Kanrich Finance to merge with Nation Lanka Finance | Daily News

Kanrich Finance to merge with Nation Lanka Finance

Capital found to reach Rs. 3 Bn
KFL rebounds with Rs. 183 Mn. profits last year
Chairman KFL, Ravi Ratnayake
Chairman KFL, Ravi Ratnayake

Kanrich Finance Ltd (KFL) will merge with Nation Lanka Finance PLC (NFL) and will increase their capital funds toover Rs. 3 billion, said Chairman and Director KFL, Ravi Ratnayake.

Speaking to ‘Daily News Business’ he said that this is being done under the Master Plan for Consolidation of Non-Bank Financial Institutions by the Central bank and has received the approval for this merger which is aimed at meeting the deficit of the Capital Adequacy requirements of Rs. 2.5 billion.

As directed by CBSL Kanrich Finance has already started to settle its public liabilities of their customers in full and this process will be completed before the end of February 2023. “We settle these liabilities as part of the regulations of the merger and we have adequate funds to settle all deposits and promissory notes.”

He said that Kanrich depositors after they received their deposits are welcome to join the newly merged entity. “There is another advantage to them as they can benefit from the increasing deposit rates in the market. In addition, our staff can provide advice if needed on re-investing.”

The Central Bank plans to reduce the number of finance companies from 42 to 25. “One condition of their plan is that the companies who cannot show a capita of Rs. 2.5 billion must merge with another company or become a non-licensed company. Though Kanrich fulfilled all other requirements, Kanrich is missing this threshold marginally. Therefore, Kanrich has to fill this capital gap or become a non-licensed company. Therefore, Kanrich is in the process of finalizing a merger with another finance company.”

The Chairman who is also a United Nations Chief Economist for the Asia Pacific Region assured that with the merger the total branch network would increase to 60 and staff to nearly 1,000 but assured that there would not be any re-trenching.

He also stressed that Kanrich Finance is performing well and continues to make profits recording high financial stability. “Despite the C-19 and regulatory restrictions, we recorded Rs. 183 million in profits before tax and Rs. 113 million after-tax profits last year. Kanrich is also reaching Rs. 2 billion capital and possesses an impressive capital adequacy ratio of 29%.”

He recalled that prior to this in 2019 Kanrich had a tough and to overcome this they implemented through institutional restructuring, cost reduction, and increasing efficiency and productivity which resulted in a positive turn around resulting in reducing overhead costs. Senior management even voluntarily agreed to cut their salaries and allowances.”

Ratnayake commenting on their successful Micro Finance Business he said the product of Kanrich was entirely different from what is available in the market as it was based on a sustainable financing concept.

“However we opted out of such loans mainly due to political interventions in the microfinance industry. Political leadership publicly declared in 2019 that they would write off rural masses’ micro-loans, resulting in the accumulation of extensive NPL portfolios by financial institutions, including Kanrich. The extensive NPL portfolio in the micro product resulted in weak income statements and tight liquidities.

The Company was subject to severe lending and deposit restrictions by the regulatory authority. He also strongly stressed that Kanrich will NOT exit from the finance business as it is not a failed or collapsed company and does not have any other financial problems as well.

“On the contrary, it is doing well in terms of all financial indicators and after the merger will continue to engage in finance as an even stronger merged entity.”

Asked if the time was opportune for the Central Bank to go ahead with the consolidation of finance companies and undertake reforms in the finance sector, he said that he has a doubt about the timing of these financial reforms.

President Ranil Wickremesinghe recently said that he does not want to implement any reforms because they cannot be undertaken in a crisis situation. “Unfortunately, the economic crisis is still unfolding and have an enormous adverse impact on the business sector, including finance. Therefore, I believe that the government could consider giving the distressed companies some time to recover before subjecting any reforms.”

Ratnayake a member of National Trade Negotiations Team, Sri Lanka and Founder and Coordinator of Sustainable Business Network for Asia and the Pacific, United Nations, ESCAP (with a focus on CSR) said that with the Merger they will rebrand and introduce a new product line up. “With the amalgamation with Nation Lanka we will become stronger and as a standalone lending institution will provide a better service to customers.”

Ratnayake is also the Chairman and Secretary General Bridging the Gap Foundation and has over 20 years of experience as a development economist, senior manager, researcher, and project coordinator at the United Nations offices and universities. He has also produced publications in the areas of inclusive economic development, business and environment, poverty reduction and international trade and coordinated and implemented a number of regional projects, programmes for the Asia-Pacific region.



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