In a recent interview with Global CEO Magazine, Mr Thimal Perera, Director and Chief Executive Officer of DFCC Bank, shares insights on “Banking Beyond Borders: Navigating Economic Growth and Stability.”
Mr Perera delves into DFCC Bank’s collaborative efforts with the Central Bank of Sri Lanka (CBSL) and other financial institutions to support economic growth and stability. These initiatives range from aligning policies to fostering innovation within the financial sector. Notably, DFCC Bank focuses on targeted sectors such as agriculture, SMEs, export-oriented industries, and infrastructure development, directly contributing to economic expansion and promoting financial inclusion.
Moreover, Mr Perera discusses the bank’s strategies for navigating challenges and opportunities in international markets, emphasising effective risk management and strategic diversification across investments and operations. Leveraging digital technology and strategic partnerships, DFCC Bank pioneers innovative digital banking solutions, enhances efficiency in cross-border transactions, and promotes sustainable finance practices.
Furthermore, Mr Perera highlights DFCC Bank’s commitment to supporting SMEs, fostering entrepreneurship, and driving economic growth both domestically and internationally.
Q: How does DFCC Bank collaborate with the Central Bank and other financial institutions to support economic growth and stability within the country and what initiatives have been particularly successful in driving this collaboration?
We collaborate closely with the Central Bank of Sri Lanka (CBSL) and other financial institutions to bolster economic growth and foster stability. These collaborative efforts encompass initiatives to align policies, mobilise resources, and foster innovation within the financial sector.
Our partnership with the CBSL involves supporting the execution of monetary policy objectives. This entails working in tandem to effectively manage interest rates and liquidity within the banking system while ensuring that our assets and liability practices harmonise with these objectives. Additionally, we concentrate on targeted sectors such as agriculture, Small and Medium-sized Enterprises (SMEs), export-oriented industries, and infrastructure development, which directly contribute to economic expansion.
A paramount focus of our collaboration is promoting financial inclusion. We endeavour to broaden access to banking services in underserved regions through concerted efforts with the Central Bank and other stakeholders. Our initiatives encompass tailored financial literacy programmes and solutions to empower marginalised communities, including specialised programmes for women entrepreneurs. Moreover, we engage with various stakeholders to provide mentorship and networking opportunities for SMEs and startups, fostering entrepreneurship and innovation.
In driving digital transformation, we collaborate with fintech companies and telecommunications providers to pioneer innovative digital banking solutions, thus advancing financial inclusion. Furthermore, we actively engage with industry stakeholders and regulatory bodies to enhance risk management practices, thereby reinforcing the banking sector stability. Additionally, we collaborate on initiatives to enhance industry capacity through skills development and knowledge-sharing.
Q: In an increasingly interconnected global economy, how does your Bank navigate challenges and opportunities arising from international markets and cross-border transactions, and what strategies do you employ to ensure resilience and sustainability in the face of external economic factors?
Effective risk management is paramount for achieving sustained success in our operations. We have established robust frameworks dedicated to identifying, assessing, and mitigating risks associated with international operations and cross-border transactions, encompassing credit, market, liquidity, and operational risks. This proactive approach enables us to make well-informed decisions without compromising the stability of the Bank as well as the Banking industry.
Strategic diversification across our investments and business operations is integral to our risk management strategy. By spreading risk effectively, we minimise the impact of adverse economic conditions. Moreover, our adherence to local and international regulations, including those governing cross-border transactions such as Anti-Money Laundering (AML) Regulations and Know-Your-Customer (KYC) requirements, are fundamental to our approach.
Continual stress testing of our risk model through various assessments allow us to evaluate the potential impact of adverse economic conditions or market disruptions from a global perspective, enabling us to identify and address weaknesses proactively.
Strategic partnerships and alliances are pivotal in facilitating cross-border transactions and accessing new business opportunities. We collaborate closely with correspondent banks, multinational corporations, and financial institutions in key international markets, gaining valuable insights into local market dynamics and regulatory requirements. Furthermore, leveraging modern technology such as blockchain, Artificial Intelligence (AI), and digital platforms enhances efficiency and security in cross-border transactions, streamlining processes, improving risk assessment, and enhancing compliance monitoring.
Our commitment to sustainable finance practices, integrated into our decision-making processes, underscores our values. DFCC Bank integrates environmental, social, and governance (ESG) factors into lending and investment decisions, positioning itself as a responsible financial institution dedicated to long-term sustainability.
Q: With the rapid advancement of digital technology and fintech innovations, how is your Bank leveraging digitalisation and technological advancements to enhance banking services, improve financial inclusion, and contribute to local and global economic development?
As a pioneer in digital service delivery, we have long recognised the pivotal role of digitalisation in enhancing banking services, fostering financial inclusion, and driving economic development. Accordingly, we offer innovative, user-friendly digital banking platforms, including mobile banking, internet banking, and e-wallets, ensuring uninterrupted access to banking services for our customers around the clock.
Through strategic collaborations with fintech companies, we leverage innovative solutions and technologies to enrich our product offerings, streamline processes, and deliver value-added services more efficiently. This encompasses facilitating digital payments via electronic solutions such as mobile wallets, contactless cards, and QR code payments, promoting seamless customer convenience and advocating for cashless transactions, further formalising the economy.
Digital technology is a potent tool for advancing financial inclusion. It allows us to extend services to underserved populations through initiatives such as mobile banking and agent banking, which are particularly beneficial in reaching remote areas with limited traditional banking access.
Our digital lending platforms have revolutionised the loan application and approval process, minimising paperwork, enhancing efficiency, and expanding accessibility to credit for individuals and businesses, including those with limited credit history. By harnessing data analytics and AI, we gain insights into customer behaviour, preferences, and creditworthiness, enabling personalised offerings, risk identification, and data-driven decision-making to optimise operations and elevate customer satisfaction.
Exploring the potential of blockchain technology, we aim to deliver enhanced services, including secure and transparent transactions, trade finance, and supply chain management, leading to further cost savings and risk mitigation.
Moreover, to enhance digital financial inclusion, we conduct education and awareness programmes to empower customers with digital literacy skills and educate them on online banking security best practices, enabling safe and effective utilisation of digital banking services.
Q: What strategies does your Bank employ for provisioning Stage III non-performing loans, and how does this contribute to maintaining financial stability and regulatory compliance?
Regarding Stage III non-performing loans (NPLs), our approach is thorough. We ensure financial stability and stringent regulatory compliance while mitigating credit risk and upholding the Bank’s integrity. We meticulously adhere to regulations and guidelines governing loan provisioning, maintaining transparency and accountability in our financing activities to inspire stakeholder confidence.
Employing a risk-based approach, we set aside provisions for Stage III NPLs, considering each borrower’s credit risk profile and recovery likelihood to reflect potential losses accurately. Leveraging sophisticated models and data analytics, we determine the necessary provisioning for expected credit losses on Stage III NPLs, guided by statistical data, historical loss trends, and forward-looking economic indicators.
Continuous monitoring and assessment of the loan portfolio enable early identification of loans showing signs of deterioration, facilitating timely action to address potential defaults. Independent valuation of collateral linked to impaired loans ensures that provisioning aligns with the realisable value of tangible security assets.
In distressed accounts, we employ various loan workouts and recovery strategies tailored to each borrower’s circumstances, including restructuring, negotiation, or asset sale. We prioritise customer support to minimise default occurrences.
Q: Sustainability and Environmental, Social, and Governance (ESG) considerations are increasingly important in the banking sector. How does your Bank integrate sustainability principles into its operations, investment decisions, and corporate strategy to promote long-term economic resilience and responsible banking practices?
ESG considerations are integral to our overarching strategy, shaping our approach to driving long-term economic resilience and responsible banking practices. We have taken significant strides in managing ESG risks by seamlessly integrating them into our comprehensive risk management frameworks and aligning traditional financial risk management with our broader sustainability objectives.
At the core of DFCC Bank’s sustainability agenda lies developing and promoting sustainable finance products, an area we proudly lead. As trailblazers, we were the first Bank in Sri Lanka to devise and implement a formal Sustainability strategy. As such, we offer various financing solutions to support environmental sustainability and social responsibility. From green loans that bolster renewable energy projects to sustainable agriculture financing and microfinance initiatives targeting underserved communities, DFCC Bank emerges as a genuine catalyst for sustainable development, underscoring our commitment to fostering economic activities that benefit people, the planet, and profitability.
Governance and ethics are pillars of our sustainability objectives, which are evident in our steadfast adherence to stringent corporate governance standards and ethical principles. These principles cultivate a culture of transparency, accountability, and integrity across our operations, from board oversight to stakeholder engagement, setting high industry level standards.
Stakeholder engagement remains another cornerstone of DFCC Bank’s sustainability strategy. We prioritise open communication with diverse stakeholders, including customers, employees, investors, and the wider community. Our commitment to transparency is reflected in our exceptional ESG reporting and disclosure practices, ensuring stakeholders are well-informed about our sustainability Key Performance Indicators (KPIs), challenges, and achievements.
Furthermore, our dedication to sustainability extends to educational initiatives and awareness campaigns. Through targeted training programmes and public outreach efforts, we disseminate knowledge on sustainable finance and ESG principles, empowering internal and external stakeholders to make informed decisions that contribute to environmental and societal well-being.
Q: As a leader in the banking industry, what role do you see your Bank playing in driving innovation, fostering entrepreneurship, and supporting Small and Medium-sized Enterprises (SMEs) to stimulate economic growth and create employment opportunities within the country and beyond?
DFCC Bank plays a pivotal role in driving innovation by fostering entrepreneurship and extending support to Small and Medium-sized Enterprises (SMEs). This, in turn, catalyses economic growth and creates employment opportunities both domestically and internationally. Our approach involves a multifaceted strategy encompassing financial innovation, dedicated support programmes, and strategic partnerships.
Our efforts focus on crafting and delivering tailored financial products and services to address the specific needs of SMEs and entrepreneurs. This includes a diverse array of lending solutions, trade financing options, and venture capital funding aimed at overcoming the unique challenges encountered by these entities. By providing innovative financial offerings, DFCC Bank empowers SMEs to expand their operations, explore new ventures, and contribute significantly to the national economy.
Recognising the critical role of nurturing entrepreneurship, we conduct various support programmes to offer mentorship, foster skills development and provide networking opportunities to budding entrepreneurs. These initiatives equip them with the requisite tools for success, help them navigate the complexities of business initiation and growth, and foster a dynamic entrepreneurial ecosystem.
Moreover, DFCC Bank extends SMEs’ access to finance under favourable terms through targeted financing initiatives. These initiatives encompass benefits such as preferential interest rates, flexible repayment structures, and loans with relaxed collateral requirements, all geared towards alleviating common financial hurdles that SMEs face.
Embracing digital technology and service delivery further enhances our support to SMEs by simplifying banking processes and elevating customer service standards. This ensures greater accessibility to our services and equips these businesses with tools for improved financial management. Additionally, through collaborations with government and private sector stakeholders, we aim to broaden opportunities for SMEs, including co-financing arrangements, knowledge-sharing platforms, and initiatives to enhance the business environment.
Recognising the significance of global markets for SME growth, DFCC Bank actively facilitates its international expansion through a comprehensive suite of services, including trade finance solutions, export assistance, and networking opportunities. These concerted efforts are essential for addressing systemic challenges entrepreneurs face in Sri Lanka and positioning SMEs for sustainable success on the global stage.
Q: Over the last few years, what key initiatives has your Bank implemented to enhance its performance and competitiveness in the global market? What are your expectations for your Bank’s performance and growth in the coming years, particularly in expanding operations beyond borders?
While we serve numerous international clients and facilities abroad, we recognise the importance of the role we play in contributing to Sri Lanka’s economic revival before considering expansion initiatives beyond national borders.
