A Malaysian based private equity fund has a remaining capital of U.S.$ 80 million for investment in the region, including that of Sri Lanka.
Lew Oon Yew, Executive Director, Head, Private Equity, KFH Asset Management Sdn Bhd who made a whistle stop visit to the island to participate in a CIMA organized seminar on Tuesday morning on private equity told The Sunday Leader that he was meeting one or two local parties in this connection on Tuesday itself, before leaving the island on the same day.
The total monies allocated to this region are U.S.$ 200 million of which 60% has already been committed to projects in countries such as Malaysia, Singapore, China and India. Their lending is for an eight year tenure.
Projects alrady invested included solid waste management and real estate.
Yew said that among the areas of funding that they were looking at was shipping and in the local context, health, education, agriculture, food processing and light manufacture.
“Young and developing economies like Sri Lanka should seriously explore private equity in order to fast track growth,” said Yew.
Often, private equity investors choose small to medium enterprises (s.m.e.s) to fund and sometimes they buy into management to ensure the finds are handled prudently. Although private equity acquired some disrepute in the hubris following the credit crunch led global financial crisis, it is still alive and flourishing in most fast developing nations, Yew cited Brazil, India and the Middle East as examples.
Koshy Mathai, I.M.F.’s Resident Representative in Sri Lanka in his speech said that as bank lending does not go beyond seven years, the way forward for obtaining capital was from private equity, listing and from the corporate bond market.
He however said that the corporate bond market was not developed in Sri Lanka.
Mathai said that a key problem was s.m.e.s not having access to finance. He also emphasized the importance of developing the capital market.
“Sri Lanka has a financing model that is bank dependent and long term finance (for time periods longer than seven years) is not available.” S.m.e.s have limited sources of funding as a result. ‘The capital market in Sri Lanka must be developed and after corporate bonds and listing in the stock market, private equity is the third natural thing to consider as financing options for businesses,” said Mathai.
Hatton National Bank p.l.c. Chairman Rienzie T. Wijetilleke said that there were reasons why private sector credit was not growing, whilst admitting that banks were sitting on liquidity. He however said that he doesn’t have time to elaborate on such matters, but among one of the chief reasons was the bureaucracy despite the war end.
He cited the example of one of his clients who had been driven from pillar to post by the U.D.A. to obtain approval for a project.
Wijetilleke further said that for credit to pick-up issues such as governance and confidence rebuilding needed to be addressed.
He also said that as 75% of the populace was living in villages, investments should be targeted at this sector.
Wijetilleke said that areas that needed investments included education, health and tourism sectors.
“We require a cultural change in the way corporate and the way people look at private equity. The small scale villagers’ and s.m.e.s must be helped out in order to develop our economy and private equity must be used in a way the s.m.e.s also get management expertise,” he said.
Together with adopting a more thought out development orientation to a private sector driven private equity funding base, Wijetilleke also stressed on the importance of getting rid of governmental red tape to create a business environment that is more accommodative and friendlier to startups.
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