Dunia Finance reports its first profits, after the consumer finance company's inauspicious launch reaps the benefits of its backing by Abu Dhabi's Mubadala and Singapore's Temasek.
Dunia thrives from its desert location
A patch of barely populated desert beyond the unfinished Dubailand theme park is an unlikely base for one of the UAE's fastest-growing consumer finance firms.
But it is here that Dunia Finance - which is backed by Mubadala Development, a strategic investment company owned by the Abu Dhabi Government - has its nerve centre. It may have seemed an uphill task when Dunia launched two weeks after the Lehman Brothers collapse in September 2008, but the company has now recorded its first annual profit.
"We're building an institution that's unique, and in some ways all that is now showing through in our efficiency," said Rajeev Kakar, the chief executive."Going out into the desert" had brought great cost savings, he said.
The company reported earnings of Dh18 million (US$4.9m) for last year, compared with a net loss of Dh88m a year earlier. Dunia's revenue almost doubled during the same period, to Dh205m.
Net loans totalled Dh559m at the end of the year, up 57 per cent on the corresponding period a year earlier. The company's deposit base of Dh241.6m rose 226 per cent during the same period, but is still less than half required to cover the company's loan book.
"We're fully self-funded with customer deposits and with equity," Mr Kakar said. "We're not heavily extended because we have equity on the other side." For now, the company has the backing of well-capitalised shareholders, although it plans eventually to launch an initial public offering. Dunia is controlled by Mubadala and Fullerton Financial Holdings, a subsidiary of Temasek Holdings, Singapore's sovereign-wealth fund.
This gives Dunia a low cost of funds and a large spread on its interest rates. On some of its credit cards, laden with consumer tie-ups and offers to entice retail customers, Dunia charges interest rates of 3.25 per cent a month.
The UAE's banking sector was joined by a number of new entrants when Dunia launched.
Dunia, Arabic for "the world", began with 250 employees and has expanded to about 800 workers in 19 branches.