Private equity firm Aspic Group has announced it will launch a new business unit focused on microlending to small and medium enterprises, mainly targeting agricultural enterprises. The company plans to invest LKR 200 million (USD 1.9 million) in the microfinance subsidiary, through which it will offer loans ranging between LKR 10,000 (USD 93) and LKR 200,000 (USD 1860).

According to Aspic’s Managing Director, Deepthi Perera, lending will be targeted at Sri Lanka’s farmers in an effort to promote agricultural development in the country. “The local agricultural sector[,]with additional financing[,] could look at new machinery, [and] better transport[ation] systems to minimize post harvest loss and look at high yielding varieties,” he said.

Aspic’s microlender will offer loans to farmers at discounted interest rates compared to rates offered to non-agricultural borrowers. According to Perera, farmers will be given discounted rates because it will assist them in avoiding what he calls “unconventional methods” of financing frequented by farmers. “Farmers are used to look[ing] at unconventional methods when it comes to borrowings which involve high interest rates. One of the prime objectives of Aspic Micro Finance arm is to assist the farmer to avoid this informal sector which forces the farmer to sell their product to them at a low price.”

Established in 2003, Aspic Group is a private equity firm that makes investments in ventures that foster economic growth and stability, according to its mission statement. Through Aspic’s 12 subsidiaries, the firm has active investments in Asset Management, Engineering and Construction, Real Estate, Aqua Culture, Plantation, Mining, Bio Techniques, Professional Development, Migration Services and Entertainment. Aspic does not disclose financial information on its website.

Sri Lanka’s microfinance sector consists of 15 microlending institutions, serves a total of 960,000 borrowers, and constitutes an aggregate loan portfolio of USD 235.6 million, based on data reported by microfinance information provider MIX Market. Nine microlenders operate as for-profit entities and six operate as nonprofit organizations.

By Ryan Benson, Research Assistant

Additional Resources:

Aspic Group: Home

Yahoo: Currency Converter

Daily News (Sri Lanka): Aspic to launch Micro Finance, by Shirajiv Sirimane, July 7, 2008

MIX Market: Sri Lanka