Ranil Dissanayake, Deputy General Manager—Branch Credit of Seylan Bank, shares insight into the bank’s strategic focus on supporting the small and medium enterprise (SME) sector, a cornerstone of Sri Lanka’s economy. The bank has developed tailored financial services through a client-centric approach and expanded its geographical reach while embracing innovative technology to streamline operations and enhance the customer experience. As the bank looks ahead, it remains committed to evolving alongside the needs of the SME sector, supporting economic recovery, and driving sustainable growth with cutting-edge financial products and services.
Can you walk us through the bank’s SME credit strategy and how it aligns with its growth objectives?
Seylan has prioritized the SME sector in our operations, recognizing its pivotal role in the economy. In Sri Lanka, SMEs contribute 52% to GDP, and account for around 45% of job creation, making them a key driver of economic growth. The bank’s SME loan portfolio stood at approximately Rs143 billion as of 31st December 2024, which represents 27% of the total loan portfolio of the bank; therefore, supporting this sector is a core part of our credit strategy. To ensure accessibility, we have expanded our branch network to over 170 locations nationwide. Additionally, we introduced 13 SME Credit Hubs staffed by expert credit analysts who visit clients, assess proposals, and expedite approvals, improving efficiency and response times.
Our approach is always client-centric. We design tailored credit solutions to meet the evolving needs of SMEs. We have also embraced digital innovation, leveraging advanced technology to provide seamless financial solutions that enhance customer confidence and simplify business operations.
What are the key drivers behind Seylan Bank’s growth in the SME credit space, and how do you balance healthy credit growth with managing risk?
The SME sector has been particularly affected during the past few years. Unlike the corporate sector, many SMEs do not have significant financial reserves for difficult times. However, some businesses managed to withstand the challenges without relying on government relief packages. Their strong business models and financial reserves allowed them to continue operations and expand. Many of these customers bank with us, and as their businesses grew, so did their need for enhanced financial facilities.
Our proactive stance is evident in our close engagement with SMEs to understand their evolving requirements. The past few years presented unprecedented external challenges, starting with COVID-19 and followed by a severe economic crisis. These conditions significantly impacted business needs and lending requirements, and we responded with tailored credit solutions rather than a one-size-fits-all approach. This approach to risk management ensures that we are always one step ahead, ready to meet the changing needs of our clients.
At Seylan, we believe in balanced growth. We maintain a diversified portfolio while managing concentration risk at acceptable levels. This approach allows us to support our existing clients and actively pursue new customer acquisitions, all while ensuring strong asset quality.
What is your Outlook for Credit Growth?
Our SME credit growth in 2024 was modest. Exchange rate volatility and higher interest rates created uncertainty in 2024, compounded by the elections. As a result, we saw slower growth. However, post elections with the expectation of political stability and intervention of CBSL to ensure favourable macro-economic variables such as lower interest rates and less volatile exchange rates, it is envisaged that the year 2025 will be a good year for SMEs. As such, robust credit growth is expected.
Now, we see a renewed interest in lending, with customers seeking financing for new investments, projects, and business expansions. Exporters have been a key focus in terms of sectoral demand. Despite the rupee appreciating lately, affecting exporter margins, this sector remains resilient and crucial to economic recovery, and the government actively supports its growth. Given its role in generating foreign exchange, we continue to provide tailored financial solutions to help exporters thrive.
Tourism, another vital sector, faced significant challenges but is rebounding. Since it is susceptible to external factors, ensuring its stability is critical for foreign exchange earnings, and we remain committed to supporting businesses in this space. Similarly, agriculture—particularly export-oriented crops like coconut—plays a dual role in domestic consumption and export revenue generation. Strengthening the SME sector supports the broader economy.
Manufacturing, especially export-driven industries, is another area of growth. We anticipate continued credit demand from these key sectors, and our focus remains on providing strategic financial solutions to support their expansion.
In an ever-changing economic environment, managing credit risk is critical. What are some of the key risk factors you focus on, and how does Seylan Bank mitigate potential risks in its lending and credit operations?
As you correctly pointed out, growth is essential, but asset quality is equally critical for any bank, including Seylan. To achieve this, we focus on several key risk factors and implement corrective measures to mitigate them.
First, we assess borrower-specific risks, including creditworthiness, repayment capacity, and financial performance. Then, we consider industry and sector risks—because even a strong business can struggle if its industry is under stress. Macroeconomic factors such as inflation, exchange rates, interest rates, and GDP growth also affect business sustainability and repayment ability.
Regulatory changes are another key factor, as evolving policies can impact businesses’ operations. Environmental risks are particularly relevant in an agrarian economy, where droughts or excessive rainfall can disrupt the agricultural sector. Additionally, labour shortages, rising labour costs, and subdued demand—driven by higher taxes reducing disposable income—can affect business performance.
These risks, individually or collectively, influence our credit portfolio quality. To maintain our desired credit standards, we have a robust risk management framework, including continuous portfolio monitoring, stress testing, and simulations. We also regularly review the bank’s credit appetite to different sectors, considering each sector’s performance.
How does Seylan Bank assess market demand and ensure its credit offerings remain competitive?
The bank employs a multi-faceted approach to assess market demand for its credit products to ensure we remain competitive and increase our Market Share.
Several methods are used, namely Customer Feed Back and Market Research using the service of Reputed Agencies. We also regularly review our Product Portfolio with offerings from other Banks to assess gaps and opportunities in the market. Monitoring economic trends and changes in the financial landscape allows us to anticipate shifts in market demand and adjust our product offering accordingly. We also leverage digital analytic tools to track customer behavior and preferences so that our offerings can be tailor-made to suit such preferences.
So, in a nutshell, to always be ahead of the curve/competition, we come up with innovative products (for which Seylan is well known) designed with a customer-centric approach. We also collaborate with business organizations such as business chambers and other Apex bodies to expand the reach of our product offerings.
What measures has Seylan Bank taken to minimize Non-Performing Loans?
Maintaining low NPL ratios, or what we now refer to as Stage 3 loans, is a critical priority for the entire banking industry, including Seylan. Our approach to minimizing credit risk begins at the onboarding stage itself.
We implement a stringent credit evaluation and approval process when evaluating a new-to-bank relationship or approving facility enhancements for existing clients. This process includes assessing the borrower’s creditworthiness, industry performance, market position, and repayment capacity. A firm initial assessment ensures that we onboard financially sound customers who can meet their obligations.
Our robust risk management framework includes continuous portfolio reviews and post-disbursement monitoring. Identifying stressed accounts early is crucial before they transition into NPLs. We actively assess our portfolio to understand the extent of stress exposure, categorizing customers in Stages 1 or 2—those with overdue payments but not yet classified as NPLs.
We take proactive measures for such cases, including restructuring and rescheduling loans based on the customer’s present and projected cash flows. Any restructuring plan must be sustainable and ensure a borrower’s business can operate effectively while meeting repayment obligations. This process is highly collaborative—we engage directly with customers to understand their challenges and work toward a viable solution.
If a business has genuine financial difficulties due to economic downturns or industry-specific challenges, we also consider providing additional financial support to help stabilize and grow operations. This bundled approach ensures that clients have the resources they need to recover and remain sustainable in the long term.
To strengthen our risk management further, we leverage advanced early warning systems that analyse customer data and flag potential financial difficulties early, allowing us to intervene promptly with remedial action before accounts transition into Stage 3.
Additionally, we recognize that while SMEs are strong entrepreneurs, many face challenges in financial management. To address this, we conduct financial literacy seminars, equipping them with the necessary skills to manage their finances effectively. By improving financial awareness, we help our clients make informed decisions, reducing the likelihood of economic distress and ensuring long-term business success.
How has Seylan Bank integrated technology into its credit offerings to enhance customer experience and operational efficiency?
Technology is crucial in banking, enhancing operational efficiency and customer experience. A well-integrated technological infrastructure streamlines operations, optimizes costs, and improves productivity while introducing digital solutions that make banking more convenient for customers.
One of the most significant advancements is automating the credit evaluation and approval process, ensuring swift assessments, efficient approvals, and timely disbursements. This seamless approach provides clients with much-needed flexibility in a fast-paced business environment where time is invaluable.
Beyond credit approvals, digital payment solutions such as Seylan Pay, Internet Payment Gateways, and the Seylan Merchant Portal simplify transactions, allowing businesses to receive payments automatically without visiting a branch. These payments can be seamlessly directed toward servicing credit facilities, making the repayment process effortless.
Recognizing the power of data, the bank will embrace AI and machine learning to understand customer preferences and develop personalized credit products. A fully automated call centre provides round-the-clock support, ensuring customers can access essential information whenever needed. Additionally, the upcoming automated cashback facility via the mobile app will allow customers to obtain funds against their deposits from the comfort of their homes or offices, eliminating the need for branch visits.
We remain agile in a rapidly evolving economic landscape, refining our solutions and introducing new products to meet changing needs. Continuously evolving based on real-world insights ensures sustained demand and strengthens and broadens customer relationships.
What is your vision for Seylan Bank’s credit business?
The banking sector is poised to face various challenges, primarily due to the country’s ongoing recovery from a severe financial crisis. Two key factors that will influence the performance of any bank are the volatile exchange rate and the high interest rate environment. Currently, we are seeing some stability in the exchange rate and a shift to single-digit interest rates, which is favourable for SME lending. However, this stability may be under pressure in the coming years due to various factors. For instance, removing restrictions on vehicle imports will increase imports, which could pressure the exchange rate. Additionally, the country will begin repaying loans in 2028, which will create pressure on these variables, potentially hurting the financial landscape.
A reasonable level of GDP growth is vital to alleviate the potential pressure on the economy. As I said earlier, the SME sector contributes 52% to the country’s GDP. As a bank, we are committed to understanding the evolving needs of this sector because, without staying in tune with these changes, we will be unable to offer the proper credit packages and innovative solutions needed to support SMEs effectively.
Our focus is to remain proactive in addressing the credit needs of the SME sector while also keeping an eye on priority sectors of the economy, such as exports, agriculture, manufacturing, and tourism. We seek partnerships with government agencies, business chambers, and international organizations to gain deeper insights into these sectors and their trends. This collaboration helps us evolve our credit offerings and adapt to emerging needs.
At the same time, we remain mindful of the risks and challenges accompanying growth. We understand that with expansion comes a need to refine our risk management practices. We are committed to aligning our risk management framework with global best practices. We aim to stay ahead on the technology front by leveraging cutting-edge solutions to help our customers do business more efficiently.
In conclusion, Seylan Bank is dedicated to driving the growth of the SME sector, providing tailored financial solutions and state-of-the-art digital tools. With the next generation of SMEs coming into play and many eager for innovative technological solutions, we are ready to be a trusted partner. Over the next three to five years, we aspire to be at the forefront of fulfilling the financial needs of SMEs and contributing to their success.