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Saturday April 20th, 2024

Sri Lanka’s LOLC enters Tajikistan taking over micro-lender

ECONOMYNEXT – Sri Lanka’s Lanka LOLC said it had bought a 75 percent of stake in a gold-loan and micro-finance company in Tajikistan as part of efforts to expand its overseas micro-lending operations.

LOLC said it will increase its stake to 100 percent by the year end. LOLC did not disclose the transaction value or the size of the company.

LOLC struck gold going into Cambodia, a country in which the central bank was emasculated after the currency collapsed and people moved to US dollars and agency lost the power to do monetary policy and further de-stabilize the country.

After entering the country in 2007, LOLC exited the firm for taking out 800 million US dollars 12 years later selling it to Korea’s KB financial group.

However Tajikistan has a bad central bank. Over the last five years the Tajik Somoni has fallen from 5.30 to 11.40, head of Sri Lanka rupee’s fall from 131 to 225 levels.

In Malawi, it had acquired a 100 percent stake of Express Credit Limited, LOLC said, without giving a transaction value.

From January 2015 to now the Malawi Kwacha has collapsed from 458 to 810 to the US dollar. From January to August 2021, the Kwacha had collapsed from 727 to 810 to the US dollar.

In Tanzania the group had acquired a 96 percent stake in a company called Tujijenge Tanzania Ltd.

Tanzania Shilling had been relatively more stable falling from 1,726 to 2,300 from January 2015.

In Cambodia, LOLC still has control domestic currency micro-lender in Cambodia. The Riel has been fixed at 4,000 to the US dollar sometime before LOLC entered the country, giving a stable foundation for the country to take-off, draw foreign investments and gradually become an export powerhouse.

The Cambodia Riel fell from 424 in 1990 to 4100 in March 1999, leading market dollarization and the central bank lost is ability to conduct monetary policy and bust the currency because people adopted dollars.

Analysts say the International Monetary Fund is urging Cambodia conduct ‘flexible’ monetary policy without the current de facto strict rules that protects the people and companies against monetary expropriation through depreciation.

In the last Article IV consultation report IMF directors noted ominously that “promoting further …local currency use would allow the central bank to move toward a more robust and flexible
monetary policy framework.”

“The authorities are committed to promoting the use of local currency (Khmer Riel) in the economy and underscore the importance of maintaining exchange rate stability as a nominal anchor to help keep inflation manageable,” the IMF staff said even more ominously.

“They are aware that a high degree of dollarization continues to limit the National Bank of Cambodia’s (NBC) ability to implement monetary policy effectively.”

If the IMF succeeds, the Riel may also go the same way as Sri Lanka did with ‘flexible’ inflation targeting and ‘flexible’ exchange rates, analysts say destroying the value of LOLC Cambodia like in Sri Lanka and African nations. (Colombo/Aug30/2021)

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Sri Lanka discussing giving extra land, water for Chinese oil refinery

ECONOMYNEXT – Sri Lanka is in discussions with China’s Sinopec to give extra land and assure water supplies after the company decided to expand the capacity of a planned oil refinery in Hambantota, Energy Minister Kanchana Wijesekera said.

“There are concerns on how the water supply is going to be provided for the refinery,” Minister Wijesekera told reporters Friday.

The refinery will need more land and also revise conditions in a Board of Investment agreement, he said.

Read more
Sinopec to double capacity of new refinery in Sri Lanka’s Hambantota

Recommendations and decisions from Sri Lanka’s side had already been sent and Sinopec is expected to revert back in May.

“We are hoping to sign the agreement once everyone has agreed,” Wijesekara said.

The principle agreements are expected to be signed by June, he said.

The refinery could sell up to 10 percent of its output in the domestic market.

“There is no commitment by the government to purchase anything,” Minister Wijesekera said. (Colombo/Apr19/2024)

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Sri Lanka rupee closes weaker at 302.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 302.00/50 to the US dollar in the spot forex market on Friday, down from 301.50/302.00 a day earlier, dealers said.

There was increased demand for dollars after the central bank bought 715 million dollars from forex markets. In the previous two months it was buying on average about 200 million US dollars, leaving market participants and bank in a ‘oversold’ position.

There were some official dollars sales Friday dealers said.

READ Sri Lanka rupee quoted wide to US dollar as peg inconsistencies flare up

Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed at 11.30/40 percent down from 11.35/40 percent.

A bond maturing on 15.09.2027 closed at 11.95/12.05 percent up from 11.90/12.05 percent.

A bond maturing on 15.12.2028 closed stable at 12.15/25 percent.

A bond maturing on 15.09.2029 closed stable at 12.30/40 percent.

A bond maturing on 01.10.2032 closed stable at 12.40/50 percent. (Colombo/Apr19/2024)

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Sri Lanka stocks close down, banks trade down

ECONOMYNEXT – The Colombo Stock Exchange closed down on Friday, data on its site showed.

The broader All Share Index closed down 0.38 percent, or 44.80 points, at 11,753; while the S&P SL20 Index closed down 0.53 percent, or 18.46 points, at 3,456.

Turnover was at 1.4 billion. The diversified financials (Rs366mn) and banks (Rs266mn) sectors continued to see selling pressure.

“This was possibly due to uncertainty around the bond discussions,” market participants said.

With the exception of Sampath Bank Plc (up at 77.50) all other banks traded down in the day. Commercial Bank of Ceylon Plc was down at 104.50, Hatton National Bank Plc was down at 188.50, and DFCC Bank Plc was down at 77.00.

LOLC Finance Plc saw the most trades and closed up at 6.40. Another LOLC company, Browns Investments Plc, also saw high traded volumes and closed up at 5.60.

Softlogic Capital Plc was up at 7.00, and Softlogic Holdings Plc was up at 11.20. A trading suspension imposed on SHL.N0000 was lifted effective today as the company submitted the annual report for the year ended 31st March 2023.

However, shares of the Company will remain in the Watch List “due to Qualified Audit Opinion and Emphasis of matter on going concern in the Independent Auditor’s Report in the Audited Financial Statements for the year ended 31st March 2022.”

Dialog Axiata Plc, which announced its merger with Bharti Airtel Thursday, saw its share price close up at 11.90.

“There was some traction on index heavyweights,” market participants pointed out.

Top contributors to the APSI included Aitken Spence Plc (up at 134.50), Ceylon Tobacco Company Plc (up at 1,245.25, and Lion Brewery (Ceylon) Plc (up at 1,048.50).

There was a net foreign inflow of 5 million. (Colombo/Apr19/2024)

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