Commercial leasing & finance: a legacy of stability

Terence Kaushalya, Assistant General Manager and Head of Liability Management & E-channels at CLC

With a credit profile better than some of the country’s banks, CLC can deliver consistent returns to depositors and influence a post-pandemic economic revival

Commercial Leasing & Finance Plc (CLC) is one of the largest and stable finance companies in Sri Lanka. Rating agency ICRA Lanka recently affirmed its ‘A’ stable rating, noting the finance company’s ‘impressive track record and leadership position in the Sri Lankan NBFI sector’.

CLC’s experienced management team, commensurate risk management systems and adequate funding profile have ranked it impressively above the credit ratings of several banks as well. Terence Kaushalya, Assistant General Manager and Head of Liability Management & E-channels at CLC, explains why stability and consistent returns should matter during an economic slowdown, and how the company is contributing to the revival of businesses post-Covid by improving financial inclusivity.

Can you tell us about CLC’s founding and journey thus far?

CLC was established in 1988 and has grown exponentially over the years to become a trusted brand synonymous with stability and dependability, emerging as a catalyst for empowering the people of this country. CLC is a subsidiary of LOLC, one of the largest and profitable groups of companies in the country. Our unblemished track record over the last 32 years with exceptional performance in all the key areas has been instrumental in cementing our reputation as a leading non-bank financial institution.

The number of financial services in our product portfolio has grown over the years too, enabling CLC to become a one-stop-shop for financial services in the country. Our services include leasing, fixed deposits, savings, loans, flexi-cash, microfinance, Islamic finance, gold loans and factoring. Technology has played a pivotal role in our growth and positioned CLC as a modern innovative finance company because of our innovative financial solutions and advanced tech platforms.

We were the first financial institution to introduce a fully-fledged online banking service to customers, and the first financial institution to implement CEFTS which is a real-time fund transfer system between financial institutions.

How has the company performed in 2020, and what is the outlook for the year ahead?

CLC has performed exceptionally well despite the pandemic and economic crisis, and the trust people have in us have deepened as demonstrated by the 19% deposit base growth during the first eight months of the 2020/21 financial year. Our enviable customer retention rate of over 95% reflects the public perception of the company as a reliable and trustworthy financial services provider at a time when most financial institutions are finding it hard to grow their deposits. With interest rates at historic low levels and the economy in crisis, investors will turn to more secure investment options that deliver stable returns. This plays into our strengths.

Best-in-class customer service, a suite of thoughtful financial products designed to benefit and empower, and advanced tech that delivers unique and seamless experiences have enabled CLC to stand out as an innovative and stable finance company. Customers are increasingly becoming more aware of how financial markets behave and are also savvier when it comes to making investment decisions where stability matters as much as returns.

We see a clear correlation between our deposit base growth and customers opting for stable finance companies to entrust their funds. CLC is unique compared to the rest of the market in many ways, but fundamentally few financial institutions in Sri Lanka match the benchmarks set by CLC. For instance, we have a capital base of Rs19 billion, whereas the minimum requirement for registered finance companies is only Rs2 billion. Asset quality is also important to us.

Our NPL ratio is well below the industry average. We have robust due diligence processes to ensure that we invest funds in performing leasing, loan and or hire purchase assets which generate consistent cash flows, and this enables us to meet liabilities with ease and absorb any shock including from the pandemic.

What is your prediction for interest rates in 2021, and how should investors invest in the year ahead?

We believe interest rates will remain stable, or even slightly increase by 10-15 basis points during the first quarter of the year, so the outlook is generally muted. The Central Bank has capped fixed deposit rates finance companies can offer which is a fixed rate above the benchmark Treasury bill rates.

The one-year T-bill rate is around 5% which is 10-15 basis points from where it was in October 2020. Investors should aim to invest in one year or six-month fixed deposits to maximise returns. Investing in shorter terms may result in lower returns compared to one year or six-month FDs. Also, with market rates not expected to remain range-bound, its best to follow this strategy.

Investors should not only focus on returns when deciding where to place a fixed deposit. Stability is critical, especially during this challenging period, so they need to look at credit ratings of financial institutions, capital strength, NPL ratios, profitability, and other important factors like the strength of the parent company. CLC scores high on all these and our credit rating is higher than several of the smaller banks!

How has COVID impacted CLC, and how has the company responded to the ongoing economic challenges?

We engaged our customers during the lockdown period, and our tech platforms made life easy for them: all our financial products and services are available online. Even before the lockdown, we already had swift and efficient end-to-end processes in place for opening accounts, fund transfers, bill payments and other online transactions. Our customers enjoyed uninterrupted access to financial services anywhere, anytime without ever needing to visit our branches. One of the main reasons for the strong financial performance during the lockdown was our portfolio, which consists of over 95% asset-backed products that served to absorb any possible shocks.

We have granted over 59,000 moratoriums to our customers whose livelihoods were affected due to COVID-19 and continue to closely engage with customers to meet their financial needs and serve them better during this difficult time. Non-bank financial institutions have a critical role in shaping the economic future of this country. They serve underbanked segments in the economy that is considered too risky such as micro, small, and medium businesses and rural entrepreneurs.

Micro and SMEs touch 70% of the population, and if the country is to prosper and alleviate poverty, it is imperative for finance companies to support them to reach greater heights by improving access to finance. Improving financial empowerment and inclusivity is core to what we do at CLC. We continue to penetrate rural markets and reach unbanked and underbanked communities, and we are doing this with technology, thereby delivering a world of possibilities to their doorsteps.


We have a capital base of Rs19bn, whereas the minimum requirement for NBFIs is only Rs2 bn