Softlogic Finance in $10 m deal with FMO

Softlogic Finance is pleased to announce that it has reached an agreement with the Dutch development bank FMO, for a funding facility of USD 10 million. The facility will enable financing of the important SME segment of the market. Softlogic Finance is one of the few non banking financial institutions in Sri Lanka to obtain foreign funding from a Development Finance Institution (DFI) which is a reflection of the stability, track record and immense growth potential of the company. DFI’s that lend in developing markets such as Sri Lanka require local lending institutions to maintain impeccable operating standards and adopt international best practices in order to secure funding.

The signing ceremony for the USD six million, senior secured term facility of the first phase took place in Colombo on 30 November 2012. The purpose of this senior secured term facility is to provide long term funding to boost Softlogic Finance’s lending portfolio further in a bid to meet the company’s strategic goals. The second phase, which is a subordinated term facility with the option to convert to equity, will witness FMO releasing a tranche of USD four million. This facility will be used to enhance tier two capital to the company and concurrently to grow the lending portfolio. The tenor period for the entire loan amount of USD 10 million is five years.  

Striving for the growth and competitiveness of the Small and Medium Enterprise (SME) sector, Sri Lanka has often been identified as imperative in order to provide more employment, bridge regional growth disparities, and ensure that post-war growth is inclusive and widespread. Several issues continue to hamper the faster growth of the Sri Lankan SME sector; particularly the difficult access to finance. Softlogic Finance has specialist knowledge and expertise in the SME sector, and this funding line will be utilized to develop business with customers who require financial assistance, to build their businesses and improve their livelihoods.

Headquartered at The Hague in the Netherlands, FMO is a Dutch development bank that finances companies, projects and financial institutions from developing and emerging markets. It believes that entrepreneurship is vital to create sustainable economic growth and to improve quality of life, and it specialises in sectors where the contribution can have the highest long-term impact such as financial institutions, energy and agribusiness, and food and water. Commenting at the signing, Manager Financial Institutions Asia of FMO Tony Bakels, said “We are very pleased to commence a relationship with Softlogic Finance who focus strongly on the SME sector, and will also be looking to extend further cooperation with the Softlogic group. We feel that post conflict Sri Lanka has enormous growth potential and FMO is keen to promote its mandate to develop business that in the final analysis will contribute to sustainable growth.”

Softlogic Finance Chairman Ashok Pathirage commented, “We are delighted to commence this relationship with FMO and are privileged to be counted amongst the few financial institutions that match their lending profile. Sri Lanka needs to develop and uplift her SME’s to achieve inclusive growth and Softlogic Finance with its network and expertise will contribute their part. The Central Bank is urging local companies to raise capital in foreign markets and we are optimistic that this deal could act as a catalyst in obtaining similar further funding from international markets, in line with government initiatives and budget proposals.”

Softlogic Finance is a Licensed Finance Company under the Finance Business Act No. 42  of  2011  as  well  as  a  Specialised  Leasing Company,  licensed by the Central Bank of Sri Lanka under the  Finance Leasing Act No. 56 of 2000. Further, the Company became a public listed company by way of offer for sale of shares in December 2008. Softlogic Finance provides finance leasing and hire purchase facilities and accepts fixed deposits and savings, personal finance, business finance and gold loans through a network of 17 branches that are located all round Sri Lanka, supplemented with 24 Gold loan centres and marketing offices in Softlogic retail showrooms.  Softlogic Finance is part of the Softlogic group that is one of Sri Lanka’s most diversified and fastest-growing conglomerates, with interests in healthcare, retail, ICT, leisure, automobiles and financial services. Softlogic Finance is rated BBB-/P3 rating from RAM Rating with a stable outlook.