Importance of rural financial market not recognized

Anuradha Kodagoda

Most of the economists, intellectuals and bankers in the country have not recognized the importance of the rural financial market in the country said Chairman, Lankaputhra Development Bank, A. Sarath de Silva.

“As a developing country Sri Lanka needs a steady rural financial market and at the time the Lankaputhra Bank was established the rural financial market operated informally and it was unnoticeable.

With the guidance of President Mahinda Rajapaksa, the Lankaputhra Development Bank was established specially targeting to serve the Small and Medium Enterprise sector in the country and to develop the small and medium entrepreneurs to compete internationally. The bank has disbursed almost Rs. 2.4 billion during the past three years which is a massive task for a state bank. The bank raised advances mainly for manufacturing, agriculture and fisheries which is 41.9 percent for manufacturing and 38.5 percent for agriculture and fisheries. The increase in advances between the years 2007 to 2008 was 46.1 percent,” he said.

“We have already set systems for risk mitigation in the bank and we are also trying to minimize the transaction costs.

We always introduce new technological methods to our customers and we are planning to implement the branchless banking system in the near future.

This system would be significantly cheaper and attractive compared to the traditional banking systems and we hope that these innovative technologies will reduce the transaction costs by 50 percent,” he said.

“Considering the regional focus of the bank, during the last year we merged with the Small and Medium Entrepreneurs Bank (SME Bank) to strengthen the capital base of the bank.

With the result of this merger the business environment during the last year was more conducive, attracting a significant growth in the approvals of loans and advances”, he said.

“We have already identified the business opportunities that are available in the Northern and the Eastern provinces. We have already set up a branch in Batticaloa and are planning to expand branches in some of the main cities in the Northern and the Eastern provinces,” Silva said.

“Having taken into consideration the rapid expansion, the bank has also proposed to launch a number of new products during this year, which include leasing, pawning and innovative product delivery mechanisms,” he said.