Credit Movement

July 14, 2009 (LBO) – Fitch Ratings Lanka said it has confirmed Sanasa Development Bank’s (SDB) national long-term rating at ‘BB(lka)’ with a stable outlook. “SDB’s rating reflects its historically high levels of profitability and moderate asset quality,” the rating agency said in a statement.

“The rating is constrained by the riskier nature of its client base, which is more susceptible to economic downturns.”

SDB’s clientele primarily consists of the somewhat riskier microfinance segment (MFI), with an average small loan size of about 200,000 rupees.

Fitch said the bank’s loan growth has historically been high, with a compound annual growth rate of 41.9 percent during the 2005-2008 period.

However, loan growth slowed to 5.6 percent in the five-month period to end-May 2009 (as did the rest of the banking sector), due to the economic slowdown.

SDB intends to substantially increase disbursements in the second half of 2009, although growth would remain below historic levels.

“Fitch has some concern on the impact of this on credit quality as the current economic climate is likely to prevail at least through FY09,” the rating agenc