Sri Lankan company Lanka ORIX Leasing Company PLC (LOLC) will launch LOLC Micro Finance Company (LOLC MF) with a USD 10 million loan and equity injection from the Netherlands Development Finance Company (FMO). FMO is investing USD 2 million in equity, USD 1.5 million as a convertible loan and USD 6.5 million as a senior loan. FMO will own 20 percent of LOLC MF. This will be the first Sri Lankan microfinance institution (MFI) to have foreign shareholding. LOLC MF already has a Rs 2.3 billion (USD 21.2 million) loan portfolio which has a non-performing loan ratio on a portfolio-of-risk basis of around 5 percent.

LOLC MF will by a subsidiary company of LOLC and expand on its existing microfinance operations. LOLC MF will work to expand internet access in rural areas and undertake internal staff training in microfinance. They will also work to increase their 23 microfinance branches and 14 service centres. Currently LOLC MF has approximately 20,000 clients, but expects to expand to 100,000 by 2010, according to CEO Ravi Tissera.

LOLC was incorporated in 1980 and commercial operations commenced in 1981. It was created after the Sri Lankan Government initiated a World Bank survey which then resulted in a proposal to establish a leasing industry in Sri Lanka, at the same time the IFC asked the Bank of Ceylon to take the lead in setting up a leasing company, and the LOLC was set up. MicroCapital reported on LOLC’s expansion into microfinance. As of March 2008, the total assets of LOLC were Rs 27.6 billion (USD 255 million) and of LOLC Plc were Rs 33.8 billion (USD 312 million).

The FMO was created by the Dutch government in 1970 to replace, and expand upon, the investment development activities of the previously operating Netherlands Overseas Financing Association. The FMO offers a variety of financial products and programs including the Small and Micro Enterprise Fund (SME Fund) which lends to MFIs across several regions. The FMO had 2007 total assets of EUR 2.7 billion (USD 3.4 billion) and a loan portfolio of EUR 1.3 billion (USD 1.64 billion) of which USD 422 million was allocated to microfinance investments. microfinance MicroCapital recently reported on FMO’s investments in Tanzania and Guatemala.

By Lori Curtis, Research Assistant

Additional Sources:

The Colombo Times: “LOLC sheds new light on the Microfinance industry of Sri Lanka“

FMO: “Access to microfinance for rural entrepreneurs in Sri Lanka” “2007 Annual Report” “Home“

Lanka Business: “Sri Lanka-Dutch joint venture in microfinance“

LOLC: “History” “Annual Report“

MicroCapital Story: “Sri Lankan Orix Leasing Company’s (LOLC) Move to Become a Total Financial Solutions Provider Includes Expansion into Microfinance“