Sri Lanka’s recent economic performance has been better than expected. Its seven percent annual growth in recent years has boosted the economy out of the doldrums, prompted by a credit crisis, which followed the country’s civil war in the mid-2000s. Now the economy is booming, with one of the highest growth rates in Asia, despite headwinds from market turbulence in the emerging sector, as well as climatic shocks.
As such, Sri Lanka’s bank credit is estimated to grow 14 percent in 2014 and the outlook for the local banking sector is stable. This is due to strong fiscal policy and a recent surge in banks’ loan books and customer numbers. A particularly strong performer is People’s Bank, a state-owned commercial bank headquartered in Colombo, Sri Lanka’s capital.
Sri Lanka’s bank credit is estimated to grow 14 percent in 2014 and the outlook for the local banking sector is stable
With 738 branches and service centres located across the island and more than 10,000 employees, People’s Bank is one of the largest institutions in the country. With more than 13 million customers – the largest customer base of any commercial banking entity in Sri Lanka – it has grown exponentially. The bank has continued to enhance its banking activities and grow its business portfolio in response to the country’s economic growth.
A key part of this growth has been the bank’s focus on accommodating a broad base of the Sri Lankan public, which speaks several different languages and has varying levels of wealth. To this end, the firm has launched accounts that suit various needs, such as ‘Sisu Udana’ for students, ‘Yes’ for the youth, ‘Vanitha Wasana’ for ladies, ‘Parinatha’ for senior citizens, ‘Ethera Isura’ for foreign employees, ‘Aswenna’ for agri professionals and an investment savings account. Of particular note, People’s Bank has launched various loan schemes in addition to its advisory services that can help stimulate local wealth and the development of businesses.
Loan growth
This personalised service has been popular in recent years as the economy has improved and prompted ratings agencies to give a positive outlook for Sri Lankan loans. Moody’s looked at how creditworthiness will evolve over the next 12-18 months and said that it viewed the operating environment, asset quality, capital, funding, liquidity, profitability, efficiency and systemic support as stable.
The rating is good news for Sri Lanka, which is recovering from a balance of payments crisis, which led to a sharp rise in interest rates, a depreciation of the exchange rate and energy price hikes.The impressive loan book growth during the year 2013 in People’s Bank was due to some very strategic initiatives employed during the year with absolute focus on sustainable development cascading to regions around the country. The North gained intensity with People’s Bank strengthening operations and driving business growth in Northern Peninsula. This saw a significant number of entrepreneurial ventures being initiated especially in agriculture, dairy and fisheries which are the staple industries in this part of the country. The Bank began rolling out regional development facilities at concessionary interest rates and relaxed security requirements to support entrepreneurs and industries in the region. Srikanth Vadlamani, Vice President and Senior Analyst at Moody’s said in a statement, adding that the ‘stable outlook for the Sri Lankan banking system is also consistent with our stable outlook on the Sri Lankan government’s B1 rating’.
Strengthening the economy
This comes down to the authorities investing in a pipeline of infrastructure projects, which are expected to boost economic growth, together with an accommodative monetary policy. Fitch ratings suggested that such an environment would prompt loan growth to rebound and asset quality to stabilise.
Essentially, this is why People’s Bank has seen a growing interest in loan products (see Fig. 1) and its scheme offerings for SMEs. This ties in perfectly with the firm’s overarching goal to be the bank “for the aspiring people in Sri Lanka, empowering people to become value creating, competitive and self-reliant”.
Having one of the largest ATM networks in Sri Lanka, along with offering mobile and e-banking, has helped grow People’s Bank’s customer base and seen it retain profit growth in a challenging economic environment. To this end, People’s Bank has contributed greatly to the country’s financial development, as it endeavours to continue in setting high socioeconomic goals that will make Sri Lanka a financial hub by 2016.
