First-ever historic profitability in SL’s corporate sector

Sri Lanka’s most valuable and globally diversified financial conglomerate, the LOLC Group, posted a record-breaking performance for the financial year ending March 31, 2021, achieving unprecedented bottom line results of Rs. 57Bn in Profit Before Tax (PBT), and a Profit After Tax (PAT) of Rs. 53Bn – a first for any corporate in the country.

By achieving profits on this significant scale, the Group once again consolidated its position as the top most profitable diversified corporate in the country, three years in a row – establishing LOLC as one of the largest Micro and Small & Medium Enterprises (MSME) platforms in the world.

This stunning performance by LOLC resulted in Rs. 28Bn being recorded as Profits Attributable to the Equity Holders of the Parent company. The Group results denote an impressive Earnings Per Share of Rs. 59.01 compared with Rs. 22.93 recorded in the previous year.

Whereas, the total comprehensive income was Rs. 81Bn out of which Rs. 37Bn is attributable to the Equity Holders of the Parent company. Furthermore, the total attributable comprehensive income per share was Rs. 77.84. The resultant Net Assets Value per Share as at the year-end was Rs. 286.23 compared to Rs. 194.72 reported last year, demonstrates the exceptional value creation by the Group during the concluded financial year.

The story of LOLC’s rise into an elite blue-chip within a span of 40 years is nothing short of awe-inspiring, surpassing competitors who have been in existence for over a century. A pioneering leasing company established in 1980, in collaboration with ORIX Corporation of Japan and International Finance Corporation (IFC), LOLC, revolutionized the future of MSMEs in Sri Lanka and rose in stature as Sri Lanka’s largest Non-Banking Financial Institution (NBFI).

Having established a high performance microfinance business model, LOLC rapidly exported its expertise to global markets such as Cambodia, Myanmar, Indonesia, Philippines, and Pakistan in Asia; as well as Zambia and Nigeria in East and West Africa, bringing prosperity to people at the bottom of the pyramid. In addition, the Group has established its footprint in the Maldives and Sierra Leone in the arena of Non-Financial Services.

In Sri Lanka, the LOLC Group diversified into agriculture and plantations, leisure, renewable energy, construction, manufacturing and trading, information services, as well as research and innovation over and above its flagship financial services. All of these businesses recorded an upward trend in profitability in 2020/21, despite the adverse effects of COVID-19 being felt by Sri Lanka’s economy through 2020, coupled with weak GDP growth in the preceding year.

Despite the global economic downturn experienced during the period, a strong pipeline of multilateral and bilateral funding has been available to LOLC and its operating companies both locally and globally – a testimonial to the confidence these institutions have placed in the LOLC Group due to its strong and unblemished track record and the potential for growth even during turbulent times.

LOLC’s financial services have brought about life-changing financial inclusion in MSMEs in Sri Lanka, empowering frequently marginalized communities to build a better future for their families – driving women’s empowerment and financial independence by encouraging their entrepreneurial ambitions. Overall, the LOLC Group’s Financial Services achieved a Rs. 17.3Bn as bottom line despite allowing for a strong level of risk mitigating provisions amounting to Rs. 30Bn for bad and doubtful debts on a very conservative basis against Rs. 17Bn last year.

Livelihoods of people in all sectors have been badly affected by the COVID-19 pandemic and at the request of the regulators of each country, the Group’s Financial Services Companies have extended moratoriums to affected customers – extending a safety-net to those in need.

LOLC’s finance companies in Sri Lanka experienced a strong level of deposit inflows despite the all-time low interest rates. The flagship finance company – LOLC Finance PLC (LOFC) – with a Total Assets base of Rs. 170Bn, recorded PAT of Rs. 4.4Bn. Commercial Leasing & Finance PLC (CLC) with a Total Assets Base of Rs. 77Bn also recorded strong performance, posting a PAT of Rs. 2.2Bn in 2020/21. Meanwhile, with a Total Assets Base of Rs. 19Bn, LOLC Development Finance (LODF) PLC recorded a PAT of Rs. 155Mn.

Seylan Bank succeeded in delivering a steady PAT of Rs. 3Bn for FY2020. Deposits increased by 9.9% and advances increased by 4%, whereas the CASA Ratio stood at 33%.

LOLC’s overseas financial services entities made strong contributions to the profitability of the Group in 2020/21 with LOLC Cambodia leading the way with a US$ 45 Mn in PAT with the Total Assets base exceeding over US$ 1 Bn. In Cambodia, LOLC continues to hold a 97% stake in LOLC Cambodia – the fourth-largest microfinance company in terms of market position, and the second most profitable microfinance institution in Cambodia after PRASAC.

LOLC Myanmar Microfinance Company Limited has now become the fourth-largest among the 176 MFIs, with an asset base of US$ 175 Mn, a portfolio of US$ 126 Mn and a growing deposit book of US$ 20 Mn. LOLC Myanmar has seen exceptional performance in FY2020/21 by posting a profit of US$ 3 Mn as PAT, and envisages strong growth prospects amidst the atmosphere of a large unbanked population.

In 2017, LOLC ventured into Pakistan by investing in Pak Oman Microfinance Bank (POMB), a joint venture with the Islamic Republic of Pakistan and the Sultanate of Oman, which is now poised for rapid growth in a country with a population of over 200 million – offering attractive industry fundamentals.

Tapping into other neighbouring emerging markets, LOLC invested in the Philippines – a country with a population of 110 million – through LOLC ASKI Finance and LOLC Bank Philippines – a thrift bank in 2019.

In the year under review, the Group made its first finance sector investment in the African region by acquiring a controlling stake of FinaTrust Microfinance Bank in Nigeria – a west African nation with the largest population in the continent of 206 million.

The Group commenced operations in Zambia by incorporating LOLC Finance Zambia as a greenfield operation – which currently operates through six branches.

The global expansion strategy for the financial services sector remains a key focus, with plans being made for expanding into more markets in both Africa and Asia.

LOLC General Insurance Ltd. and LOLC Life Assurance Ltd. demonstrated strong resilience against the unprecedented impacts of the pandemic and other socio-economic adversities.

LOLC Life Assurance registered a GWP of Rs 3.2 Bn – the first Life Company in the industry to achieve this milestone in less than 10 years – and posted a growth of 21% in GWP, backed by a robust growth of 59% in first year premiums: the highest new business growth in the insurance industry. Meanwhile, LOLC General Insurance achieved Rs. 6Bn in Gross Written Premium in 2020 in less than 10 years – a first for Sri Lanka.