March 5, 2021
By investing in The National Development Bank in Sri Lanka, Norfund aims to contribute to increased access to capital for SMEs and the unbanked in a country hard hit by Covid-19.
Sri Lanka is a lower middle-income country with a total population of 21.8 million.
Low usage of formal financial institutions
During the period 2010-2019, the Sri Lankan economy grew at an average 5.3 percent. Although a large number of adults have bank accounts, only 29 percent of adults in Sri Lanka have savings at formal financial institutions and just 17 percent have loans.
The COVID-19 crisis is believed to have triggered sharp jobs and earnings losses, and informal workers, about 70 percent of the workforce, are particularly vulnerable.
Serving millions of Sri Lankans with financial services
National Development Bank PLC (NDB) is a premier bank with 113 branches and over 150 ATMs and CRMs across the island, serving millions of Sri Lankans through a host of financial services.
During the COVID-19 pandemic, NDB has been in the forefront of efforts to ensure the resilience of the MSME sector and supporting the economic revival of the country.
Norfund to invest up to 9,99% in the bank
Today, NDB and Norfund announced that they have reached an agreement for Norfund to invest up to 9.99% in National Development Bank.
This is the first foreign equity placement agreement for NDB bank, and the investment will increase its foreign shareholding percentage to around 21%.
The investment comes at a time when international rating agencies have downgraded Sri Lanka’s credit rating. This shows that Norfund endorses NDB’s resilience in a challenging environment and alignment to international standards.
Financial inclusion is critical to support economic growth, job creation and reduce poverty in Sri Lanka. Norfund is pleased to support NDB’s growth strategy that targets small and medium-sized businesses. This is aligned with Norfund’s mandate.Fay Chetnakarnkul, Norfund Regional Director for Asia
Under this agreement, Norfund will participate in the Rights Issue that NDB has already announced by way of subscribing to unsubscribed rights and also by way of a private placement if required. This investment is subject to other conditions, including regulator and shareholders approvals.
In addition to investing equity capital, Norfund will provide technical assistance and global expertise assisting the bank to promote global environmental and social standards, and to achieve best in class corporate governance.
For Norfund, this is the first equity investment in Sri Lanka, and the second investment in the country.
We are extremely happy to have the opportunity of partnering with a DFI such as Norfund as it seeks to support the SME sector in reviving our economy. The values Norfund will bring will help the bank and the country overcome the current challenges. As NDB strives to improve financial inclusion by promoting digital technologies, Norfund can make available its experience and technical assistance to help NDB improve in this area.DIMANTHA SENEVIRATNE, Group CEO of NDB Bank