Mindset Change

Aug 27, 2010 (LBO) – A top Sri Lankan banker has urged a shift to loans based on cash-flows, not assets, and more lending to people in the north-east of money mopped up by new branches in the former war zone. Rajendra Theagarajah, chief executive of the private listed Hatton National Bank, said banks should also be less tight-fisted and lend more to small and medium entrepreneurs.

The end of the island’s 30-year ethnic war fought largely in the north and east has opened up new opportunities that should accelerate growth, Theagarajah told an investor forum organised by CT Smith Stockbrokers.

But he said it was important to ensure inclusive growth and a better distribution of income.

“Building the confidence of the common man in the north and east is also important,” he said.

“There is a surge in banks setting up branches in the north-east but banks must not just mop up deposits and bring the money to Colombo. We might need legislation to ensure a reasonable amount of money mopped up there is redeployed in the region,” Theagarajah said.

“If not we’ll never eliminate inequality.”

Theagarajah said it would be up to the banking sector to drive economic growth in the immediate futur