‘Banks can help Sri Lanka leapfrog into the digitally-supported growth of tomorrow’

(COLOMBO, LANKAPUVATH) –World Bank Country Director for Nepal, Sri Lanka and the Maldives Dr. Idah Pswarayi-Riddihough says banks have a critical role to play in fueling growth and help Sri Lanka leapfrog into the digitally-supported growth of tomorrow.

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, Dr. Pswarayi-Riddihough said the banks have a critical role to play in in supporting remittances that can fuel growth beyond consumption and financial inclusion, as well as in increasing access to financing for Small and Medium Enterprises.

“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.

Secondly, as an enabler, banks are critical actors for financial inclusion and, in Sri Lanka, banks have done a tremendous job in promoting it.

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.

However, Dr. Pswarayi-Riddihough noted 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.

The World Bank official says 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.

Dr. Pswarayi-Riddihough said banks can enable development through different means, such as: (1) designing innovative loan schemes for entrepreneurs; (2) supporting financial literacy and digital ecosystems in the development of new data-driven business models; and (3) 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.”

“You are part of the equation in Sri Lanka’s recent graduation into upper middle-income status, and you will continue to be very important for the country’s future,” she told Sri Lanka’s bankers.

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