Fall of LTTE and interest rates biggest line up for SL in 2009

By Deepal V. Perera

In the wake of the Sri Lankan Army liberating Kilinochchi from LTTE after ten years under siege, a leading CEO said that the potential fall of the LTTE and the indirectly linked fall of interest rates are two significant events and trends that could star in the New Year and ones which would impact positively on the economy.
Lanka Orix Leasing Company PLC, Group Managing Director/CEO Kapila Jayawardena told Daily FT that in 2009, interest rates are expected to fall during the year due to the government injecting money into the economy and bringing down the reserve ratio by the Central Bank."The benefits have already started to show with the inflation rate now experiencing a downwards trend and the end result will be that Central Bank will be able to bring down interest rates. It will stimulate the economy like dropping an oil drop to an engine. Therefore people will able to borrow at lower rates, thereby increasing more business opportunities in the economy" he said.

Speaking on an increased number of people falling into difficulties after losing their money in dubious institutions and how that will reflect other financial institutions, Mr. Jayawardena said that the illegal deposits crisis has brought more business to the those institutions that are registered under the Central Bank.

"Ever since the Sakvithi and the recent Golden Key crisis erupted, we are now experiencing increased number of deposits than before, as more and more people are now understand the risks that they face when they deposit their money with an unauthorized institution or individual. The number one rule that the people should keep in mind before investing their money is that they should not risk capital for the interest. After the Golden Key fiasco, people now looking for the qualities such as Fitch Ratings, solid track records and other measurements in the financial market" he said.

Highlighting the LOLC's performance last year and company's expectations for the year 2009, Mr. Jayawardena told Daily FT that in the last year, 2008, the company laid its foundations to become one of the best financial conglomerates in the country. "For that, we obtained the approval from the Central Bank to accept deposits from the public and to maintain accounts. Thus the main focus was to attract foreign remittances from people working abroad. It was remarkable to see that after just three to four months of operations, we managed to attract foreign currency worth more than Rs.100 million in equity value" the CEO said. According to LOLC, last year was also more significant due to the fact that the company received foreign funding valued at Rs.3 billion to expand its services.
In the area of micro financing, the company reached 20% equity partnership with the Netherlands Development Finance Company (FMO) which is the international development bank of the Netherlands. This was considered as a land mark event in the history of the Sri Lankan finance industry as it is, according to LOLC, the first time that a private sector local micro finance entity was set up with foreign equity. LOLC's ratings were upgraded by the Fitch Rating system by one notch to 'A' status which is considered as the only upgrade seen in a major financial institution in the country. During the year, LOLC also acquired 98% stake of the Commercial Leasing Company, bringing synergy into the company and becoming a leasing company with the largest portfolio in Sri Lanka. In the area of deposits, the CEO stated "We managed to double our deposit base to Rs.4.5 billion over the past 12 months. In terms of earnings for the six months ending September last year, the group income increased by 76% to Rs.4.6 billion and profits after tax increased by 55% to Rs.275 million". Mr. Jayawardena said that 2009 is going to be the year that really helps the company to shape itself in becoming a fully fledged financial conglomerate in the country.
