Micro financing brings LOLC’s profits
LOLC, Sri Lanka’s largest microfinance entity in the country, says that micro finance which is its core business, is doing exceptionally well and has helped their financial sector being the cash cow in the group, officials said. “In terms of geographic presence and portfolio size and the largest agriculture equipment provider through Brown & Company (which LOLC acquired mid this year) we are the largest microfinancier. LOLC’s net profit for 2010/2011 was Rs. 8.9 billion, a 27 per cent increase over the year before which was Rs. 7 billion.
This comes amidst a challenging environment where LOLC’s core business of financial services faced interest rate volatility, increased taxes on motor vehicles, lower liquidity in the market and a general credit squeeze,” Kapila Jayawardena, CEO LOLC told the Business Times. He added that despite these challenges, financial services remained dominant in profit contribution, with 72 per cent of the profits amounting to Rs 7.4 billion coming from this sector further reducing the dependency on other sectors in the LOLC Group.
He said that LOLC’s micro financing comes in two varieties: asset-backed and income-backed. “Our group loan model is somewhat different to the popular Grameen Bank model. We have a smaller group with a speedier and more effective step-up loan cycle. At present, 95 per cent of our group loan portfolio graduate to individual borrowers. This opportunity not only empowers working women in the microfinance sector, but also facilitates their transition to an SME entrepreneur, alleviating poverty and uplifting the living standards of their families,” Mr. Jayawardena explained.
He added that LOLC’s investment in the Browns’ Group which is heavily involved in complementary businesses harmonises the two group’s synergies. “We are the largest micro financer and they are the largest agriculture equipment provider. Leveraging its automotive interests further, Browns’ manufactures vehicle batteries and radiators, the market leader in these product lines. Together with Browns’ we maintain a healthy portfolio of investments, ranging from banks to hotels, construction to forestry; plantation to agri inputs,” he added further.
He also said that they are in the process of setting up a unique financing model for LOLC customers, while recognising Browns’ synergies.
LOLC now owns the Confifi Group and its portfolio of hotel properties – Eden, Riverina and Club Palm Garden in addition to Tropical Villas, another hotel closely situated in 26 acres. “We are actively looking for a strategic partner to what might be the largest resort complex in the country on completion of the proposed development.”
Mr. Jayawardena said that the energy policy of the country indicated that by 2020, 100 per cent of the country will be electrified with at least 20 per cent of it generated via renewable energy sources has enabled their venture into renewable energy (with a 75 per cent stake in United Dendro Energy with its biomass power generating plants and plantation investments) to explore better potential.
“Our stake in associate company Sierra Construction was taken on the basis of the growing demand for large scale construction, their capability for major infrastructure projects. Through Sierra we ventured into Agstar Fertilizer, a leading fertilizer and agri input producer.
This too is a long-term investment aimed at establishing synergies with other Group companies and equity partners such as Browns’,” he said.
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