Sri Lanka’s NBFI sector seeks clearer skies for Fintech and Crypto adoption

Sri Lanka’s Non-Banking Financial Institutions (NBFI) sector is calling for a clear regulatory framework and strategic direction from the Central Bank (CB) to navigate the burgeoning fields of financial technology (fintech) including cryptocurrency. 

The appeal comes as industry leaders express concerns that Sri Lanka is falling behind global trends in adopting new technologies, a sentiment echoed by Asia Asset Finance PLC Director and CEO Rajiv Gunawardena during a recent discussion hosted by Softlogic Stockbrokers.

“One of the sectors we can look at in terms of where new improvements are needed would be mainly on the fintech side because there are not many of technological advancements taking place,” Gunawardena stated. “For those kinds of sectors, I think we are a little bit in the gray area whereas developed countries have already adopted new technologies. They are using crypto as a trading commodity. They’re using so many new innovations. But we are still in the early stages there.”

He emphasised the need for regulatory guidance to foster innovation and future planning within the sector.

‘‘If the Central Bank also can provide us a framework or a direction in this regard, it would be helpful for us also when we make our business plans for the future,’’ he added.

The discussion also highlighted the significant strides the NBFI sector has made in overcoming recent economic challenges, with Gunawardena noting a marked improvement in performance and asset growth. He credited this resilience as part to the stability of products like gold loans.

“I feel that gold loan is a product which is resistant to challenges. So this product has been helping the industry grow and develop over the past,” he explained, underscoring its importance in the sector’s portfolio, especially over the last two years.

In a move welcomed by the industry, the Central Bank recently eased Loan-to-Value (LTV) ratios for vehicle leasing. Gunawardena views this as a positive development that will empower NBFIs, the pioneers of leasing in Sri Lanka, to better meet the anticipated surge in demand following the relaxation of vehicle import restrictions.

“The Central Bank has introduced new LTV ratios which will be beneficial for the sector as well and it will be helpful to cater to the requirements of the people through our product lines,” he remarked.

On the topic of risk management, Gunawardena asserted that the sector has matured, learning valuable lessons from past crises. He pointed to significant improvements in operational frameworks and the adoption of technology to make more informed decisions.

“We have evolved a lot. We have significantly improved our operations. We have given a lot of prominence to our risk framework. We have built better risk profiles, and additionally we have used a lot of good information to make better decisions,” he said. This enhanced approach to risk, he believes, is enabling financial institutions to explore new market segments and identify creditworthy customers more effectively.

Looking ahead, Gunawardena outlined Asia Asset Finance’s strategy of integrating technology with its conventional product offerings, such as gold financing and leasing, to enhance customer service and accessibility.

“We want to be able to serve our customers from anywhere, anytime, any place,” he envisioned, highlighting a future where understanding customer patterns through technology will be key to developing responsive and efficient financial products. (NF)