Arosha Liyanaarachchi, Nations Trust Bank’s Senior Vice President – Commercial Banking, explains the bank’s vision to transform the country’s small and medium enterprise (SME) sector. It is doing this with digital technology, cutting edge banking solutions, and advisory services, including matchmaking with large corporates, and unlocking export markets.
For some time now, Nations Trust Bank has positioned itself as a bank that is focusing on SMEs. Can you tell us over the last few years how this SME strategy has evolved?
The SME sector is often overlooked but adds tremendous value to the economy, or maybe even the engine that drives the economy. SME businesses account for a major share of the country’s GDP. There are approximately 1.2 million SME businesses and they employ over three million people or 70% of the working population. SMEs generate more than 30% of industrial output and account for over 20% of value-added exports. As a responsible financial intermediary, Nations Trust Bank has embraced its duty to support the SME sector and partner them in their growth journey.
Our goal is to divert capital to SME businesses and grow them to the next level and elevate the entire economy to a whole new plane, thereby fulfilling a social obligation that banks have to enable economic stability and growth. Our approach with any small and medium business is long term and holistic. We at Nations Trust Bank are proud to be associated with SME businesses, and partnering them throughout their growth cycles and grooming them to evolve into bigger and better enterprises is a remarkable experience. We do not just offer plain vanilla, collateral-backed loans, we have a suite of products tailored to their needs, and we also provide advisory services. In short, Nations Trust Bank’s focus revolves around transforming SMEs into economic power houses that employ more people and generate higher economic value. The SME component of our banking business is quite significant in terms of contribution to loan assets and profitability. At Nations Trust Bank, we are committed to helping SMEs grow in domestic as well as in international markets with digital technology along with adoption of best practices. We have assumed the role of matchmaker, linking SMEs with larger corporates, and helping them gain access to global value chains and export markets.
Economic downturns hit SMEs hardest. How is Nations Trust Bank helping SMEs navigate this crisis and find growth beyond?
The unfolding economic downturn triggered by the Covid19 outbreak since early 2020 has disrupted economies the world over. And everywhere, SMEs are the first casualties and the hardest hit too. We decided to take a step back and evaluate the situation when the global pandemic broke out, and Sri Lanka had to lock down for nearly two months to prevent the virus from spreading. We trained our people, especially our credit officers, in dealing with customers in uncertain times and how best to structure financial products for unique industry-specific needs. We constantly engage our SME clients. While supporting them with their immediate concerns, we firmly encourage them to take a long term view: we advise them on a range of subjects from improving financial management and operational efficiencies to related diversification, adopting digital processes, sustainability, and planning for growth through seamless succession and with build-up of capital. A perennial problem confronts The SME sector: they are underserved by the banking sector. The reasons for this are many, including the lack of proper financial records and business plans, but the heart of the matter is that few SMEs are bankable.
At Nations Trust Bank, our goal is to make SMEs bankable. With that in mind, we designed a purposeful range of products and services to help them at every stage of their life cycle, particularly during the unfolding pandemic, the worst global crisis since the Second World War. While we gave borrowers relief under the Central Bank’s re-financed credit stimulus, we launched our own concessionary credit scheme called Nation’s Diriya and disbursed more than Rs20 billion. Apart from that, we have partnered with FMO on a $40 million loan arrangement to provide SME support.
credit stimulus, we launched our own concessionary credit scheme called Nation’s Diriya and disbursed more than Rs20 billion. Apart from that, we have partnered with FMO on a $40 million loan arrangement to provide SME support.
What is your outlook for the SME sector?
The banking regulator believes we will have 12% credit growth, and I think SMEs will lag behind initially due to the impacts from Covid-19, the lockdowns and movement restrictions. If we can prevent another wave, contain the pandemic, and the vaccination programme rolls out successfully, economic activity and credit growth could pick up towards the end of the year. I expect SME credit growth would pick up to double digits by 2022 as the economy recovers and development of local businesses in line with import substitutions and gradual shift to a manufacturing economy Beyond that is a new age. We always tell our SME clients that post-pandemic consumers will be quite different to the post-Covid consumer. Covid-19 has irreversibly altered the way people consume and do business. Sales, collections, and payments will increasingly happen online. SMEs need to be sensitive to those things, and we can help them unlock opportunities.
When it comes to improving bankability, digital technology is a great enabler, and we help businesses unlock potential. We support SME clients to adopt digital technology for greater efficiencies, cost management and generate data for better decision making, and better data leads to better credit scores. We have a state-of-the-art digital banking platform that SME clients can use for faster and more efficient transactions, including a cash management system which I believe is a gamechanger product. We also have one of the largest credit card merchant networks in the country that will benefit SMEs in trading and services because it helps build a database.
We have a suite of cash management products and services designed to help businesses become strategic and more effective with their working capital and liquidity management. We can give SMEs greater visibility and control over their local and overseas payments while streamlining both paper and digital payments locally and across borders with Nations Direct Enterprise, an internet banking solution developed to meet specific client needs. Our liquidity solutions aim to help businesses enhance surplus cash, increase efficiencies across business and build a data base of all financial activities where financial information can be extracted with ease of convenience. The best part is that companies can now integrate their ERP systems with our digital banking services.
When it comes to improving bankability, digital technology is a great enabler, and we help businesses unlock potential