Commercial Bank continues dominance in SME space
The Commercial Bank of Ceylon is the largest lender to Sri Lanka’s Small and Medium Enterprise (SME) sector, which is today acknowledged as a key factor in achieving sustainable economic growth.
Over the years, the Bank, through various credit lines of international donor agencies, its own ‘Diribala’ credit line as well as various other initiatives has fostered and partnered the progress of a large number of SMES, in the drive to fully realize their potential.
In an interview with ‘Daily Mirror’, Commercial Bank’s Deputy General Manager (Personal Banking), Ms. Sandra Walgama spoke about the Bank’s strengths in the SME sector, new initiatives, sustainable approach to lending and more. Following are excerpts from the interview.
Q : In which year did Combank step into servicing the SME sector?
Commercial Bank officially recognized this product as far back as 1979. This is the time the economy really opened-up, and the World Bank provided low-cost funding. We were the pioneers in the World Bank initiative of having a dedicated credit line for the SMES. From 1979 onwards, we participated in every scheme that came to the bank relating to refinancing.
Q : What are the businesses that come under the SME category and what’s the maximum finance provided?
The Central Bank has defined what an SME is and the Bank follows that definition. The company requires registration, the entire package should not exceed Rs.250 million, and the audited sales turnover should be less than Rs.750 million. It can be for any business.
Q : What are Combank’s strengths and unique selling propositions to boost this segment?
As mentioned earlier, the Bank has been lending to SME’S since 1979 and possesses substantial experience in this arena. And we also have a wide network of branches totalling 266 at the moment. Our team at branches are well-trained to cater to this segment. The customers do not have to come to Colombo to obtain these services. Everything is done at branch level.
SME is more about project lending, where the future is predicted in connection with their repayment capacity. So, there is a need for project reports. Many borrowers are unable to produce clear project reports that would meet the Bank’s requirement. We visit and interview prospective borrowers and produce our own reports for internal evaluation.
Commercial Bank team work very closely with customers to understand their business, provide guidance, training and ultimately help them to build profitable and sustainable businesses. In the case of a family business, we also train them in succession planning. We take a very holistic approach. The partnership goes way beyond providing financial assistance.
There is also a separate SME scheme for women entrepreneurs, where loans are offered at concessionary rates and necessary training is provided.
Q : Potential SME entrepreneurs often find it difficult to obtain funding, as they struggle to meet the traditional criteria for loans. How has the Bank assisted them in this regard?
Some clients are unable to furnish collateral, which is generally required. We analyze the cash flow of the business and do a very close follow-up. If they are encountering problems to furnish collateral we do not insist on them. If the proposal has potential, the Bank together with the entrepreneur will draft a flexible financial plan and then provide the loan. Being the largest private Bank in Sri Lanka, Commercial Bank has the ability to take a calculated risk.
Q : Tell us about the bank’s presence in the North and East and its contribution to the SME sector in those regions?
Our growth in the North and East is quite substantial. We have about 18 branches in the North and about 10 in the East. In addition to that we have the mobile banking service called the ‘Bank on Wheels’ operating in these two regions. Through this facility we enter into the unbanked areas, to the inner-villages. We try to bring these entrepreneurs up to the SME level, from their current micro business position.
Q : In your view, how do SMES reflect on employment generation?
SMES are the backbone of the country’s economy. About 50% of the country’s Gross Domestic Product (GDP) is dependent on SMES. And of the registered businesses, 70% are SMES. As per the statistics, around 45% of the country’s employment is generated by this sector.
Q : To what extent has the bank utilized latest technology to serve SME customers?
Commercial Bank offers state of the art Online and Mobile Banking services to customers, together with a host of services for their convenience. We also have introduced the ‘Flash’ digital banking platform which allows investment, and basically facilitates the overall financial health through effective budgeting tools.
Q : Is there focus on start-up businesses by your bank?
The Bank has a different strategy for start up businesses under Micro Financing. We have our Agriculture and Micro Finance Officers (AMFOS) in all regions of the country. It’s a handholding exercise. The specialized officers visit the locations, analyze, understand potential businesses and start lending at a feasible and sustainable level. Over the years, we have seen them grow from micro to SME and even to corporate level. It’s quite amazing.
Q : Tell us about your Bank’s training and other support programmes for SMES?
We conduct Skill Development Programmes along with the Central Bank. The Bank has successfully conducted skill development programmes for over 6000 entrepreneurs over a period of 6 years. We do maintain a very close rapport with institutions such as the EDB, IDB, SEA, CEA and the ITI in order to extend necessary support for this sector. In the meantime, we are also currently focusing on supply chain financing, where the suppliers of our big corporate clients, who are generally SMES, could be financed with relatively low collateral.
Q : What progress has the Bank made in this sector so far?
We have experienced a year-on-year growth of around 14-15%.
This year, we will focus on offering a comprehensive solution encompassing all relevant areas of SME business to customers. We are trying to make it more productive with emphasis on streamlining of processes and centralizing evaluations etc. We are projecting a growth of around 20% this year for this sector.
Q : What are the new initiatives introduced by your bank to expand and strengthen SMES?
Having seen the need for a platform where the SME sector could be recognized, and catered to, Commercial Bank, for the first time in the country, formed such a platform named the ‘Combank Biz Club” recently. It is a platform that focuses on bringing SME customers together in order to create new business opportunities, and to provide them support beyond lending. Four tiers of membership– Premier, Platinum, Gold and Silver were created to enable the Bank to identify and support the specific requirements of different SME customers. At the moment we have approximately 3000 SME customers linked to this platform. The bank has also introduced a new loan scheme named ‘Biz Loans for SMES’ which is a dedicated product to meet financial requirements of Biz Club members.
Q : How has the success and growth of the SME portfolio been reflected in Combank’s overall growth?
The bank’s overall growth on the advances side is generally about 12% -15% now with SME is accounting for a substantial portion. Whilst the Bank is enjoying a steady growth momentum, the SME sector growth is little higher than the bank’s normal growth.
Q : Could you name one success story that personifies the impact of the bank’s SME sector efforts?
Yes. ‘C N Orchids’ is one of the many success stories. This is a woman entrepreneur who has been with us for more than ten years. At present, she exports orchids to the European market and her success is a good example of a productive business relationship between a business and the financing organization.
Q : Could you explain about Combank’s sustainable approach to lending?
We take ‘sustainability’ very seriously. A sustainability report is a must in connection to all our facilities. It has to prove that whatever we finance doesn’t hurt the environment. Also we ensure that we do not lend for the sake of lending, but do correct evaluations to lend at a sustainable level to ensure that the business owner can repay whilst maintaining their business.
We also look at the green aspect. We try to see how best we can finance and improve on the green aspect. “Green” projects are entitled for special subsidized rates and facilities.
Q : What are your medium and longterm projections for Sri Lanka’s SME sector?
SME will continue to be the backbone of our economy. The Bank has ambitious plans to increase its involvement in this sector and also to offer many more innovative solutions for customers. The Bank’s vision is to be the Most Preferred Bank in the country where SMES are concerned.