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Sri Lanka: One of the oldest financial systems in Asia

Interview - September 24, 2015

Mr. R.S. Egodage, CEO of Commercial Credit and Finance, sits down with Globus Vision to talk about the company’s strategy and its plans to grow.


Asian banking revenues have grown at an annual average rate of 9% across Asia over the last three years, at a time when revenues have been flat or shrinking in Western markets. This growth has been achieved while maintaining a strong profitability. Average ROEs in emerging Asia are especially high, ranging from 15% to 25% in markets such as India, China and Indonesia, and above 15% in more developed markets such as Malaysia and Hong Kong. How are banks the key enablers of Asia’s growing economy?

The banks in the region play a pivotal role, they not only are the key enablers for the economies but also financiers for infrastructure and social development.

If we look at all the developing regions such as South America, Middle East or Africa, sustaining high economic growth will depend in large part on developing an enabling environment for increasing domestic savings and investment efficiency in those regions.

In this sense the development of financial markets is a vital component to robust economic growth and poverty reduction. Historically liberalization and reforms have led to the deepening of domestic financial markets, however I believe there is still room for further liberalization, such as macroeconomic stability, costs of doing business, transparency and governance, and limited financial inclusion. 

Sri Lanka has a relatively sophisticated financial sector for an economy of its size, with 24 commercial lenders in 2012, specialized banks and, in addition, 58 non-banking financial institutions, with the current banking penetration standing at 83% in Sri Lanka according to the 2014 Global Financial Inclusion (Findex) database, and also with per capita income set to double to US$7,325 by 2020 from the current US$3,170. What is Sri Lanka’s financial sector’s role in the region and what’s its competitiveness?

Sri Lanka has one of the oldest financial systems in the region, however the civil war that had lasted over 30 years had slowed down any vigorous development within the financial sectors, it is only after the war ended in 2009 that we have started experiencing newer incentives whether coming from public or private sector to grow and expand our networks.

The Sri Lankan banks have 100 percent coverage of the island, where the reach across the country was reached through conventional “brick and mortar” branches and extension counters that offer limited but necessary services.

Technology‐dependent service delivery platforms such as ATMs and internet banking have also played a pivotal role to provide access to banking all over Sri Lanka, according to a study conducted by the World Bank (Getting Finance in South Asia: An Analysis of the Commercial Banking Sector), Sri Lanka has one of the highest branch and ATM penetration in south Asia.

Commercial Credit & Finance PLC was established in 1982, when it only focused on lending to the Agriculture sector. However, come 2009, with your appointment, the company has undergone strong changes. Please discuss the genesis of the company and how the bank plays a greater role in Sri Lanka’s economy.

Commercial Credit & Finance PLC was incorporated in 1982, and we have never looked back again.

We are a key provider for microfinance and other banking services to 535,000 customers via its 74 branches in the country.

We offer a range of financial products including auto leasing, education loans, micro-savings and Islamic banking.

Our vision is to be an ethically driven financial institution and the growing force of Sri Lanka’s financial sector. We believe in clear and open communication channels and flat management structures to encourage free thinking. 

My main objective is to grow with Sri Lanka’s economy and our people, by creating a learning culture that promotes individual and organizational development as well as promoting innovation and value for customers.

The bank is committed to monitoring and demonstrating an impressive commitment to results, that will not only showcase our economy’s robust growth but also showcase how Commercial Credit & Finance is ready for new partnerships, investor relations and expanding the boundaries outside Sri Lanka.  

In a year when the LFC and SLC sector experienced a number of challenges, Commercial Credit delivered very positive results. The company’s total assets grew from Rs. 18.3 billion as at the beginning of the financial year to Rs. 31.6 billion by year’s end. What were the main fundamentals for such a strong growth?

The results are extraordinary and will go down in the annals of the history of our Company as the year during which we first recorded Rs.2.1 billion in profits.

This is all the more creditable in view of the various challenges of differing magnitudes that the leasing and finance sectors experienced during this period.

Such heights could have not been achieved if we did not have an aggressive expansion plan, where we are one of the biggest success stories in Sri Lanka.

Internationally recognized as one of Asia’s finance companies, our record-breaking growth and premier service continue to set the industry benchmark, and this is through pioneering innovation and unparalleled customer service.

Leading frontier markets private equity investor, Creation Investments Capital Management LLC, through its subsidiary, Creation Investments Sri Lanka LLC (Creation Sri Lanka), has agreed to invest Rs. 1.68 billion (US$12.8 million equivalent) into Commercial Credit and Finance PLC. What does this investment mean for CCF?

In 2014 in partnership with Creation Investment Ventures Fund II, a private equity fund managed by US-based Creation Investments Capital Management, we have managed to raise LKR 1.68 billion) UDS 12.4 Million) in equity funding through n issue of 80 million new shares.

This funding has helped us to enhance our branch network and asset and client base as well as to meet our future capital adequacy requirements.

We will be concentrating on to providing wide range of financial products to the Sri Lankan consumer including a variety of microfinance and SME products combined with a high quality service.

What does this decision to invest in CCF say about the international confidence in the investment climate and growth potential of the country?

This is the largest investment by an international private equity fund into a publicly listed Sri Lankan licensed finance company and which is a strong validation for the success of CCF and also of investor confidence in our nation.

Creation was very impressed by the strength and the commitment our team has to the mission toward serving the under-banked population in Sri Lanka.

In a previous interview you have said that “Commercial Credit underwent a change of management in 2009, which marked the beginning of a new era for the company.  We have grown our worth from Rs. 1 billion in 2009 to Rs. 10 billion today”.  Finally, what are the three things related to the CCF that you would like to change?

I want to leave a legacy of transparency and also of high ethics within company. CCF should be known of its high values whether locally or internationally, with strong social and sustainable impact, a bank that is concerned with our nations well being, our younger generation and the environment.

We want to build a long lasting, sustainable relationships with everybody who comes into contact with us through a win-win thinking. 

I also believe that learning is the single most powerful investment we can ever make in our life, so we are ready to learn from our international partners and also from every individual customer in order to set benchmarks for other financial institutions to follow.