As Mercantile Investments and Finance PLC (MI) celebrates its 60th anniversary, Managing Director Gerard Ondaatjie reflects on its journey from its founding by his father, the late Deshabandu George Ondaatjie, in 1964 to its current status as a leading finance company in Sri Lanka.
As the company celebrates its 60th anniversary this year, could you walk us through the inception and evolution of Mercantile Investments?
Mercantile Investments commenced its business operations under the leadership of its founder Chairman, the late Deshabandu George Ondaatjie, six decades ago. Being a visionary in the field of automobile dealerships he cut his teeth by working at Autodrome for ten years after working for General Motors in the initial part of his career. Having identified the growing need for automobile financing in Sri Lanka, he commenced Mercantile Investments Ltd. operations on 14th June 1964 to mainly bridge financing shortfalls for clients to purchase vehicles unlike the popular lease financing carried on in Sri Lanka now. It was during this crucial period that a few depositors stepped up to support him with much-needed funding, demonstrating trust in him and the company.
MI, as we are known in the market, flourishes to this day, because it is built on a solid foundation based on upholding the interests of depositors who continue to be the company’s key stakeholders.
Since taking over the helm in 2011 from my father, I was able to build on his foundation and raise MI’s financial standing further through steady profitability growth and by managing to enhance shareholder capital which stood at over Rs12 billion by this year and was also able to surpass Rs50 billion in total assets, backed by a strong 1,200 plus workforce and having branch presence in over fifty prominent locations across the island. Our lending product mix goes beyond traditional lease financing to include personal and corporate loans, microfinance and gold-backed lending while affording attractive returns for our depositors who place fixed and savings deposits with us.
How is MI navigating the challenging economic landscape we are in today?
I believe our performance speaks for itself. For the recently concluded financial year 2023/24, the company was able to post sound post-tax- profits of Rs555 million, reflecting an over 400% year-on-year growth. We rebounded well, taking advantage of the improving economic conditions, including the rapidly declining interest rates, which helped us to grow the company’s loan book by 13% year-on-year while capitalizing on lowering the cost of funding by repricing the deposit base, which too grew by 15% to reach Rs36 billion by 31st March 2024.
Through proactive recovery measures, we have improved collections on credit granted, which kept our non-performing lending ratio exceptionally below the two-digit mark at 9.81%, at a time when borrowers across the industry continued to grapple with the challenging economic landscape which resulted in an industry NPL average above 15%. We continue to maintain an unblemished track record in business as a reputed premier finance company with an A-grade regulatory ranking that is indicative of MI’s capital strength.
What is your approach to deploying technology?
Like the banking sector, technology has a strong influence over the finance company sector and at MI we have adopted proactive measures to embrace greater technology to service our customers better. We have partnered with Scienta Technologies to migrate our existing homegrown system to this tailored tech platform from last year. Our FD and savings systems have already been migrated with a few more modules including the lending module to be completed shortly which will enable MI to enhance its unique offerings and product types.
Having over 50 branches across all provinces, our existing system is geared to provide real-time access from all locations and customer transactions can be executed immediately. We have SLIPS, payment gateway digital options and are on the verge of launching the CEFT option so real-time fund transfers can be afforded to our clients this year. We also hope to provide shopping card-backed ATM withdrawal facilities this year which can be used anywhere in the country at any ATM. Our customers can look forward to e-wallet and internet banking services too this year, which will help the digitally savvy to transact easily on a mobile device.
How does MI embrace corporate governance practices for prudent management?
MI is a registered finance company with the Central Bank of Sri Lanka and complies with the Corporate Governance Directions issued under the Finance Business Act. We also follow the Financial Transaction Reporting Act ( FTRA) and Financial Intelligence Unit (FIU) guidelines to ensure we adopt high standards in conducting our financial transactions to maintain compliance with anti-money laundering regulations through effective policies and procedures.
As a Colombo Stock Exchange-listed entity, we proscribe to the regulations on high-level corporate governance and have a highly qualified and experienced board, having the right blend of executive and non-executive directors to shape the future of MI. Under the board’s oversight, there are sub-committees and a strong senior management team, each with expertise in their respective functional areas, that help drive MI towards excellence. They have established clear policies and procedures, including internal controls, to ensure the smooth functioning of the company’s business operations encompassing credit, recovery, deposits, finance, legal, IT and HR.
What do you envision for MI as you contemplate the future?
As a company committed to proactive financial management practices, the leadership of MI has established a three-year corporate plan extending to 2027 which aims to grow MI by enhancing revenue, profitability, and capital. We are confident in achieving these targets due to our investments in people, skills, and technology, and expanding our physical branch network and virtual reach through digitization initiatives.
Since MI’s inception, the company has been led by a member of the Ondaatjie family, who remains the majority owner. However, to uphold the values and foundation built on depositor trust and interest, future leadership will be entrusted to proven professionals in their respective fields. This strategic shift will steer MI through its next phase of growth.