staff gets shares via IFC
The International Finance Corporation (IFC), a World Bank affiliate,
in a revolutionary move set to stimulate the Colombo bourse, has
offered its allotment of shares - in a proposed rights issue of
the Nations Trust Bank (NTB) - to members of the bank staff.
It is the first
time in Sri Lanka that staff at a bank or private company would
be owners in the institution they are working in. This step is in
line with IFC thinking to move out of projects that are well managed
and also promote share ownership among a larger section of the population,
according to IFC's country coordinator Sanjiva Senanayake.
a well managed bank and doesn't need our input anymore. So when
the rights offer came along we thought we could offer it to the
staff to enable them to become part-owners of the bank," he
said. IFC has a 15 percent stake in NTB.
NTB's board recently approved a Rs. 455 million rights issue of
35 million shares on a seven-for-10 basis to shareholders. Proceeds
from the rights issue will increase the bank's core capital to Rs.
1.1 billion from the current level of approximately Rs. 1 billion.
The rights issue would be traded at Rs. 13 per share against the
current market rate of Rs. 19.
that NTB staff is expected to take upto 1.5 million shares of IFC's
entitlement of some 5 million shares. The balance would be offered
to a reputed international investor, the IFC official said.
NTB's Director/CEO, said the bank's 300-plus staff including trainees
have all expressed an interest in buying into the rights issues
and would do so with their own funds without loans or other support
from the bank. "It is purely voluntary and out of their own
interest. Even the trainees are keen to buy shares," he said
adding that this was a good signal to the market in the march towards
a share-owning democracy.
staff members have expressed an interest in buying parcels of between
100 shares to 200,000 shares per individual. He said the bank has
done well in recent years with its non-performing loans (NPL) ratio
at less than six percent compared to the 10-12 percent average in
the banking sector.
The NTB CEO
also rejected a perception in the market that banks were making
huge profits during good times and bad times in the economy. "In
our case our spread is small and rates attractive. We have also
managed our NPLs well. On the other hand much of our profits come
from fee-based income and treasury operations."
The bank performed
extremely well in the first quarter of the current year with the
total business turnover growing to Rs. 548 million compared to Rs.
167 million in the first quarter of 2002. Deposits have reached
Rs. 5.3 billion and with the acquisition of Waldock Mackenzie in
2002, the asset base has increased to Rs. 16.6 billion. The steady
growth in business volumes has yielded a net profit of Rs 83.4 million
for the quarter. NTB, which has the exclusive franchise for the
American Express charge card, is planning to introduce it into the
market in July to the middle and upper segments of society. It would
be the third card in the market after Masters and Visa.
banking licence for Islamic banks under new Act
Islamic financial institutions will be able to get full commercial
banking licences under the amended Banking Act to be passed by parliament
Amendments to the Banking Act have been made to accommodate the
concept of Islamic banking, in which the definition of words such
as "deposits" and other words have been changed.
Ltd (AIL), one of the pioneering Islamic banking institutions in
Sri Lanka, hopes to widen its branch network and increase its product
range in the future, according to A.I. Marikar, Managing Director
of AIL. It now has branches in Pettah, Kandy and Kattankudy in the
Islamic finance market size in Sri Lanka, based on the extent of
their transactions with the public, could be around Rs. 25-30 billion.
Amana Investments will also issue credit cards once the banking
licence is given. AIL also plans to help Malawi to set up an Islamic
bank and has also received inquiries seeking support from South
Africa and the Maldives.
AIL, which has
nearly 9,000 customers and deposits of over Rs. 1.6 billion, presently
enjoys the status of a merchant bank. It accepts deposits but does
not pay interest.
do not need a specific licence to function nor do they need to maintain
a reserve in the Central Bank. Islamic banking institutions worldwide
grew 20 percent last year, helped by interest rate fluctuations
which encouraged many to move out of fixed interest rate investments
to equity financing.
due to the unstable environment in interest bearing instruments,"
said Afzal Yusuf, Assistant General Manager, AIL. "Today there
is massive interest rate volatility. Even in Sri Lanka the fixed
deposit interest rates are fluctuating."
He said Islamic
banks operate on the basis of equity funding, in which customers
are considered to be shareholders, and not just depositors. "Islamic
banking has been growing phenomenally worldwide and there's enormous
potential for it to grow further," said Marikar.
There have been
many inquiries from fund managers overseas about the status of Islamic
banking in Sri Lanka. "They want to spread their risks. They
don't want to have all their eggs in one basket," said Marikar.
People are moving
out of conventional banking because Islamic banking seems to be
more attractive as it is based on profit and loss sharing while
fulfilling the ethical obligations of Muslims.
nations are moving away from USA and Europe following the Western
campaign against terrorism and attacks against Arab states such
as Iraq. These funds are now being attracted by Islamic banks in
Far Eastern countries like Malaysia.
is great potential for the sector to grow. There's a large amount
of ethical funds available in the Middle-Eastern markets and several
other markets. With countries like India, Pakistan and Bangladesh
still not developed into established markets of Islamic banking,
Sri Lanka has an edge over them," Marikar said.
Marikar points out that this is a wonderful opportunity for Sri
Lanka with the island acting as a gateway to regional markets.
links with Bank Islam Malaysia and Takaful Malaysia, Sri Lanka could
become a hub to launch Islamic banking into neighbouring countries
which have large Muslim populations," Marikar said.
The trend all
over the world is now towards more profit and loss sharing investments.
Marikar said this is one of the best ways to protect against interest
rates fluctuations. He strongly believes that Asia, and specially
Sri Lanka, should prepare itself to accommodate the funds that are
now flowing out of Western Europe, USA and other countries.
AIL made a post-tax
profit of Rs. 10 million for the period 2001/2002.
Amana Investments, started in 1996, has an issued share capital
of Rs. 500 million.
In the early days, the Central Bank was not in a position to issue
banking licences to institutions that were functioning as Islamic
finance institutions because Sri Lanka was not familiar with the
There were doubts
whether the Sri Lankan market would accept the new concept. Therefore,
the Central Bank agreed to let AIL function as a merchant bank.
Four years ago the Central Bank carried out an extensive audit on
AIL, which confirmed that Amana was fulfilling all requirements
and was well within the parameters set by the Central Bank.
New sustainability reporting awards
The ACCA Sri Lanka Branch is to shortly launch Sri Lanka's
first national Sustainability Reporting Awards, its new president
said. Ajith Tudawe said the governing body will be directly involved
with the Environmental Reporting Awards Scheme due to be held later
He said ACCA
continues to be a world leader in social and environmental accounting,
auditing and reporting and in the UK played a leading role in the
Global Sustainability Reporting Initiative with good links to governmental
to stand as the vanguard of efforts to encourage business, government,
the media and academia to recognise the impact on business performance
of sustainability issues.
Its ground breaking
awards scheme, which has recognised and promoted the best practice
in environment reporting since 1991, now covers wider sustainability
issues. During the year our governing body launched national sustainability
reporting awards in Australia, Hong Kong, Malaysia, Pakistan, Singapore
and the United States," he said at ACCA's recent annual sessions.
calls for report on Sathosa deal
Chandrika Kumaratunga has asked the cabinet to defer any decision
on the awarding of the tender for the Sathosa supermarket chain
until Commerce Minister Ravi Karunanayake submits a full report
on the process through which the sale is to be conducted, informed
They said the
president sent a note to the cabinet last week raising several issues
relating to the sale of a 40 percent stake in Sathosa Retail Ltd
and has asked for a comprehensive report from the minister.
has denied reports of lack of transparency in the tender process
which has been on since last November. Last month, the Ministry
called for amended financial bids from the five parties that submitted
offers in November, on the grounds that the value of the stake has
increased. Three of the original bidders have submitted amended
owners oppose Taj plans at Bentota
the traditional small villager versus big developer issue, a wealthy
group of boutique-type hoteliers are opposing plans by the Taj group
of hotels to build some 30 chalets on the beach at Bentota saying
it would ruin their business and the environment.
The group, individually
owning about 10 small, exclusive properties that have drawn the
rich and famous - even former Beatle Paul McCartney and his daughter
stayed at one of these villas about a year ago -, is furious that
the Taj is going to build on a stretch of beach that ostensibly
is a protected area.
lose everything if the Taj is given this strip. This green belt
is a reservation and a protected area," said S.M.A. Hameed,
spokesman for the group and owner of the exclusive Club Villa. The
area in question is a stretch of mangrove and beach about three
kilometres in length and lying between Saman Villas and the Taj
Exotica, and is right in front of the properties owned by the protestors.
include multinational Unilever (having a bungalow there) and Ajay
Zecha, son of billionaire hotelier Adrian Zecha who is pushing ahead
with plans to acquire or newly build his hotel chain across Sri
Lanka. They have all signed a letter of protest and sent it to Prime
Minister Ranil Wickremesinghe, urging him to call off the project.
Board of Investment
Chairman, Arjunna Mahendran, who met the group along with a representative
from the Taj group, was quoted as saying that the government was
keen on the Taj investment and requested the concerned parties to
agree to a compromise in which a passage to the beach from their
properties would be permitted. The group has rejected the proposal.
If the Taj goes
ahead with the construction, the chalets would obstruct an undisturbed
view of the beach for the older-established villas - some designed
by architect Geoffrey Bawa - and would result in lost business.
undisturbed beach view is the main selling point of these villas
boutique hotels and would seriously endanger the business,"
the letter to the PM said. The room rates at the luxurious properties
range from $150 per night to $400 per night and some of their clients
include film star Bo Derek, famous fashion designers, writers and
producers. "They are able to spend a comfortable holiday without
being disturbed," Hameed said, adding that, that's how McCartney
stayed at Bentota without being discovered.
owner of Taru Villas, said that they were told at the BOI meeting
that Tata group investment running into millions of dollars was
essential and the government was keen on this investment.
have joined the campaign and are raising concerns about the fate
of turtles - some very rare species - bird life and mangroves. "This
is a protected area and is preserved by the coastal conservation
department. I don't know how someone has been given permission to
build on this green belt," an from the Wildlife and Nature
Protection Society said. There are six species of turtle and 70
species of migratory birds.
too residents blocked efforts by the Taj - when it was building
the Exotica hotel in 1995 - to develop this land. Then Tourism Minister
S. Thondaman intervened at the request of residents and halted the
alerted to the latest move when government officials began visiting
the site about three weeks back. "We found some activity going
on and then discovered that the Taj was planning a fresh project
on the site," said Hameed, who noted that local authorities
have not allowed even a flag to be planted on this stretch.
"We have repeatedly asked the authorities to lease the land
essentially so that we could protect it and keep it development-free.
But we have been refused. We are still prepared to lease it and
preserve it for the benefit of the public," he added.
not opposed to development but you must be fair and equitable,"
Hameed said. The row of villas has a total of 60 rooms, accommodating
about 120 upmarket tourists and employs 130 locals. (FS)