Micro Rating

Oct 22, 2012 (LBO) – Fitch Ratings has lifted the outlook of Sri Lanka’s ‘BB+(lka)’ rated Sanasa Development Bank, a micro lender, to positive from stable, on improving asset quality ad better margins. “The revision of the Outlook reflects SDB’s improved credit metrics, which are now more in line with those of higher-rated peers,” Fitch said.

“SDB’s rating continues to reflect its healthy capitalisation relative to peers, high net interest margins (NIMs), improving asset quality, and effective management of its core business – micro finance (MF) lending.:

SDB has been able to manage the quality of its loans despite MF borrowers being more sensitive to economic cycles. However, non-performing loans (NPLs) could increase through the bank’s exposure to the agriculture sector (13% of total loans) as the prevailing drought takes its toll on its MF borrowers.

Though non peforming loans (NPLs) fell to 4.3 percent in the first half of 2012 from 4.4 percent in 2011 and 5.7 percent in 2010, Fitch said there may be an uptick due to drought related agriculture loans.

The full statement is reproduced below

Fitch Revises Sanasa Development Bank’s Outlook to Positive; Affirms at ‘B