CDB gets first foreign funding of $ 6 m from Belgian fund
Monday, 21 October 2013 00:03
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Citizens Development Business Finance PLC (CDB) in a breakthrough transaction for itself has acquired the first foreign funding line worth $ 6 million (around Rs. 780 million) from a multilateral agency.
CDB said it obtained the funding line from Belgian Investment Company for Developing Countries (BIO) based in Brussels, Belgium. The funding line comes with tenure of four years and has been fully hedged against any exchange rate fluctuations on a fixed interest rate.
This funding line has been offered by BIO based on a comprehensive initial field survey. CDB said apart from the financial fundamentals and governance structures, the key criteria considered by the BIO in selecting CDB included its urban funding, rural lending business model leading to being a net lender to the rural economy and the base of the pyramid focus lending framework contributing to inclusive economic growth.
CDB Managing Director and CEO Mahesh Nanayakkara said: “We are extremely happy for the opportunity to work with BIO and we firmly believe that we could convert this first step to be a strong long term partnership with BIO in the future. Apart from having access to a new funding source which will strengthen our capacity, we are also happy that CDB has been exposed to an exhaustive due diligence process by BIO in considering this facility and also will be able to contribute in our own way for the macro framework set in encouraging foreign funding to support post war accelerated economic development in Sri Lanka.”
CDB’s Executive Director/COO and Head of Corporate Finance Roshan Abeygoonewardena said that the BIO deal is another important milestone for CDB in expanding the bank’s debt funding portfolio to complement deposits and savings.
“We have adopted a focused strategy in developing a medium to long term debt funding portfolio mainly contributing in strengthening our asset liability maturity management process. This breakthrough transaction will be a definite boost to our efforts that was up to now consisting of local funding,” he said.
“The entire process including structuring, negotiating and hedging arrangements have been handled by CDB’s Corporate Finance Division and so far the Division has finalised Rs. 4.2 billion worth of debt funding for CDB,” Abeygoonewardena added.
The Currency Exchange Fund (TCX) based in Amsterdam hedged the currency risk of BIO, who decided to underwrite a local currency loan for CDB. BIO is a shareholder of the fund since 2007.
Jerome Pirouz who partnered with BIO to structure the loan said: “We have been actively focused on Sri Lanka for the last few years to promote local currency investments via our shareholders. We are pleased to see that FDI denominated in rupees is on the rise as our mandate is to facilitate the origination of local currency transactions and to hedge against the currency risk of our shareholders and their clients alike.”
BIO’s Financial Sector Director Carole Maman said: “As a development finance institution, BIO is committed to promoting financial inclusion to micro, small and medium sized entrepreneurs. We are very pleased to bring funding to a financial institution which is dedicated to offering a full range of financial services to rural and bottom of the pyramid clients in Sri Lanka. We appreciate the motivation and quality of CDB’s staff and management and its commitment to uplifting the skills and professional experience of its full staff.”
The mission of BIO is to support a strong private sector in developing and or emerging countries, to enable them to gain access to growth and sustainable development with the aim of achieving the country’s Millennium Development Goals.
BIO’s mission statement also includes to “improve and consolidate the local financial sector, facilitate access to long term financing for SMEs and micro entrepreneurs, play a pioneering role in underserved markets, act as a catalyst in capital mobilisation and offer innovative solutions/products”.
