The Merchant Bank of Sri Lanka (MBSL) is planning to commit around Rs. 200 million to increase its lending to the rural economy in a bid to helping the government realise its goal of achieving equitable and inclusive growth. The bank’s chairman said the benefits of the present near-8 percent growth of the economy were not trickling down to the majority of the country’s citizens.


MBSL, owned by state-banking giant the Bank of Ceylon, engages primarily in Leasing and Hire Purchase, Trade Finance, Corporate Advisory Services, Capital Market Activities and Corporate Secretarial Services. It is perhaps more popularly indentified with some of the biggest and more successful initial public offerings in the country’s stock exchange in the recent past, totaling Rs. 5.75 billion.


But the bank is diversifying and is also focusing on providing collateral-free credit lines to rural entrepreneurs and businesses.


"The economy is said to be growing at near 8 percent. But where is this being reflected. The Western Province enjoys a lion’s share, what about the rest of the country and what of the people?," MBSL Chairman M. R. Shah, once a respected trade unionist in the banking sector, told The Island Financial Review.


He said it was pointless to speak of strong economic growth if rural communities did not enjoy its benefits. "The government realizes that there is a need to spread the country’s wealth outside the Western Province and it is doing much to facilitate this. However, the government cannot do this alone. The private sector too must get involved. While the attention is on large scale infrastructure development projects, steps have to be taken to enhance livelihood opportunities of the people of each and every province across the country," Shah said.


Earlier this year, MBSL launched a special credit line to rural entrepreneurs and SMEs without asking for collateral as security. "We start by lending in small amounts and we make sure the monies are used on what it was intended for. This way, our rural clients develop their livelihoods and the recovery rate so far has been 100 percent," Shah said.


MBSL has tied-up with Agro-Development Financial Services Ltd for the purpose of training rural entrepreneurs and monitoring their activities.


"When we started the scheme the board had approved Rs. 10 million for this purpose. But soon the allocation was increased to Rs. 100 million. To-date, we have disbursed loans amounting to Rs. 85 million. The Bank of Ceylon would shortly provide another Rs. 100," Shah said.


The bank has so far supported SMEs and livelihoods in the sectors of coconut plantations, fresh-water fisheries, dairy, agriculture.


"We see the rural sector as growth sector with huge potential. The majority of the people in rural Sri Lanka do not have the opportunity of dealing with banks and we will make an effort to provide this service country wide. We are continuing to identify the key sectors that need a little push for growth," Shah said.


MBSL’s turnover for 2010 was Rs. 2.99 billion, up nearly 28 percent from the previous year. After tax profits grew 114.5 percent to Rs. 492.3 million. Its asset base grew 22 percent to reach Rs. 14.4 billion while its lending portfolio grew 25 percent to Rs. 10.5 billion.


Renewing old alliance to boost Indian investment


The Merchant Bank of Sri Lanka is soon to re-energise an old alliance which could result in more investments flowing in from India.


The bank’s Chairman M. R. Shah said a partnership entered into in 2005 with State Bank of India Capital would be brought back to life with the attention of attracting Indian investments.


"We will renew the alliance shortly and we hope to channel private investments from India to some of the large infrastructure projects being carried out in the county, thus creating opportunities of private-public sector partnerships," Shah said.


Trade unions, goverment should talk more


M. R. Shah, a former President of the Ceylon Bank Employees’ Union (CBEU) which was respected for its non-partisan approach, said the country’s trade unions were the watchdogs of the country and that the government should appreciate their importance. At a time when trade union activism has heightened in the country, Shah called on the government and trade unions to engage in dialogue.


"You can never discount the service done to the country by trade unions. For example, it was the constant campaigning of the CBEU from President J. R. Jayewardena’s time up until Chandrika Bandaranaike Kumaratunga’s that prevented state banks from being privatized. Similarly, unions stand in the way of similar matters and injustices," Shah, who was a trade unionist for decades, now holding a top post in the public sector, said.


"The problem today is that there is not enough dialogue between the state, employers and the unions. There has to be content dialogue and engagement. Trade union activism must be taken in the right spirit and authorities must learn to listen," the Chairman of the Merchant Bank of Sri Lanka said.