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The LOLC Group yesterday effected a landmark syndication worth $ 247 million (nearly Rs. 36 billion) obtained by three of its key financial institutions
The official signing ceremony of the loan agreements took place in Colombo in the presence of the Finance Minister Ravi Karunanayake and Central Bank Governor Arjuna Mahendran, both of whom hailed LOLC Group for the significant achievement and urged others to follow suit.
Several ambassadors of the participant funding agencies and their representatives were also present.
A total of $ 247 million was received from multiple foreign funding partners and consists of three loans, demonstrating international investor confidence and reliability of the LOLC Group.
This funding amount represents a significant national milestone, as it includes the largest syndication of the Non-Bank Financial Institution sector in Sri Lanka. A $ 153.1 million loan was granted to Commercial Leasing and Finance PLC, through FMO (Financierings Maatschappij Ontwikkelingslanden), the Dutch Development Bank that provided the loan and acted as Mandated Lead Arranger and Facility Agent.
The loan consists of a senior loan of $ 39.2 million from FMO and a $ 113.9 million syndicated loan from 11 distinguished funding partners for Commercial Leasing & Finance PLC (CLC).
The 11 partners are: The OPEC fund for International Development (OFID) ($ 20 million); Finnfund – the Finnish Fund for Industrial Cooperation ($ 11 million); Proparco – a subsidiary of the Agence Française de Développement (AFD) ($ 10 million); BIO – the Belgian Investment Company for Developing Countries ($ 7 million); DEG – the German Investment and Development Corporation ($ 20 million); OeEB the Austrian Development Bank ($ 10 million); responsAbility Investments AG ($ 12 million); Blue Orchard Finance ($ 10.1 million); Symbiotics ($ 9.0 million) and Dutch Oikocredit ($ 5 million). ACTIAM also participated by providing $ 5 million via FMO’s fund structure.
Speaking on the occasion, FMO Chief Investment Officer Linda Broekhuizen said: “FMO is proud to act as Mandated Lead Arranger and Facility Agent of this $ 153 million facility. It is encouraging to see so much commitment to job creation and economic growth, both among the other lenders and CLC. FMO is particularly proud to lead this facility for the LOLC Group, with which we have a long lasting relationship for more than 25 years. LOLC Group’s efforts to strengthen small businesses and entrepreneurship in Sri Lanka is an important basis for sustainable economic development and lasting improvement of people’s living conditions in the country.”
In addition to the syndicated loan transaction, FMO – in partnership with other lenders in the syndicate – is committed to supporting CLC with a tailored technical assistance program to further strengthen CLC’s operation standards. The technical assistance includes capacity building in the area of Asset and Liability Management, environmental, social and governance standards, client protection principles and a management development program focused on leadership and skill training for employees.
LOLC Finance PLC received a $ 69 million loan consisting of $ 30 million from the Asian Development Bank (ADB) and a $ 39 million syndicated loan from prominent Middle Eastern banks. Transcending business, this is also a symbolic moment in multilateral relations, as this is the first syndicated loan from a consortium of Middle Eastern banks to the NBFI sector Sri Lanka.
The ADB syndication of $ 69 million to LOLC Finance PLC is structured in two tranches: Tranche A is for a period of seven years and has been funded by ADB; and Tranche B is for a period of 3 years and has been funded by Emirates NBD Bank, Bank Muscat, First Gulf Bank, National Bank of Oman and Rakbank. ADB has acted as a Lender of Record for both the tranches, with Bank Muscat and First Gulf Bank as the Mandated Lead Arrangers for Tranche B, while Dubai Based Investment Bank, Alpen Capital ME Ltd. acted as the financial advisor.
LOLC Micro Credit Ltd., the largest microfinance company in the country, received a USD 25 million senior loan from ADB, making it the single-largest loan received by the company in the present financial year.
In addition to the loan transaction, ADB will also provide a technical assistance package to LOLC Micro Credit Ltd., and LOLC Finance PLC, comprising mobile banking support and the development of environmental and social management systems.
Over the years, these programs have played a vital role, supplementing funding assistance by providing LOLC with the training in the technology and procedures required to maintain their standing at the top level of the Sri Lankan finance industry.
“ADB is very pleased to partner with LOMC and LOLC Finance to provide long-term funding to micro-entrepreneurs and SMEs – critical segments of the Sri Lankan economy. The ADB loans build upon our relationship with the LOLC Group, which was initiated with a loan in 2007. It also complements other funding that ADB has done recently to support growth of the private financial sector in Sri Lanka. In addition to senior loans, ADB partnered with a consortium of leading Middle Eastern Banks to provide a B loan to LOLC Finance to meet their expanding needs,” said Christine Engstrom, Director for Financial Institutions at ADB’s Private Sector Operations Department.
Finance Minister Karunanayake said: “On behalf of the Government of Sri Lanka, I would like to thank the overseas partners in this landmark transaction for placing their confidence in the LOLC Group. This is a proud occasion not just for the LOLC Group but for the country as a whole. These loans will greatly assist the macroeconomic environment, thereby restoring the confidence, stability and growth required as Sri Lanka is entering a new chapter in its economic development and we are optimistic that more investor interest of this magnitude will further fuel the nation’s progress.
“I would like to commend LOLC for tirelessly assisting in the development of the SME and Micro Segment activities, and for its success in securing this funding. The most efficient economic policies cannot completely eradicate uncertainties that a country faces, as borrowings from domestic and international markets are a necessity for economic progress. The government is making a strong effort to bridge the financial deficit and drive public finances on a sustainable path, and FMO, ADB and its consortium of partners need to be recognised for the great role they play in transforming the nation’s future.”
Commemorating this landmark syndication, the LOLC Group Managing Director Kapila Jayawardena said: “We are pleased to be the recipients of near a quarter billion dollars by renowned Development Financial Institutions (DFIs) around the world. The group has one if not the largest array of international funding partners. These institutions consider LOLC Group as their preferred conduit in achieving their development and commercial goals. Over the years these partnerships have expanded and strengthened and contribution extends beyond funding.
“Our foreign partners have offered us invaluable assistance ranging from capacity building to exposure to global standards over the years, which has enabled us to achieve operational excellence offering the competitive edge. With such a strong platform as the long-lasting relationships we have created with the funders, I hope to see our Group harness our strengths and further promote our vision, especially in the micro and SME sector; inclusive, sustainable growth and flourishing prosperity for all Sri Lankans.”
