Sri Lanka’s state-controlled pension fund, Employees’ Provident Fund (EPF) is believed to have made a substantial investment in Sri Lanka’s Cargills Agriculture and Commercial Bank (CACB), the yet to be launched greenfield banking unit of Cargills group, Mirror Business learns.

According to informed sources, the EPF is believed to have made Rs.550 million investment in CACB to acquire a10 percent stake with a director board seat.

However, when contacted CACB’s CEO Harris Premaratne neither confirmed nor denied EPF’s move and declined to comment on the matter urging that he was not in a position to disclose anything.

Officials representing EPF or Central Bank were not available for comment.

World Bank’s private sector investment arm, International Finance Corporation (IFC) and DEG, a unit of German state development bank KfW, announced a few months back that they were making investments in CACB, acquiring 10 percent each.

According to IFC’s website, the entity was expected to a make an equity investment of US $ 3.84 million to acquire 10 percent stake of CACB, which would amount to 44 million shares of the bank’s initial share capital and US $ 7 million senior loan to support the bank’s debt funding requirements. When contacted, IFC Country Director, Adam Sack, told Mirror Business that IFC is currently maintaining an investment portfolio of about US $ 200 million in the country, and has investments in Sri Lankan banks.

“It is encouraging to see EPF believing in the future potential of Cargills Bank and making investment commitments alongside IFC,” he said.

In September 2011, the Central Bank of Sri Lanka granted CACB with provisional approval to set up banking operations subject to fulfillment of routine terms and conditions.The bank is expected to set up significant operations in the underserved North and East region and increase access to finance to micro, small and medium enterprises (MSMEs). It is further expected that CACB will utilize the countrywide supermarket chain of its parent company to expand its presence.

The Sri Lankan government has sizeable investments in almost every commercial bank in the country—including government nominees as board members— primarily though EPF and several other state-owned entities.

Some analysts, good governance activists and opposition party legislators have pointed out at the possible conflict of interest situations arising from such investments by EPF, with the Central Bank, under which EPF operates, being the banking regulator.