Banking
NDB approves Rs.2.5 Bn to strengthen the Plantations sector
View(s):Pledges further support in future projects
Importance of the Plantation sector to the national economy
With a rich heritage of over 150 years Sri Lanka’s plantation sector still maintains its grandeur as an integral part of the country’s socio economic composition, with its notable contribution of 2.7% ((tea, rubber & coconut )to the national GDP and also as one among the largest employers. The national production of both tea and rubber is contributed by Regional Plantations companies (RPC’s) and small holders with greater contribution coming from the latter.
NDB’s role in the Plantations sector
Thus from its inception, as a development financier, NDB has played a significant role in funding the plantations sector of Sri Lanka. Sri Lanka’s endeavor to improve the plantations sector has been facilitated through dedicated credit lines from multilateral agencies such as Asian Development Bank (ADB).
Two such major credit lines were made available to Sri Lanka by ADB, i.e Plantations Sector Reform Project (PSRP) during late 1990′s for the purpose of reforming the plantation sector and then secondly Plantation Sector Development Project (PDP) as a booster to the sector which was reformed some time ago. NDB as a premier development financier has played a noteworthy role under these schemes.
NDB: financing and building capacity in sector reforms
In this backdrop, NDB has been playing multiple pivotal roles. Most importantly, it played the role of a financial partner to the private sector, which was at that time embarking on a nationally important project of reviving the plantations sector. This was done by providing long tenure loans required for the field development activities and factory modernization activities which was of dire need at that time. The total tenure of these loans extended up to 15 years inclusive of a long grace period up to 5 years. Total facilities approved by NDB under this credit line amounted to approximately Rs 2.5 bn.
With its decades of project financing experience and the in-house legal expertise available, NDB also played a project partner role where advice on project management and legal aspects were made available to the RPC’s and this was undoubtedly appreciated by the companies as value added services which could not be measured in monetary terms.
As one of only two development financiers of the nation, NDB also worked with the government of Sri Lanka closely, to ensure that the expected objectives of this reform credit line was achieved, thus acting as a sound banking channel with development project evaluation skills, in which the government placed enormous confidence. Further, NDB moved beyond traditional boundaries of financing projects and stretched its professional services to taking up the additional responsibility of building capacity among its fellow commercial bankers, who were new to the development financing concepts at that time.
Plantations Sector Development Project (PDP)
Once reformed in 1990′s the sector was provided with a further financing booster through PDP in early 2000′s which was again made available by ADB. The total value of the credit line was around Rs 2.5 bn and NDB was proud to be ranked as the lead Participating Credit Institution (PCI) among 7 PCI’s with approximately Rs 1.2 bn worth of loans being granted. These loans also carried long tenures extending up to 15 years inclusive of similar long grace periods.
Therefore, NDB has been providing much needed financing assistance for the development of these national assets, which are significant in terms of earning foreign exchange to the country as well as in terms of providing employment.
NDB’s lending with its own funding
Having identified the need for long term funding and the working capital financing required for the sector, NDB has continuously supported the sector by way of both long term loans and securitization facilities even after the above said credit lines were fully exhausted (in the absence of concessionary funding from multilateral funding agencies).
Total credit facilities approved amounting to approximately Rs 2.5 bn in 2012 to the plantation and agri-business sector is the best credential for its continued support even in the absence of credit lines. NDB not only partnered with its plantation sector customers in developing fields, factory modernization and working capital funding, but also in their strategic investments overseas.
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