Registered financial bodies stable:

Finance industry shows steady growth

Charumini de Silva

Sri Lanka's finance industry has shown steady growth. It grew by 3.8 percent in the first quarter of 2009, with an economic growth rate of 1.5 percent.

The lending credit growth slowed down in the first quarter and there is an increase in the non-performing loans.

At present all registered financial institutions are in a stable position to cope with a substantial capital, an official of the CBSL told Daily News Business.

"Due to the global economic downturn, there is an economic slowdown in the country, but as Sri Lanka has a growing economy we will recover soon. With the ushering of peace there is an expansion in all sectors of the economy. As a result, the Central Bank of Sri Lanka (CBSL), expects an economic growth of 4.5 percent in 2009."

All development projects that are under construction in the Northern and Eastern provinces will add more importance to the country's economic growth and we hope to open banking institutions there, the official said.

At present the finance industry is facing the challenge of reviving the growth of credit and with the development programs the situation will improve.

As development activities require machinery and equipment, there will be a big demand for leasing and finance institutions in the Northern and Eastern provinces.

The CBSL expects to introduce a new Finance Act, to strengthen the current regulations in the finance industry. The new law will restrict all unauthorized financial institutions.

By strengthening the laws in the finance industry, the public will have more confidence in the investments and that will enhance deposits.

Meanwhile, a media report yesterday stated that the Central Bank of Sri Lanka, which regulates Registered Finance Companies in Sri Lanka, has accepted in principle a proposal made by the Securities and Exchange Commission of Sri Lanka (SEC) to list Registered Finance Companies in the Colombo Stock Exchange.

According to the Media report, Director General of the SEC Channa de Silva said Sri Lanka's Registered Finance Companies mobilized a substantial amount of savings in the country and this proposal is a move to increase the level of public scrutiny, accountability and transparency, he said.

Listing on the Colombo Stock Exchange would enable these institutions to derive a wide range of benefits including improved visibility, enhancement of brand image and access to raise substantial capital.

By obtaining a listing, the financial reporting and public disclosure levels of these institutions would be monitored by the Colombo Stock Exchange and the Securities and Exchange Commission in addition to the Central Bank's present regulatory scrutiny on operations, it said.

The proposal to list the Registered Finance Companies would undoubtedly be a timely measure to further strengthen and enhance public confidence in finance entities, in the wake of the recent financial scandals which currently led to the decline of public confidence, the statement by the SEC said.