IFC and NTB – Two Decades On – A Partnership Aiming to Create a Promising Future for Sri Lankan Small Businesses

Photo Credits: Nations Trust Bank

A little over two decades ago, a senior IFC official spoke about his vision for the banking sector in Sri Lanka, when asked about the future for one private sector bank.  

“The presence of a strong commercial bank would increase competition in a sector dominated by government banks and stimulate greater efficiency, innovation and growth in banking,” said IFC’s then Vice President for Investment Operations, Jemal-ud-din Kassum. His comments came at a time when IFC was making its first equity investment in a commercial bank in Sri Lanka.

True to that prediction, twenty-one years later, Nations Trust Bank (NTB) is one of the commercial banks offering world class financial products and services for individual, corporate and institutional clients across Sri Lanka. It was in 1999 that IFC made its inaugural investment in NTB with an equity investment of $1.1 million. At that time, NTB was a brand-new private sector bank set up by John Keells Holdings (JKH) and Central Finance, both IFC clients. Today, NTB is the 7th largest private bank in Sri Lanka.

In IFC’s 50 years of operations in the country, NTB has been one of a number of longstanding clients. As a founding shareholder with a 15 percent stake, IFC has supported the bank through multiple investments and advisory initiatives since 1999.

A few years later, in 2007, NTB joined IFC’s Global Trade Finance Program (GTFP). The aim was to help the bank increase the volume and value of trade transactions, paving the way for a country like Sri Lanka to increase its share of global trade. IFC’s $5 million facility within the GTFP was geared towards providing “NTB with risk coverage in a difficult market and a global network that will assist the bank in undertaking trade finance deals,” said Farida Khambata, then IFC Regional Vice President for Asia and Latin America. Under the IFC South Asia Enterprise Development Facility (IFC-SEDF), which was set up to promote the growth of small and medium enterprises (SMEs), this also included a component to build the institutional capacity to help boost the quality of service to the bank’s SME clients.

A year later, in 2008, IFC partnered with the bank to help develop credit-scoring models for retail banking products, including credit cards, housing loans, auto finance, personal loans, and overdrafts. By doing so, the bank was able to expand and manage its retail portfolio in a sustainable manner.

With IFC’s continuous advisory assistance over the years, NTB had strengthened their capacity to expand product portfolio, serve small business clients, and increase access to financial services. In 2012, IFC worked with the bank to help up to 30,000 small business owners in Sri Lanka become more competitive, sharpening their readiness to access new markets. IFC’s SME Toolkit, an online resource that provided training and management tools for small businesses through multi-lingual ‘how-to’ content, enabled the bank to train staff members to better support their SME clients, promoting increased access to financial services across the country.

In Sri Lanka, SMEs are a key driver of the country’s economy. Supporting small businesses is therefore significant in creating job opportunities and promoting inclusive growth – key priorities for both IFC and NTB.

In another effort to boost access to finance for small businesses in the country, IFC extended a $50-million financing facility in 2017 to expand its lending to SMEs. Amena Arif, IFC Country Manager for Sri Lanka and Maldives said at the time that “this partnership fits well within IFC’s strategy in Sri Lanka to boost financial inclusion across the country.”

In 2019, IFC invested $36 million (including mobilization) in the bank – once more to help increase lending to small businesses. A quarter of the funds were earmarked to support women-owned SMEs, making it NTB’s first gender-focused commercial lending in the country.

The latest of IFC support to the bank came a few days ago.

With the impact of COVID-19 hitting the shores of Sri Lanka since March 2020, many businesses struggled to keep afloat amid the economic fallout from the pandemic. Strong economic growth and job creation are essential for a resilient recovery with a vibrant private sector playing a key role. In order to help businesses get back on track, IFC stepped into support Sri Lanka, including its clients and partners such as NTB.

In this latest investment, IFC provided a $25 million loan to NTB to support Sri Lankan businesses with improved access to critical working capital to continue operations and preserve jobs. The financing package is part of IFC's $8 billion global COVID-19 fast-track financing facility, aimed at helping companies stay afloat during the ongoing public health crisis. 

Over the years, IFC-NTB partnership has helped create a promising future for many small businesses across Sri Lanka, opening new markets and opportunities. As we embark on a brand-new year, we look forward to new opportunities in promoting inclusive growth in Sri Lanka as this partnership continues to grow.