NDB talks to funding agencies for more SME credit lines
View(s):NDB, after successfully disbursing a US$12.5 million credit line from the Asian Development Bank (ADB), is in discussion with other major funding agencies and also the ADB for more such partnerships, officials say.
At the end of April 2016 NDB was elected to be one the winning banks under the auction in which funds were to be awarded to the selected bank, by the Ministry of Finance of Sri Lanka, to be re-distributed to various Small and Medium Enterprises (SME) initiatives, they said.
More jobs
The bank was awarded funds worth $12.5 million, a rupee equivalent of approximately Rs. 1.81 billion and had disbursed loans within four months whilst ensuring speedy processing to meet the time constraints, along with qualitative aspects of the disbursement considering the significant economic impact that the funds/credit line and leave on the country’s economy, they said.
“Among such qualitative aspects, we prioritised on aspects such as generation of employment opportunities, assisting women entrepreneurs and reaching out to people who are currently not a part of the formal banking system of the country. Another major target of the bank’s disbursement plan was maximum geographical reach in terms of disbursement. Achieving this target, the bank succeeded in opening access to the credit line to 160 beneficiaries spread across 23 out of the 24 administrative districts in the country. The district of Kilinochchi, which was not covered in our disbursement initiatives, was due to the simple reason that the bank was not operating its network in this district,” Dimantha Seneviratne, CEO told the Business Times.
He added that the bank had a great demand for this credit line and it had to restrict processing based on several factors such as the limited time, its outreach, availability of beneficiary data, the capacity to meet eligibility criteria, etc. “Right now we are in discussions with ADB for more such funding and we are also talking to other funding agencies,” he said.
The ADB credit line did not have a prescribed minimum value for a single customer, instead capped a single facility to a maximum of Rs. 50 million. “Some 160 facilities were granted with an average loan size of Rs. 11 million. This is one of the qualitative aspects that the bank focused in the administration of this fund, to ensure the maximum positive economic impact left of the beneficiaries individually, and the country’s economy at large.” He added that this project would overall create 3,128 new employment opportunities. “We didn’t record indirect job opportunities created and we hope there would be indirect employment opportunities created as well. The 3,128 employment opportunities are a commendable outcome as the project ultimately would assist to uplift the living standards of the people.”
NDB had also reached out to women entrepreneurs, energising them in their commendable contribution to the national economic thrust. “We also reached out to start-up business ventures, a segment which is more often overlooked by financing institutions, due to the high risk involved with them,” Mr. Seneviratne said.
Every project that NDB financed under the ADB credit line ensured that the beneficiaries were properly screened in terms of environmental regulations in force and helped number of projects to meet with such resulting businesses getting Environmental Protection Licenses or Environmental Recommendations wherever applicable. Now under the SMILE III Revolving Fund which is sponsored by the Japan International Co-operation Agency (JICA) and managed under the Ministry of Industry and Commerce there are 10 Participating Financial Institutions (PFIs) in the country, of which NDB is also one. NDB holds the first place among the PFIs for this fund, another affirmation of its strength in supporting the SME sphere. The bank granted 92 facilities during 2016. Total disbursements by NDB as at the end of the year were Rs. 1.02 billion.
NDB CEO Dimantha Seneviratne
Mr. Seneviratne noted that strategic decisions have been taken to drive the SME banking with a mindset change. “The recent retail and SME integration at all branches, promotes aggressive cross-selling. The changes combine wider distribution/delivery of SME products with centralized processing to reap the economies of scale – which are fundamentals to building a successful and sustainable SME business proposition in the bank.”
Women rule
NDB’s SME lending portfolio expanded by 48 per cent during 2016 and the portfolio stood at Rs. 328.4 million (source NDB annual report) covering 2334 number of clients, out of which 60 per cent accounts for females.
NDB also strengthened the marginalised section of the economy through non-financial services such as improving financial literacy, management and technical skills, training and market linkages, along with value additions such as technical skill developments, Mr. Seneviratne added. “In Sri Lanka as in many developing and emerging economies, small and medium enterprises are the backbone of the economy and their role is vital to jump start the economy. Recognising this, the bank has from its inception responded to the needs of the SME sector by giving adequate credit,” Mr. Seneviratne added.
NDB has a group structure dedicated to uplifting SMEs, he said noting that it has dedicated subsidiary companies engaged in full service investment banking, securities advisory and trading, wealth management and management of private equity funds. Of these group companies, NDB Zephyr Partners Ltd, which is the private equity management arm, was established in 2014 dedicated to the SMEs of Sri Lanka. Zephyr Partners manages the Emerald Sri Lanka Fund and is a private equity fund dedicated to investing in small and mid-sized businesses seeking expansion capital in Sri Lanka.
During 2016, Emerald Sri Lanka’s Fund invested in Cleanline Linen Management (Pvt) Ltd. (CLM), a centralized laundry services provider to star class hotels in Sri Lanka. CLM, as a part of its value proposition, adopts sustainable environmental practices by implementing energy and water conservation methods and efficient waste management systems.
The Emerald Sri Lanka Fund also invested in JAT Holdings (Pvt) Ltd. (JAT), the market leader in water-based wood coatings sector in Sri Lanka. JAT has exclusive rights to manufacture and distribute one of the world’s leading wood coating brands, Sayerlack, across Sri Lanka, India, Bangladesh, Maldives, Pakistan and Seychelles. In 2014, JA established a partnership with Crown Paints UK to manufacture and sell premium emulsion brands, Crown and Permoglaze.