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Wednesday May 12th, 2021

Thilak Piyadigama on breaking traditional banking models

Thilak Piyadigama Chief Executive Officer of SDB bank

The Chief Executive of SDB bank Thilak Piyadigama is breaking traditional mindsets and leading a digital transformation at the bank. With a passion for tech and innovation, he is on a journey to make SDB bank an integral part of the nation’s development agenda.

SDB bank was founded to contribute to Sri Lanka’s economy through development banking. As its CEO how do you envision using this legacy to build a bank for the future?

Our mission as a development bank to date remains the same. However, the scope and approach to achieve this mission has become much broader. We are driving economic development by providing financial services to the country’s SME sector, which is the backbone of our economy accounting for 52% of GDP. Approximately 40% of our loan portfolio goes into the SME sector, amply demonstrating our commitment as a development bank.

I am a firm believer in technology and my vision is to create a future-ready bank by marrying technology with the bank’s larger mission so that we not only contribute to the national agenda but also help build a futuristic nation. Since taking over the driving seat at SDB bank as its Chief Executive Officer in 2019, I have made technology the core for all future development and growth.

How challenging was it to make digital the centre of all operations in a bank that is more traditionally set?

Leadership plays a major role. It means walking the talk as well. I have a passion for technology and strongly believe that it can make a difference in our lives. As a leader, I had to make others also believe in the power of technology, and the convenience that comes with it. Yes, we had a traditional mindset then, but data speaks for itself. When we as a nation have 31 million mobile connections for a population of 21 million, which is equivalent to 149% of the population, and a digital literacy rate of close to 50%, the need to change the way we do business and connect with our customers is quite clear if we want to remain relevant and competitive. So, the journey of transformation from a hardcore traditional bank to a digitally-driven banking service provider was made easy because our entire leadership worked towards making this digital shift possible.

We leveraged the power of tech and went beyond that to create unique experiences for our customers with a product that is appealing and user-friendly. It was a challenge but one that we could overcome through persistent and clear communication and leadership. Today, we have 100,000 plus digital transactions a month with Lanka QR being a core driver. We have also seen a growth in registrations for the use of digital transactions including Upay, internet banking, and debit card transactions, with an impressive 300,000 plus customer base as of to date.

We leveraged the power of tech and went beyond that to create unique experiences for our customers.

What is the one leadership lesson you learned the hard way?

Honestly, I do not think I have learned anything the hard way. Maybe I was lucky. I started my career at JKH, and I was made a leader in about one and a half years, so I learned to lead and manage people quite early in my career. I also got to meet many people who inspired me. There were many lessons to learn from them. Any leader has to face challenges as change is always a constant, whether it is to do with changing people or behaviours, or attitudes. I always think that nothing is impossible and that probably helps to drive SDB bank.

If you were to talk to yourself that was 10 years younger, what advice would you give yourself?

I always believe hard work cannot be replaced with anything else, not even technology. There are no shortcuts to success. Hard work can be more smart work now because we have the tools to help us through. We cannot take things for granted. We have to plan for all eventualities and if we do that, we can be successful.

SDB bank recently received a $40 million loan from the International Development Finance Corporation of the US Government. Can you discuss this and other capital-raising efforts?

As an SME-focused development bank, SDB bank is constantly looking for opportunities for funding at competitive rates, in order to stay relevant and competitive, while being able to deliver on our promise to help build the nation’s SME sector. Therefore, long before the Central Bank started lowering interest rates, we wanted to look at options of raising debt and equity so that we could extend credit to help the SME grow.

We approached many international funding organizations for this purpose including The Development Finance Corporation. When we started discussions with DFC, the interest rate on rupee borrowings was quite high so it made perfect sense to get loans in US dollars, converting them to rupees and hedging it to lower the risk. Since our core business is SME-focused, it made more sense with our low lending rates. The DFC loan came at a very low interest rate. In addition to this, we have a $15 million loan from FMO. In all, we have raised $55 million in debt in the recent past, which has helped us offer more attractive interest rates. Of the two loans, the DFC loan is allocated for the SME sector, and 40% of this is assigned to women-led micro-enterprises, which we are currently in the process of finalizing and disbursing.

In terms of equity, we had a remarkably successful rights issue that took place during the most challenging of times, when COVID-19 was impacting businesses across the country. It was the first rights issue that took place digitally for the first time in Sri Lanka. We raised Rs1.5 billion through this rights issue which was oversubscribed by Rs.200 million.

I want SDB bank to be recognized as a bank that helped Sri Lanka’s development agenda, leveraging tech to provide banking services that cut across all corners of the country, thereby creating an impact on the lives of Sri Lankans

In a post-COVID phase, lending has become much riskier. Leading a development bank, where do you see NPLs heading?

Overall, the NPLs of our bank are at 4.5%, which is one of the best in the industry. In fact, other banks of our size have an NPL of over 8%. The reason NPLs are controlled more effectively at SDB bank is because we are extra cautious in our credit evaluation process. We know the risks associated with lending to grassroots-level organizations, so gathering more insight before lending and consistently monitoring progress is key at SDB bank. Managing customer relationships while monitoring and reviewing the progress and recovery status of every single customer in our loan portfolio helps keep NPLs low. This approach makes it possible for us to identify the trends and challenges ahead of time and take action to reduce the space for a loan to become non-performing. We have also deployed technology to facilitate the collections process which has enabled our team to be more efficient and effective in debt recovery. I believe if you manage your loan book and customers effectively, NPLs can be kept well within control.

What advice would you give to a person aspiring to be in a leadership position like you?

Firstly, you need to find your passion. Secondly, you need to have the drive and find that one thing that inspires you. Those two can take you to the place you want to be. Always find that passion and inspiration. That passion can potentially have a positive impact on the world, not just yourself. And it is always good to have a mentor. Finding a mentor can fast-track your life as well. I have learned a lot from my mentors. And one last thing is, you have to love what you do. If you hate what you are doing, then you should not pursue it. Be ready to learn and embrace change. Always remember, change is constant.

Technology is rapidly transforming the banking industry. How will banking be different five years from now in Sri Lanka?

I think banking has to remain what it is today to some extent. Because ultimately, you cannot have an app, and someone unknown managing your money. So, the physical infrastructure has to be in place for the next few years, as it’s an important factor for establishing trust in the mind of the customer. That said, I believe banking relationships will be different. People will come into the bank for more relationship building, rather than transactions. Earlier you would visit a bank to carry out a transaction but now most of your banking needs can be done through an ATM or digitally. So, the need to visit the bank is no longer there unless you wish to seek advice on financial matters. Banks may also diversify into other areas such as the stock market, insurance, and other specific service partnerships that are relevant to customers.

What is your vision for the future of SDB bank and how do you hope to get there?

I want SDB bank to be recognized as a bank that helped Sri Lanka’s development agenda, leveraging tech to provide banking services that cut across all corners of the country, thereby creating an impact on the lives of Sri Lankans.

Ultimately, we are not the judges of our work, but our consumers and stakeholders are. Their views, beliefs, and trust in us are what will matter. We will continue to work with people to uplift them, making it possible for them to achieve their dreams.

Leaders need to keep an eye on the future while managing everyday challenges. How do you balance these competing demands as a CEO?

It requires a lot of learning. And also unlearning. Sometimes you have to explore areas that you are not familiar with and have no interest in either. I am trying to learn new things daily, new concepts from totally different areas, just to understand and maybe apply it someday.

I was an engineer by profession and studied electronics and telecommunication, and I guess that is why I look at things from a different perspective. I try to stay up to date most of the time and I also challenge the system to think innovation. With tech advancing rapidly, I believe the way we do banking can also change.

Although our bank is not connected with international businesses, I always stay focused on what is happening out there, as it helps to keep an eye on the future and the ever-changing regulatory environment both locally and internationally. Ultimately, we are not the judges of our work, but our consumers and stakeholders are. Their views, beliefs, and trust in us are what will matter.

Ultimately, we are not the judges of our work, but our consumers and stakeholders are. Their views, beliefs, and trust in us are what will matter