LOLC joins the ‘trillion’ club

Tuesday, 26 February 2019 00:37 -     - {{hitsCtrl.values.hits}}

Sustaining its unblemished track record in performance, the LOLC Group has crossed the trillion mark, with total assets reaching Rs. 1.008 trillion as at December 2018. 

This significant achievement is on account of the Group’s consistently resilient financial sector – both local and international – coupled with its strategic investments in non-financial sectors – Leisure, Plantations, Construction, Healthcare, Trading and Manufacturing. LOLC Group Managing Director Kapila Jayawardena said: “It is a great achievement for our Group to cross the trillion mark in total assets. Now we have a balanced and diversified investment portfolio and will pursue to invest further into selected markets in Asia and other emerging regions with the objective of enriching livelihoods of small and medium entrepreneurs.” 

Nine months’ post-merger, LOLC Finance PLC (LOFC), the flagship finance company of the Group, together with Commercial Leasing and Finance PLC (CLC) and LOLC Development Finance PLC (LDFC) (formally known as BRAC Lanka Finance PLC), contributed 29% to the total assets with a combined asset base of Rs. 297 b. 

The total lending book of the three finance companies reached Rs. 216 b while the total interest income reached Rs. 44 b for the nine months ended December 2018, an increase of 6% compared with the comparative period. The equity of these companies are well above the regulatory requirement. Both LOFC and CLC are rated A by ICRA, a subsidiary of Moody’s Investors Service.

LOLC Deputy Chairman Ishara Nanayakkara
LOLC Group Managing Director Kapila Jayawardena
LOLC Executive Director Kalsha Amarasinghe

Over the years, LOLC’s proficiency and experience across a range of specialties in the Sri Lankan business landscape has raised its global profile, providing the impetus to venture overseas. LOLC’s maiden overseas investment, PRASAC Microfinance Institution Ltd., the largest microfinance company in Cambodia, has made a significant contribution to the Group. 

In 2007, LOLC was invited to invest Rs. 62 m to acquire a 19% stake in PRASAC, a key performer in the dollarised Cambodian economy. This was the first step taken in line with LOLC’s long-term vision to propagate its unique business model in microfinance beyond the shores of Sri Lanka. 

The value addition of this investment was further reinstated when LOLC increased its holding from 19% to 70% over the years. Today, PRASAC has a lending book of Rs. 354 b, Rs. 236 b in deposits, Rs. 435 b in total assets and a customer base of 400,000. With a staggering profit contribution of Rs. 10 b (for the nine months ended) to the Group, PRASAC stands strong with LOLC at the helm.

Diversifying its portfolio by expanding regionally has offered LOLC resilience, financial stability and a well spread risk profile, which had enabled the Group to stride ahead with consistent performance even during turbulent times in the local economy. Thus, LOLC rapidly expanded its regional microfinance footprint to Myanmar, Pakistan, Indonesia and Philippines over the years. 

In 2014, LOLC Myanmar Microfinance Co. Ltd. (LMML) was established as the fourth foreign operator in response to an initiative of the Myanmar regulators. Albeit a greenfield operation, LMML demonstrated remarkable growth – both financially and socially – attracting an array of international funding agencies on board to achieve their development goals. 

The Group made its second investment in Cambodia in 2014. LOLC Cambodia Plc (LOCAM) is the fourth largest microfinance and the second most profitable microfinance institution in Cambodia with an outreach of 236,000 and an asset base of Rs. 112 b. Today, LOLC holds 97% of LOCAM, a 24-year-old microfinance institution that was first established by an NGO. 

In 2017, the Government of Pakistan and the Sultanate of Oman invited LOLC to take up the major shareholding of their joint venture, Pak Oman Microfinance Bank Ltd. (PakOman), in recognition of LOLC’s outstanding contribution to the microfinance community. Today, PakOman is rapidly growing to become an important player in Pakistan, an economy with a population of over 200 million. 

The Group’s technical expertise in areas such as effective and focused risk management, stringent credit evaluation and fin-tech driven processing, will provide a steadfast hand for Pak Oman in their goal to uplift and empower bottom-of-the-pyramid entrepreneurs.

The Group ventured into Indonesia in early 2018, acquiring a controlling interest in PT. Sarana Sumut Ventura (PTSSV). With a population of over 265 million, and more than 40% households classified as “very poor,” the company is poised to accomplish its long-term vision of alleviating poverty by empowering women and micro entrepreneurs.

LOLC concluded 2018 with its investment in Philippines. LOLC ASKI Finance and LOLC Development Bank were both carefully identified for their strategic locations, where the former will penetrate the northern part and the latter the central and southern parts of Philippine archipelagos.  

Considering the social impact created in both Indonesia and Philippines and identifying the tremendous potential going forward, the respective regulatory bodies and several Development Financial Institutions (DFIs) have expressed their interest to work closely in these initiatives. 

Today, foreign investments in the financial services sector account for Rs. 560 b as total assets in the books of LOLC and have contributed a PAT of Rs. 12.7 b to the Group for the nine months ended 31 December 2018. The lending portfolio of the foreign businesses amounts to Rs. 450 b with a deposit base of Rs. 280 b. Therefore, LOLC is determined to further penetrate Asian markets whilst exploring opportunities in other regions such as Africa. 

LOLC’s winning formula constitutes many facets: rich human capital, agile corporate culture, service excellence, good governance and strategic thinking. However, the competitive edge is driven from its globally-acclaimed, home-grown microfinance business model that is unique to the LOLC Group. 

Contrary to conventional microfinance models, LOLC’s microfinance model works in a customer-friendly way that allows budding micro entrepreneurs to graduate to the SME sector in a short time span. The model prioritises empowerment of women, widely identified as the most effective route to eradicate poverty and enhance living standards. LOLC’s microfinance model also sets itself apart with its special emphasis on fostering business fundamentals to the borrower to promote inclusive financing. 

The Group’s extensive knowledge on SME clientele plays a major role in designing bespoke hybrid products that differentiate their product mix from the peers. This has also driven LOLC in maintaining its pioneering momentum, with innovative products such as micro insurance – a first-of-its-kind in the country. Use of financial technology to drive efficiencies is another defining factor of the model where all microfinance loan officers are given tablets with real time connectivity to use in the field. 

Thus, LOLC’s microfinance model has been endorsed by many international independent organisations, whereby LOLC Micro Credit Ltd. (LOMC, now merged with LOLC Finance PLC) was the first Sri Lankan MFI to be awarded Client Protection Principles Certification from the SMART Campaign (a global initiative which exists to ensure strong client protection practices in the microfinance industry), while LOLC Cambodia Plc was the first organisation in Cambodia to be certified.

Receiving further acclaim for its exceptional performance, LOMC was selected as a business case study by INSEAD Business School in its MBA program following an independent study on the company’s remarkable growth, commitment to empowering women and communities and outstanding social stewardship reflected in their business model. 

PRASAC has also been recognised by MIX as a S.T.A.R. MFI whilst both LOFC and LOCAM are rated the coveted Platinum Grade by the Global Impact Investing Rating system for their impactful business conduct.

Over the years, LOLC has functioned as a catalyst in transforming communities to step up livelihoods, revolutionised industries through increased mechanisation, contributed to GDP by fuelling economic activities in the countries in which it operates and, above all, uplifted societies through its sustainable inclusive financing approach. 

This extraordinary role is reinstated by LOLC’s long standing international funding partners and DFIs such as the Dutch Development Bank – FMO, The French Development Agency – PROPARCO, German Government Agency – DEG and the Asian Development Bank (ADB). 

With over four dozen international funding partners, with some relationships spanning over 25 years, LOLC has been the entry point to Sri Lanka for most of these lenders. Considering the Group’s ethical business fundamentals, sound financial performance and strong social accord, these multinational lenders use LOLC Group as their preferred conduit to achieve their development goals. 

Aligning itself with the growth sectors of the Sri Lankan economy, the LOLC Group has also been an effective player in the development of the non-financial sector through Brown and Company – a 144-year-old conglomerate, with exposure in leisure, agriculture and plantation, power generation, marine and manufacturing, home and office solutions, pharmaceuticals and healthcare.

The strong foothold in the plantation sector through Maturata and Gal Oya has also yielded extended benefits along the value chain from its sister companies such as AgStar PLC and Browns Agriculture. The latter in particular has substantial market share and several strong brands (TAFE, Yanmar and Massey Ferguson) under its agriculture equipment portfolio. 

The Group also extends its portfolio in the construction sector, with strategic investments in Ajax Engineering, the market leader in manufacturing glass and aluminium doors/windows, and Sierra Group, a dominant figure in the engineering and construction industry.

Furthermore, the Browns Battery Unit is the sole distributor for the Exide, Lucas and Deganite brands of batteries and remains the market leader in automotive batteries with over 70% market share and a well-spread distribution network of over 700 dealer outlets. 

The local leisure portfolio holds four operational hotels including the 5-star property Eden Resort and Spa in Beruwala, the Paradise Resort and Spa in Dambulla, Dickwella Resort and Spa in Dickwella and the Calm Resort in Passikudah. The pipeline is promising with international strategic partners on-board for the two hotels under construction, which once completed will be one of the largest resorts in the country. 

There have also been strong inroads made in the Maldivian leisure sector as the LOLC Group has secured some of the most sought-after real estate in Male and other atolls, assuring a diversified leisure portfolio to the Group. 

These varied investments are made with the long-term vision to strike a strategic balance and to offer an additional competitive edge to an already-diversified portfolio of the Group.