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Tuesday, August 3, 2010

Banking on SMEs

Nations Trust Bank PLC (NTB) with a network of 40 branches is planning to build its SME lending portfolio and a senior official of the bank says it is the only way the bank could hope to thrive and expand in the future.

"We really do not see any other option. The bank wants to grow and we believe this could be done by aligning ourselves with the needs of the country’s SME sector," said Kapila Ariyaratne, NTB Deputy General Manager Corporate and Institutional Banking.

"The SME sector has been very successful but perhaps they lacked the kind of sophistication and management skills that would have made banks comfortable in lending to them. Take the construction sector for instance which is dominated by small time contractors who actually do the bulk of the construction work.

"We are formulating our strategy. We feel the SME sector would be the best sector to align ourselves with but we have to be prepared. The risk factor is a bit high and if we are unprepared we could get our fingers burnt.

"Dealing with the SME sector would require a change in how we operate and we would have to develop the skills required to deal with this sector which would include the ability to advise clients on their finances and other management related issues. The needs of the SME sector is very different from those of the corporate or retail banking sectors," Ariyaratne said.

Presently, of NTB’s total loan portfolio, corporate and wholesale banking accounts for 32 percent, consumer and credit cards 31 percent, SME banking and leasing 23 percent and retail banking 10 percent.

Despite falling interest rates since the war ended in May 2009, the SME sector has been unable to access bank credit and President Mahinda Rajapaksa earlier this year appointed a special committee headed by Dr. Saman Kelegama to look into SME grievances.

Ariyaratne said NTB hoped to build its SME loan portfolio with tourism, construction and manufacturing sectors expected to record solid growth.

"Corporate, retail and our other loan portfolios would continue to be vital to us and we would grow these businesses, but the SME sector would receive special attention and this is something the Chairman and Board of Directors of NTB are keen to drive through," he said.

source - www.island.lk