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Tuesday, 1 April 2014 01:36 - - {{hitsCtrl.values.hits}}
The banking sector saw a fresh boost for the economy’s backbone SMEs and micro entrepreneurs thanks to a ground breaking deal between the National Development Bank (NDB) and the International Finance Corporation (IFC).
The World Bank’s private sector investment arm IFC yesterday came forward to arrange $ 120 million worth of long-term financing at attractive terms to NDB for on-lending to micro, small and medium enterprises and as private sector foray in to infrastructure development and sustainable development. Over 50,000 entrepreneurs largely micro and SMEs as well as other corporate stand to benefit from the new initiative over the next four to six years.
IFC’s support amounts a total of $ 190 million with the balance $ 70 million extension to NDB is expected by June. The fund raising exercise has been fully supported by the Central Bank, which is keen to ensure diversification of sources for borrowing as well as lower interest rates and boost lending for SMEs.
The financing package includes a loan from IFC’s own account of $ 20 million, and $ 105 million from Union National Bank, UAE – $ 25m, HSBC – $ 25 m; Standard Chartered Bank – $ 20 m; Axis Bank, India – $ 15 m; Doha Bank, Qatar – $ 10 m; Bank Muscat, Oman – $ 10 m.
The arrangement is IFC’s largest investment, as well as its largest syndication in the country. HSBC was the strategic advisor to the syndication.
“IFC’s funding will add much-needed funding support to NDB’s lending program, helping scale up our loan portfolio across the country. We are delighted to see how our partnership with IFC has progressively created significant value to our business model,” NDB’s Director and CEO Rajendra Theagarajah said yesterday.
“The investment demonstrates NDB’s ability to raise funds at rates that make commercial sense from global banks and institutions that have partnered IFC under this loan facility,” he added.
He said that financing for micro and SMEs can range from two to four years whilst for those keen on pursing infrastructure and sustainable development such as renewable energy and water, the tenure can be as long as six to seven years or beyond.
Last year, IFC extended a loan of $ 24 million to NDB to support the bank’s growth plans generating employment opportunities and providing access to long term funding to small businesses.
NDB has lent Rs. 15 billion to micro and SMEs last year and plans to expand support to Rs. 20 billion in 2014. Such finances will be lent at competitive rates.
IFC and NDB said easier access to finance is critical for the growth of small businesses, helps creates jobs and boosts economic growth. “Robust and equitable growth requires a strong financial sector and we are proud to make our biggest contribution via this arrangement,” IFC’s Country Manager for Sri Lanka and Maldives Adam Sack said.
“IFC’s syndication for NDB demonstrates growing investor confidence in Sri Lanka, and will help NDB expand financing options across the country for small and medium enterprises,” he added.
Sack revealed that private sector borrowing has picked in recent months and acknowledged that interest rates have come down.
Having partnered the inception and growth of many small businesses in various industries, NDB has amassed vast experience on the specific financial and advisory needs of the sector; which the bank now translates to customised financial solutions that fit the industry and operational demands of SMEs.
NDB’s SME experts are specialised in diversified fields of engineering, agriculture, accounting and finance as well as marketing and branding. They add value to the bank’s SME proposition by providing comprehensive advisory solutions to educate and empower the small and medium entrepreneurs. NDB is equipped with an in-house product development team which focuses on continuous improvements and has pioneered several revolutionary solutions based on industrial requirements. To date, the bank has financed over 100,000 projects directly and indirectly, creating over 1,000,000 employment opportunities island-wide.
Sri Lanka is a priority country for IFC. IFC’s committed portfolio of $ 290 million in Sri Lanka covers projects across a range of sectors, including infrastructure, tourism, renewable energy, finance, and healthcare. IFC also provides advisory services to promote sustainable growth among small and medium enterprises by facilitating access to finance, and by offering capacity-building and training opportunities.
