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Five questions with: Duane Hinkson, CEO, Development Finance Ltd

Published: 
Thursday, November 9, 2017

1. DFL is one of the smaller finance houses that operates in T&T. How does the company compete and stay relevant in a space dominated by larger financial institutions?

That’s a question that requires us being clear as to what we’re licensed to do, what we actually do and what we see as our role in the sector. Development Finance Ltd is licensed as a merchant bank (with different classes of business allowed under same) by the CBTT, a broker dealer (with different classes of business allowed under same) by the TTSEC, and is an authorised dealer for foreign exchange.

The area of competition that you are really alluding to would be primarily in the lending area in which we currently do commercial and corporate lending but not consumer lending (though our license does allow us to pursue this customer segment if we so decided).

We believe there is sufficient capacity and commoditisation within the commercial and corporate banking customer segments to allow our down-to-earth, customer-centred approach to create a niche for us given the level of disaffection currently being voiced by customers with the commercial banking sector.

Additionally, the very flat nature of our organisation enables all customers—from the smallest to the largest—to deal directly with the most senior executives of the company. This consistently enables a more in-depth, strategic discussion of that customer’s business which they may not get at the large banks due to their size and hierarchical structure. This characteristic has been very appealing to all existing and prospective customers of DFL and has enables us to keep building relationships and our business.

2. The rates offered by the company on fixed deposits, repurchase agreements, etc are among the highest in the country; if not the highest. In a generally low return environment, how is DFL able to offer such rates?

There are a few simple reasons why DFL is able to offer better rates to customers on deposits/repos etc:

1. As a merchant bank we cannot take deposits with a term less than one year, so naturally the pricing mechanism for a fixed deposit is better than that for the banks which have chequeing and savings accounts, as we would benchmark our deposit rates using one-year instruments.

2. We genuinely believe in trying to provide real value for customers on their money and with core inflation hovering around two per cent our customers can still get some “real” returns by placing deposits at DFL.

3. With respect to repos, the answer is even simpler. We simply take less of a spread on these investment instruments than other market actors hence the better rates being passed on to customers.

3. Of the several lines of financing and financial products offered by the company, which ones have been most in demand, given the current economic climate?

Given the current environment, lending demand has come more in the form of requests for debt consolidations and working capital support, while on the investment side of the business, deposits and repos have been the most in demand.

Since the reading of the budget, though, we have had an uptick in requests for project finance related to HDC housing construction given the incentives indicated therein and we are currently evaluating some prospects at present.

4. The financial industry is all about regulations and compliance. Additionally, the financial industry is going through a lot of change as a result of technology—both good and bad. For a smaller finance house, are these issues more challenging to treat with?

The increasing requirements and costs of compliance do continue to pose challenges for the entire sector and to some extent there are areas where a smaller financial institution such as ourselves with less people than the large organisations have to plan our workflow more to ensure that we meet all regulatory deadlines but there is a flipside where the decreased complexity of our business results in less cost and, to some extent, disruption.

5. How important is corporate social responsibility to DFL, and how does it engage the local community outside of the realm of finance?

DFL believes in the principle of CSR but given our small scale and solitary location has not pursued a specific CSR initiative. Rather, we have supported a multitude of community groups and causes as they arise annually and expect to continue doing so for the foreseeable future.

ANDRE WORRELL
Deputy Head of News-Business