CIFL empowers SMEs

By Cheranka Mendis

Small and Medium Enterprises (SMEs) are said to be silent drivers of the local economy. Too many to be numbered and listed, data shows that the business contains more than 20,000 such small institutions within Sri Lanka. The sector is recognised as a 70% contributor to the country’s GDP, which in money terms amounts to US$ 30 billion or more. 

Central Investment and Finance Limited (CIFL), which has been in existence for over 44 years, has its eyes and heart set on the SMEs and aims at developing them through the development of the sector.

Director and CEO Jayanth Wickremeratne told Daily FT that the company, which operates on three key focus areas – marketing, lending and audit – and backed by his 35 years of experience in banking and finance, is geared to introduce what is best for the almost-forgotten business entities in Sri Lanka.

The ‘Danavaruna’ scheme

New products are constantly being introduced to the market to help the SME community, Wickremeratne said. Their latest successful product, ‘Danavaruna,’ which he describes as a community-based development programme, is now offered within Colombo and the outskirts and aims at helping the cream of SMEs especially in the agricultural sector to rise above their present status. The project has so far been immensely successful. “We select the people for the ‘Danavaruna’ scheme through consultation of the head of village (grama sevaka) or the priests in the village religious compounds. Those under the programme are picked out as the most skilled and committed from the profession or the village,” Wickremeratne said.

The first batch, consisting of 40 persons, has received loans ranging from Rs. 25,000 to 50,000 on the basis of a team of three. The three in the group that receives the money act as collaterals. Up to now several such projects have been completed in most of the districts in Sri Lanka. CIFL will utilise its current network of branch and service centres in Jaffna, Kandy, Galle, Mahiyangana, Anuradhapura, Polonnaruwa, Kurunegala, Talawakelle and Gampaha to reach its target market.

“Those who come under ‘Danavaruna’ are the sectors that have not been the ‘picks’ of banks and other institutions; therefore the people who benefit through the programme are those who are not beneficiaries of Government or donor programmes, which are exploited by opportunistic individuals.”

District officials appointed by CIFL will disburse and recover loans. The only hindrance faced by the company is the lack of a large sum of funds to extend the programme on a larger scale. This, however is about to change, Wickremeratne said. With the company gearing up for its IPO next month, it would get sufficient funds to further drive the programme forward. “We want to develop villages, increase living standards and grow along with the community growth,” he asserted.

CIFL also offers a variety of other services, including fixed deposits, savings and lending products such as lease, hire purchase and loans, pawning and real estate.

The ‘Shathaka’ programme

Wickremeratne also touched on the ‘Shathaka’ programme, which was initiated a month ago, where CIFL lends Rs. 10,000 which has to be paid back within 100 days on a daily basis of Rs. 150. This service is offered to boutiques and other such small-scale entrepreneurs.

Under this newest product introduced to the industry, funds have already been disbursed in Pinwala, Panadura District, to a value of Rs. 300,000 and CIFL anticipates strong growth given the host of inquiries received. “The business development unit will develop more products and services for the SME sector. We are confident that this is the way forward,” he added.

He stated that among 36 finance companies in Sri Lanka, out of which only a few are large operators, CIFL fits into a medium and small scale finance company, as does the majority. Asked if the goal is to reach the big league, Wickremeratne said: “We cannot compete with them in the short-term; however, we want to create a niche market for SMEs and strive to be the best in what we do. As a finance company we want to be identified as a company with an outreach for SMEs. Towards that objective we would be a major player catering to the market and through that initiative we would be big in the industry within the next five years.”

Company expectations

“Statistics show that more than 50% of people in Sri Lankan live below the poverty line. What we want is the money which is generated within the village circulated there itself, rather than being brought to the city,” he asserted.

The financial institution, which has generated profit from inception, on average floats profits between Rs. 20 million to Rs. 30 million. The profit, even though slow, is steady, he said. The forecast for 2012 is Rs. 60 million, Wickremeratne said.

“We also have a real estate and leisure portfolio attached to the company. This we feel will really help the company move forward as these two areas, especially leisure and tourism, are expected to grow in leaps and bounds within the next two years.”

With Q1 recording healthy performance, the company anticipates revenue of Rs. 35 million, an almost 15% increase from the financial year 2009-2010. “We are certainly growing,” Wickremeratne asserted.

Factors hindering growth

The industry itself is improving and with the banking sector and financial regulatory focused on a low interest regime, and a stable one at that, growth as a whole would be inevitable, he affirmed. However, there are two main factors which are hindering the growth of the industry: Some finance companies do not follow ethical practices being too caught up in the competition and the lack of skilled personnel in the field are major discrepancies to the industry, he pointed out.

CIFL however has its plans and goals intact, aiming at becoming a leading investment company in Sri Lanka. With a well qualified Board of Directors experienced in diverse fields such as medicine, information technology, banking and finance, Wickremeratne with his able yet small team is all set to break down barriers and head towards better times with the SME sector in the forefront.