Global specialists IFC, FMO and SBI/FMO partner to transform SDB to better serve micro, SMEs and cooperative societies
SANASA Development Bank (SDB bank) has begun a new chapter of growth with the infusion of $ 28.5 million in equity and capital funding from likeminded global partners International Finance Corporation, the FMO Dutch Development Bank and the SBI/FMO Fund.
Of the amount, $ 22 million (Rs. 3.3 billion) is in the form of equity from the SBI/FMO Fund and IFC, a member of the World Bank Group. FMO and the SBI-FMO Fund will also jointly extend long-term Tier-2 funding of $ 6.5 million (Rs. 1 billion) to support new business opportunities including SME lending and the cooperative and retail sectors.
Regulatory approvals for these substantial investments have already been secured. SDB bank is the first licensed specialised bank to respond with an immediate strategy to expand its capital to meet regulatory requirements.
The new investment will increase IFC`s stake in the bank to 8.9%, making it the fourth-largest shareholder to date. FMO and the SBI-FMO Fund will jointly take up 12.9% equity stake in the bank.
IFC has been a long-term partner of SDB bank since 2009 and is currently supporting the bank’s expansion to include more micro and small businesses, cooperatives and retail clients. This will help the bank to reach more small businesses across the country, boosting financial inclusion.
FMO is a Dutch public-private development bank with a mission to empower entrepreneurs to build a better world. FMO offers a dedicated facility to financial institutions to be on-lent to women-owned SMEs. Besides long-term finance for these businesses, they also provide technical assistance to support financial institutions and female entrepreneurs.
The SBI-FMO Emerging Asia Financial Sector Fund Pte. Ltd. (SBI-FMO Fund) is a growth strategy private equity investment fund based in Singapore which invests in the financial services and Fin Tech sectors across Asia. The fund leverages on the combined strengths of its sponsors, SBI Group, a leading internet-based financial services conglomerate in Japan, and FMO Dutch Development Bank.
The SBI Holdings Group is the leading online financial services conglomerate in Japan and one of the best performing Japanese Private Equity/Venture Capital Asset Managers with an AUM in excess of $ 5 billion.
The SDB bank said it has already made a substantial investment in organisation realignment, strengthening and improving systems and processes, and is shifting to a digitalised environment with strong capabilities across these main business segments.
Chairperson Samadanie Kiriwandeniya said: “We are well geared both strategically and operationally to undertake the next phases of our journey. We have become a more focused business, striving for long-term, responsible growth that will amalgamate profitability with the nation`s development.”
“SANASA Development Bank, which is a product of the pioneering microfinance movement in Sri Lanka, has been branded in the market for over 20 years, as a leader in the microfinance industry. However, recent market studies and our own engagements with the customers led us to realise that our customers are ready to expand their frontiers and enter into real wealth creation,” the Chairperson added.
Kiriwandeniya also said IFC, FMO and SBI-FMO Fund were the right partners with a wealth of international experience and they will support the vision of the bank. She said with the equity and capital infusion, new products and technology platforms, along with young staff, SDB bank is poised to grow.
She said SDB bank is keen to make its next journey - one which focuses on wealth creation - successful. It was emphasised that it was through a vibrant SME sector that the country can prosper but she emphasised that the bulk of the SMEs are underserved by the banking sector. “We have a responsibility locally and we hope to transform to a proper SME-supporting bank,” Kiriwandeniya added.
“IFC’s longstanding partnership with SANASA is providing more formal financial services to under-served segments within rural micro and small businesses across Sri Lanka,” said IFC Country Manager for Sri Lanka and Maldives Amena Arif. “This investment will help the bank further extend their reach across the country.”
IFC’s Arif said her institution was happy to deepen the engagement with SDB bank and described it as a critical partnership since both share common values of ending poverty and boosting shared prosperity. She said in Sri Lanka the micro and SME segments account for 52% of the economy and face challenges in terms of a lack of access to finances.
In this regard, she said SDB bank can serve this segment better as it endeavours to narrow the financial inclusion gap. Arif also said IFC’s decision to increase its stake in SDB bank is a further testament to the success of the bank and mutual commitment to be progressive.
FMO Senior Investment Officer Alwin B. Kool said it is keen to add value to the investment in SDB bank with technical and managerial expertise thereby achieving common goals.
Suramya Gupta, the Fund Manager for the SBI-FMO Fund, stated: “We are honoured to have partnered SANASA Development Bank in Sri Lanka. SANASA is a 100-year-old movement touching the lives of a large section of Sri Lanka`s population.”
Speaking on behalf of SBI-FMO Fund, Japan’s SBI Holdings Vice President Parapiboon Potay said her institution was also very excited to invest in SDB bank and help it to better serve entrepreneurs and enterprises in rural areas.
She said the SBI-FMO Fund will help SDB bank in many ways including providing insights into product development, network expansion, HR, risk management and corporate governance.
SDB bank CEO Nimal C. Hapuarachchi said: “With this new infusion of capital and long-term funding, we will consolidate on gains of past performances and proactively respond to future market requirements in order to deliver strategic objectives.”
He said the bank has made impressive progress over its two decades of operation. Since being listed in 2012, the bank’s assets have increased from Rs. 23 billion to Rs. 72 billion and shareholders’ funds have grown to Rs. 5.5 billion from Rs. 3.2 billion. He said the new equity and capital infusion will enable SDB bank to enhance its support to the micro, SME and cooperative segments. Last year the bank lent Rs. 15 billion.
Pix by Ruwan Walpola