Responsible lending and borrowing for the betterment of personal credit

From left: Lions Club of Colombo (Host) 306A1 2021-22 President and Certified Expert in Financial Inclusion Policy Asitha Pinnaduwa, HSBC Sri Lanka Country Head of Retail Banking and Wealth Management Nadeesha Senaratne, Central Bank of Sri Lanka Assistant Governor J.P.R. Karunaratne, Credit Information Bureau of Sri Lanka (CRIB) Director/ General Manager Nandi Anthony, Bank of Ceylon Deputy General Manager – Recovery Provinces, Business Revival and Rehabilitation M.R.N. Rohana Kumara 

Lions Club Colombo Host District 306A1 recently concluded the third session of the Money Matters webinar series, ‘Money Matters 1.2 – Personal Credit – a good, bad and ugly?’. This webinar series is a yet another social endeavour by Lions Club Colombo Host, which aims to enhance financial literacy and inclusion in Sri Lanka. 

The Money Matters 1.2 session was held with the participation of an elite speaker panel including Bank of Ceylon Deputy General Manager – Recovery Provinces, Business Revival and Rehabilitation M.R.N. Rohana Kumara, Credit Information Bureau of Sri Lanka (CRIB) Director/ General Manager Nandi Anthony, HSBC Sri Lanka Country Head of Retail Banking and Wealth Management Nadeesha Senaratne, Central Bank of Sri Lanka Assistant Governor J.P.R. Karunaratne, and session moderator Asitha Pinnaduwa, who is a Certified Expert in Financial Inclusion Policy and the President of the Lions Club of Colombo (Host) 306A1 2021-22.

Pinnaduwa, while giving a fitting introduction to the session, went on to emphasise that citizens should pay attention to personal finance at a time when the country’s economy has contracted due to the COVID-19 pandemic. The main objectives of the session were to understand personal credit, how personal credit debt affects personal finance and explore ways to manage it, while the speakers shared expertise and knowledge in their respective fields.

Karunaratne set the tone for the session by discussing the role of the CBSL in securing an efficient monetary finance and payment system. Answering a question on the importance of the growth of consumer credit to the overall economy, he said: “Consumers’ ability to borrow money easily allows a well-managed economy to function more efficiently and stimulate economic growth.” According to him, the demand for consumer credit paves the way for innovation and entrepreneurship, which accelerates economic growth. He produced several research findings to emphasise that consumer credit helps to increase GDP, which in turn boosts the economy.  

He further elaborated on the fact that due to an abundance of informal money lenders, a considerable number of people from the grassroots level continue to borrow through them, which is one of the main reasons for the low percentage of credit access (45%) in the country. He pointed out several other reasons for this low percentage, such as a lack of collateral in the informal financial sector and low financial literacy. 

Rohana Kumara focused on the aspect of loans and described why banks were extra vigilant when lending, given that they were lending the depositors’ money. He emphasised that banks could be reluctant in approving loans if the consumers’ past track records were weak, due to uncertain scenarios such as longer tenures where banks will require collateral. He highlighted that if the past loan records were good, the customer would have a higher advantage of negotiating the terms and conditions to suit his/her requirement. He also came up with valuable advice to consider when applying for loans. He suggested that the individuals applying for a loan be better prepared when meeting the lender and that they needed to be confident enough to discuss their purpose of borrowing. Since financial institutions often inquire about the status, health and CRIB records of a borrower, he recalled the importance of keeping good credit records.

Nadeesha Senaratne focused on the aspect of responsible lending and borrowing where he discussed the importance of understanding the target borrowing segments, why they need to borrow money and for what they borrow. He highlighted the importance of having a credit bureau, which gives adequate understanding of the total debt of a consumer while encouraging consumers to maintain good credit records.

He also emphasised the fact that while increasing the lending business, it was necessary to create awareness among consumers to invest properly, as well as the need to improve digital infrastructure to make financial services more accessible to them. 

Nandi Anthony discussed the role of the Credit Information Bureau of Sri Lanka (CRIB) and its contribution to personal credit. He noted that the public had misunderstood the purpose of the CRIB and went on to share that it had been established to ensure financial stability, responsible lending and borrowing, and to propagate credit. While giving more background information on the CRIB, he reiterated that it was a statutory body with a board of Directors. He emphasised that the CRIB has nothing to do with blacklisting and it was only a facilitator of lending where lenders could find information about past lending records, which helped the audience to clear several myths and doubts regarding its services. Finally, he suggested everyone to keep the credit records healthy, describing it as a reflection of one’s behaviour.

The Money Matters 1.2 session ended after the audience was given valuable insights on personal credit, loans, the role of the CBSL and CRIB in facilitating personal credit, the importance of responsible lending and borrowing, and investing one’s credit properly.