LOLC group’s finance firm becomes largest NBFI in the country

The recent merger of LOLC Micro Credit Ltd (LOMC) with LOLC Finance PLC (LOFC) has made the remaining entity, LOFC, effectively the largest non-bank financial institution in the country.

Earlier this year, the LOLC group, the parent of both LOMC and LOFC, sought the Central Bank approval to merge the two entities and receiving such approval concluded the merger on March 28, 2018, leaving LOFC as the remaining entity. 

“This strategic merger propels LOFC to the forefront of the industry as the largest non-bank financial institution (NBFI) in the country with a total assets base of Rs.212 billion and a lending book of Rs.152 billion. 

The joint profitability of the two entities considered as one as at December 2017 was Rs.3.3 billion (PBT),” the LOLC group said in a media communiqué. 

The diversity in the merged entity with its product and service offering as well as the strong financial support of its parent company and the large number of funding partners, is expected to empower LOFC to reach an industry-leading level of stability. 

“The high-yielding micro portfolio of LOMC aptly complements the SME book of LOFC, while LOFC’s ability to raise public deposits enables LOMC’s clientele to access the savings and FD products with the company. Furthermore, this strategic merger provides a successful model for the CBSL’s financial services sector consolidation plan.

The company’s wide customer base is poised to enjoy many benefits as a result of the merger. Indeed, the merged entity promises an innovative customer experience through traditional channels as well as through digital engagement in financial services with fin-tech solutions reaching grassroots level clientele,” the media communiqué said. 

Commenting on this formidable merger that has raised the profile of the financial services industry, Group Managing Director Kapila Jayawardena said, “We are delighted with this strategic merger between two of the LOLC group’s largest financial entities because we believe the joint synergies have optimised their individual strengths to create a truly influential industry leader.” 

“This new merged entity, which is effectively the largest NBFI in the country, is poised to achieve many historic milestones going ahead. The customers in the SME sector as well as the micro sector can expect a superior experience with the merged entity as they will have access to total financial solutions under LOFC, thereby placing the company on a strong growth trajectory. 

This dynamic merger is aligned to our group’s vision of making the LOLC group one of the most profitable conglomerates in Sri Lanka.” 

Commencing operations in 2004 as the first finance company under LOLC, LOFC is one of the largest finance companies registered under the Finance Companies Act regulated by the Central Bank of Sri Lanka. 

LOFC offers a wide range of financial services solutions spanning from loans and leases, fixed deposits and savings and foreign currency deposits and is also one of the prominent players in the Islamic finance space in the country, offering innovative solutions. 

LOFC has established a strong presence across the country with a footprint of 135 branches covering all strategic cities. 

The distribution model of the company leverages its experienced and strong sales and marketing team coupled with the branch network. 

Meanwhile, LOMC was formed in 2008 with the support of large bilateral and multilateral funding agencies like FMO and GTZ from its inception, extending funding as well as technical support for capacity building thereby developing the capabilities and the business model of LOMC in the microfinance business.

Backed by LOLC’s strong brand and financial stability, LOMC soon became the most sought-after financial solutions provider in the micro sector and at the time of merger served close to 500,000 micro clients as the largest micro credit company in Sri Lanka. 

LOMC was also the largest agriculture financier in the country and played a key role in rural development providing the much-needed finances for mechanisation and industrialisation in the micro sector, contributing positively to the improvement of the country’s GDP. 

The unique business practices of LOMC resulted in receiving several international accreditations, including certification by the SMART Campaign in Client Protection Principles (CPP), marking the company as the sole recipient in Sri Lanka of this accolade. The company was also used as a case study at the INSEAD Business School.  

“The merged entity, LOFC, embodies strength and stability with a wider client base and even stronger distribution network, holding the largest public deposit base within non-banking financial institutions complemented by the strong funding portfolio from foreign partners. 

The merged entity will also have broad business scalability with the different client segments. Aggressive growth is expected to be achieved by the new entity in terms of top line as well as profitability. 

The merged entity holds a special position within the LOLC group, with its rich history of strong growth and steady profitability. 

Buoyed by the success of the merger and its unique business model, it will provide the pivot to the group’s on-going regional expansion in microfinance in Myanmar, Cambodia, Pakistan and Indonesia. 

This model has already been replicated in several of these countries and will provide the necessary impetus to expand even further. 

The LOLC group holds ambitious plans to expand its regional and eventually global presence in microfinance by leveraging on its strong financial services model that can be projected in various countries as a low-cost and high-yield operation that is both sustainable and benefits communities from grassroots up,” the media communiqué said.