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Sri Lanka fund managers told to aim at urban rich

ECNOMYNEXT – Sri Lankan fund managers trying to drum up business would do better to focus on the cities where wealth is concentrated rather than rural areas, a senior analyst at a stock brokerage said.

Murtaza Jafferjee, Managing Director of JB Securities, said it was laudable for capital market regulators and intermediaries to seek to encourage more investors from rural areas where they hold road shows.

But the financial wealth is concentrated in very narrow pockets of wealth in the cities, he told an investment fund and asset management forum held by Fitch Ratings.

"The way to do it is in the cities where the higher income people are," he said. "To give you a statistic – 67 percent of the deposit base in the banking system is from the Western Province."

The island’s Western Province, where the capital Colombo is located, accounts for over half of economic output.

The country’s gross national savings is about 27 percent of gross domestic product but less than half of it goes to financial assets, Jafferjee said.

The rest is in real assets like gold, homes or land.

"The financial assets share of savings is also low," Jafferjee said.

Sri Lanka’s capital market promoters say they want to encourage alternate investment products, with the aim of creating ‘a share owning democracy’.

"If you want to mobilise funds, I’d say that going at this very retail level is not going to work – that we should go at the higher end households – they have the financial resources and financial savings and all these are in the cities.

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"We must first tap in these pockets of wealth."

He said an analysis of Colombo city, which has only some 600,000 people, reveals that “disproportionately they are the ones who are in fixed deposits."

"So without trying to stretch ourselves and go all over the countryside, we have to first focus on where the main pool of money is." (Colombo/September 22 2015)

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