Banks can support SL leapfrog into digitally – supported growth of tomorrow

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Banks have a critical role to play in supporting remittances that can fuel growth beyond consumption, and help Sri Lanka leapfrog into the digitally-supported growth of tomorrow, Dr.Idah Pswarayi-Riddihough, the World Bank Country Director for Sri Lanka, said.

She also noted that banks have a critical role to play in financial inclusion, as well as in increasing access to financing for Small and Medium Enterprises (SMEs).

“We believe that banks have a critical role to play in financial inclusion, as well as in increasing access to financing for Small and Medium Enterprises. Banks also have a critical role to play in supporting remittances that can fuel growth beyond consumption, and help Sri Lanka leapfrog into the digitally-supported growth of tomorrow.” Dr. Pswarayi-Riddihough, said while Delivering the keynote speech on the theme “Challenge of disruptive change: Together Towards Tomorrow” at the 31st Anniversary Convention of Association of Professional Bankers of Sri Lanka in Colombo.

The banking sector is one of the industries that could have a strong leapfrog effect on development, if it acts adequately as both driver and enabler.

As a driver the banking industry is rapidly evolving as new trends and disruptive technologies continue to reshape the sector. Fintech players are challenging the status quo with new operating models. They are leveraging digitalization in different areas (compliance, accountability, transparency, and risk management) to provide a tailored client-experience for their customers.

As an enabler, banks are critical actors for financial inclusion and, in Sri Lanka, banks have done a tremendous job in promoting it, Dr.Pswarayi-Riddihough said.

The density of bank branches in the country currently stands at 18.6 branches for every 100,000 adults. And about 83% of the adult population has a bank account, with women recording a similar penetration rate, unlike many other South Asian countries.

“We often hear that, in the case of Sri Lanka, old habits die hard. While banks are pushing the digital transformation in their sector, it seems that Sri Lankans still prefer to bank at their local branches, which are often a part of their own communities. This should come as no surprise in a country where over 80% of the population lives in rural areas,”Dr. Pswarayi-Riddihough, added.

Speaking further she noted that having a bank account isn’t enough; it must be used. “The challenge in Sri Lanka is less about the unbanked; it is more about the underbanked, especially the women.”

According to the International Finance Corporation (IFC), the number of individuals who reported no deposits and no withdrawals in 2017 was 31%. And only 17% of the women were successful in borrowing from financial institutions while, in the formal market, about 80% of the borrowers have been women. Moreover, less than 15% of SMEs and less than 1% of MSMEs use any form of insurance, which leaves businesses and individuals at greater risks.”

In this challenging and changing environment, banks should be seen as development enablers, Dr.Pswarayi-Riddihough said.

“Banks can enable development through different means, such as: designing innovative loan schemes for entrepreneurs;supporting financial literacy and digital ecosystems in the development of new data-driven business models; and adopting exemplary sectoral guidelines and best practices regarding data governance and cybersecurity in order to improve trust in the digital economy.In other words, in times of disruptive change, we should rely on strong and agile institutions to help society transition in the best possible way. At the World Bank, we believe that the private sector has a critical role to play in supporting this transition, and that disruptive technologies can help accelerate development in the 21st century,” Dr.Pswarayi-Riddihough added.