ISSN: 1391 - 0531
Sunday December 2, 2007
Vol. 42 - No 27
Financial Times  

Sanasa plans to raise capital requirements thro’ village-level movement

Sanasa Development Bank (SDB), like many other banks, has to raise its capital base in line with Central Bank (CB) regulations and is planning to achieve this through several equity programmes through the SANASA movement. “With an equity base of Rs 681 million, SDB has to increase its existing share capital to Rs 0.9 billion by 2008 and reach an equity base of Rs 1.5 billion by 2009. To achieve this, SDB has several equity programmes planned via the SANASA movement, foreign Micro Finance Institutions (MFI) and an investment fund to reach the required minimum capital requirement by the stated CB deadline of 2009. However, these equity infusions are subject to regulatory clearances,” said a statement issued by Fitch Ratings Lanka in a rating announcement.

Fitch said it has assigned a 'BB-(lka)' (BB minus(lka)) National Long-term rating to Sanasa Development Bank Ltd (SDB) with the outlook being stable. The rating reflects the bank's relatively good profitability and asset quality, albeit constrained by its low capitalisation, the challenges in meeting the minimum capital requirement set by the CB and inherent risk embedded in the MFI segment.

SDB is predominantly involved in MFI based lending (representing 41.1% of its total loans at 2006). Housing loans and vehicle leases accounted for 27.6% and 17.9% respectively at 2006, while pawn-broking loans accounted for 13.4%. SDB's loan growth in 2006 was mainly driven by housing loans, which helped SDB maintain a high loan growth of 50% in 2006.

Fitch said SDB's asset quality has steadily improved due to loan growth and NPL recovery. SDB is a licensed specialised bank established as the apex credit institution of the Thrift and Credit Cooperative Movement (SANASA).


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