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Extends
US$ 10 m support package including investing in 20%
equity
By
Nizla Naizer
Lanka Orix Leasing (LOLC Group) has partnered
with Dutch bank FMO to better serve the country’s
microfinance market, estimated to be worth over Rs.
50 billion.
The move follows LOLC launching its newest venture,
LOLC Micro Finance Company in partnership with FMO (The
Netherlands Development Finance Company).
According to LOLC Micro Finance’s CEO, Ravi Tissera,
LOLC has been conducting their micro-financing operations
through the parent company for the last five years;
but the growing need for formal micro-financing systems
and the interest of the Dutch Bank to venture into the
micro finance market in Sri Lanka with LOLC, compelled
the creation of the new company.
Speaking at a media briefing on the launch of the new
company yesterday, FMO’s Senior Investment Officer
for Asia, Arno De Vette said, “There is a huge
potential in the market where we can give access to
finance for people who have no access to finance. And
we are proud to be associated with LOLC in this venture.”
This is the first time in Sri Lanka that a micro-financing
company will be established with foreign equity with
the Dutch company owning 20% of the shares. FMO’s
package of US$ 10 million includes US$ 2m in equity,
a convertible loan of US$ 1.5m and a senior loan of
USD 6.5m. FMO, which is 70% government owned and is
one of the largest bilateral investors in Europe have
also pledged to provide technical training and capacity
building. LOLC holds the rest of the shares and will
conduct their operations through a network of offices
in rural areas and agreements with Lanka IOC and the
SL Post which will enable the rural dweller to apply
for micro-finance through these offices.
LOLC Chairperson, Rohini Nanayakkara stated that LOLC
commenced 28 years ago with the intention of economically
developing Sri Lanka, by catering to the needs of the
small and medium sector in rural and agriculture driven
areas. “Most of these individuals depend on their
existence by carrying out small enterprises where the
main asset is their labour,” she pointed out,
“Therefore,
the banks consider them ‘unbankable’ and they
look for credit from informal means outside the banking
sector.”
She went on to say that the new company will effectively
cater to that need and make obtaining finance to the
small businessman, easy and hassle free.
LOLC’s 23 microfinance branches and 14 LIOC service
centers will be expanded with their agreement with SL
Post. LOLC Micro Finance currently has around 20,000
customers and expects to have approximately 100,000
by the year 2010.
LOLC is the first financing company to tie up with Sri
Lanka Post Office to provide micro financing facilities
through an agreement signed on October 9. “This
makes LOLC’s micro finance facilities available
in over 45 post offices across the island and gives
more access to the rural entrepreneur,” Tissera
explained. “We also collaborate with USAID and
GTZ and have been providing financial services to post
conflict areas in the Eastern province.”
He said that LOLC Micro Finance Company’s business
plan would take a ‘Credit Plus’ approach where
even after supplying the loan, LOLC would improve the
skills of the entrepreneur and community development.
“The key areas we focus on are agriculture and
dairy, skills development and small business loans.”
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