customers opting for home loans skewed towards? (Lower-Middle, Middle or Upper-Middle Class)
The total housing loan outstanding for the financial sector is more than BDT 50,000 crore. Out of which 90% is in urban areas. Still, the housing market is concentrated mostly in Dhaka City. This gives us the overall picture.
Mainly middle class and upper-middle-class people are applying for Home Loans who are mostly from Dhaka. But middle-class people couldn’t afford to purchase apartment due to increased pricing.
But there is a massive demand for a home loan for lower- middle-income group with the requirement for construction loan outside Dhaka city as well as other districts. Meridian Finance has categorically focused on serving the need of the lower and middle-income group of the demography of the country.

“We have customers who have transferred their existing home loan with other bank/NBFIs to us despite enjoying lower interest rate than us only because of poor customer service, lack of proper communication, etc.”

According to you, customers are attracted by which of the following most, while taking home loans:
I. Interest Rate
II. Service provided
III. Payback Period
IV. Scheme
Home loan product is a total solution package for customers. All factors are correlated to each other. Anyone willing to avail home loan must consider each of the elements, not the single factor. But yes, most of the cases ‘Interest Rate’ becomes the major factor, but not the only factor. It’s important to understand that Interest rate varies depending on customer segment, loan purpose, geographic location, etc.
People are willing to avail loan with lower interest rates to keep the monthly payment burden within their capacity. But if they do not get the maximum payback period, the lower interest rate may not give the desired payment within their ability. Thus payback period is an essential factor.
Scheme or Product itself is also a significant factor for availing home loan. Generally, ‘Product Policy Guidelines’ includes the solutions to meet the need of customers by maintaining regulatory guideline. Customers will not be attracted if the product is not in line with market or customer demand.
I feel ‘Service’ is the ultimate factor that customers are attracted most in availing home loan. Each customer expects to get a faster decision, clear communication, proper documentation, legal and technical guidance and timely delivery to meet their need. Lower interest rate offering cannot always guarantee one the best service.
We have customers who have transferred their existing home loan with other bank/NBFIs to us despite enjoying lower interest rate than us only because of poor customer service, lack of proper communication, etc. This suggests the importance of ‘Service’ to customers rather than Interest Rates.
Since we are in the business of selling services to customers, we are focusing more on customer service than just selling the product. We are ‘Financial Consultants’ rather than ‘Financial Service Providers’. We always try to provide a tailor-made solution to meet the right set of services for different home loan products to customers.

What is the condition of customer base/Market size outside Dhaka in other big divisions?
Still, more than 70% of total housing loan market is covering Dhaka city. Different divisional HQs other than Chittagong exhibited a sluggish demand for a home loan even 5 to 6 years ago. Very few FIs have concentrated on home loan business in those areas due to the lack of genuine demand.
But the scenario has changed in the last 2-3 years. People outside Dhaka was not accustomed to the culture of buying apartments or constructing their own home with bank loan facility. The availability of home loan has significantly changed their view.
As you know, FI’s offers home loan product for Apartment purchase, Individual Construction of a residential or commercial building, Purchase of a shop or retail space, etc. Among them, 95% of Apartment loans are served within Dhaka and Chittagong. Because private sector Real Estate Developers are catering mostly upper and upper-middle income groups concentrating in Dhaka and a few in other major cities. Thus there is a significant untapped rural market consisting low- and middle-income people.
Some of the Real Estate Developers have Apartment projects in cities like Comilla, Khulna, Bogra where they got a positive response from residents. But it is quite low against expected outcome. Demand for construction loan has grown significantly due to increasing demand for residential as well rental income purpose.
People outside Dhaka are also getting interested in developing the building in their land with our construction loan.
Under the circumstances, we are expecting to see rising demand scenario in other Divisional HQs within next ten years if the current economic activities and communication- infrastructure development continues.

“There is fierce competition on interest rate among the financial institutions, which has eventually, made the home loan market a buyer’s paradise.”

With most of Dhaka already being filled up, how do you perceive the demand for home loans to be a decade from now?
We can foresee that demand will continue to grow for Home Loans in the next ten years due to rising population in Dhaka as well as surrounding area. Government land projects in Eastern and Northern part of Dhaka like Purbachal, Uttara 3rd Phase are on the completion stage. Different private sector land project is also in the implementation stage. Massive development works are coming up on these extended areas regarding Construction and infrastructure. Besides, the area covering Gazipur, Tongi, Savar, Ashulia and other close regions in Dhaka are also being developed. The Western side of Dhaka is also growing. Thus Home loan market will grow for apartment projects as well as new construction projects. International Finance Corporation (IFC) predicted that the other major cities of Bangladesh are expected to develop at a steady pace over the next few years. Thus the demand for home loans is likely to continue in the coming days.

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