Conducive environment for growth of finance companies - Chairman Sinhaputhra Finance
The environment now in Sri Lanka is conducive for the growth of
finance companies. The Finance Company sector had, by end - December
2004, accounted for Rs. 38 billion in public deposits and Rs. 66 billion
approximately in total assets. But this is about 3.5% of the total
banking assets in the country says Kithsiri Wanigasekara, Chairman and
Managing Director of Sinhaputhra Finance Ltd.
The growth of finance houses makes its mark in the growth of the
economy. "This is why it does not satisfy me to see a handful of Finance
Companies reach upwards and outwards, while others do not record such
To every finance company, growth must be that of deposits, total
assets, interest earning assets and greater and more widespread
financial performance." Finance Company sector has made an indelible
mark in this country's economic and development scenario. The
performances of finance companies have been most positive.
Wanigasekara has geater confidence in all operations, an insistent
image-building and, above all, a "basket of incentives" that, in many
ways, attracts small and large savers, institutions, industries and
small and medium enterprises and entrepreneurs. In Sri Lanka, too, the
new business outlook has seen the opportunity to build up "empires" and
it is left to be seen what the overall effect would be.
Wanigasekara, who was the Chairman of the Finance Houses Association
from 1998 to 2000 said that finance leasing and Hire Purchase Finance is
funded mainly through public deposits.
"Such deposits carry high rates of interest. And yet, banks are also
able to offer attractive lending rates on finance leases and Loans
because of the low cost of funds they experience.
Wanigasekara pointed out to the significant contribution finance
companies made to the transportation sector. He stressed on what could
best be described as the "concerned human approach" where finance
companies enhanced the economic activity of the rural and informal
"We have provided finance leasing and lending facilities, spread the
message of savings deposits, made the rural sector see the importance of
forging ahead as small-scale entrepreneurs, building up trades. There
are thousands of people who need to get on their feet, build up their
own ventures, be they big or small. Finance Companies must now expand
their operations to all geographical locations - in short, go where no
bank has gone before! The opportunities are enormous!"
There are the obstacles that arise in the operational areas -
particularly the delays in the recovery of delinquent loans, usually
because of the law's delays. "The non-performing loan ratios of most
finance companies are high. We perform in a high-risk arena and
obviously we are dealing with clients who are not able to command the
acceptance or services of the formal banking sector," he said.
But, this is a risk factor that is inevitable and a finance company
needs to be able to surmount this by the employment of good recovery
procedures and a human approach. The need to strengthen debt recovery
legislation for the recovery of delinquent loans is important."
He also said that credit risk, liquidity risk and interest rate risk
are the key factors the finance companies must take cognisance of.