2024/25
ANNUAL REPOR T
Contents
ABOUT US
Performance Highlights | 2 Chairman's Review | 4 Director/CEO's Review | 6 Board of Directors | 8
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Review | 12 Review of Operations | 15 Sustainability Report | 25
Information Technology and Security | 27
STEWARDSHIP
Corporate Governance Framework of LOLC Finance PLC | 30 Enterprise Risk Management | 76
Report of the Board of Directors | 80
Directors' Statement on Internal Control over Financial Reporting | 86 Independent Assurance Report | 87
Report of the Audit Committee | 88
Report of the Integrated Risk Management Committee | 89 Report of the HR & Remuneration Committee | 90
Report of the Related Party Transaction Review Committee | 91 Report of The Nominations and Governance Committee | 92 Report of the Board Credit Committee | 93
Chief Executive Officer's and Head of Finance's Responsibility Statement | 94
Directors' Responsibility for Financial Reporting | 95
FINANCIAL STATEMENTS
Financial Calendar | 98 Independent Auditor's Report | 99
Statement of Financial Position | 103
Statement of Profit or Loss and Other Comprehensive Income | 104 Statement of Changes in Equity | 106
Statement of Cash Flows | 108
Notes to the Financial Statements | 109
Financial Information for Last Ten Years
Statement of Profit or Loss | 202
Statement of Financial Position | 202 Quarterly Statement of Financial Position | 204 Quarterly Statement of Profit or Loss | 205 Investor Information | 206
Other Disclosures | 209
SUPPLEMENTARY INFORMATION
Notice of Annual General Meeting | 220 Form of Proxy | 221
Stakeholder Feedback Form | 223 Corporate Information | IBC
2024/25
ANNUAL REPOR T
ABOUT US
Performance Highlights
2025 | 2024 | |||
Key Highlights of the Year New Executions | Rs. Million | 347,905 | 252,411 | |
Net Interest Income | Rs. Million | 42,106 | 37,975 | |
Profit Before Tax | Rs. Million | 25,085 | 21,547 | |
Profit After Tax | Rs. Million | 25,085 | 21,547 | |
Net Assets | Rs. Million | 149,524 | 122,345 | |
Total Value Added | Rs. Million | 40,067 | 33,086 | |
Market Capitalisation | Rs. Million | 198,475 | 181,936 | |
Value Added Per Employee | Rs. Million | 6.55 | 6.54 | |
Per Share Market Value | Rs. | 6.00 | 5.50 | |
Net Asset Value | Rs. | 4.52 | 3.70 | |
Earnings | Rs. | 0.76 | 0.65 | |
Total Staff | Number | 5,053 | 5,058 | |
Total Training Investment | Rs. Million | 35.24 | 14.20 | |
Total Training Hours | Hours | 58,884 | 46,700 | |
Number of Female Employees | Number | 1,258 | 1,035 | |
New Recruits | Number | 930 | 816 | |
Rs. 42,106 Mn
Net Interest Income
Rs. 25,085 Mn
Profit Before Tax
Rs. 149,524 Mn
Net Assets
Rs. 35.2 Mn
Training Investment
5,053
Total Staff
58,884
Total Training Hours
Total Assets
Rs. Million
500,000
400,000
300,000
200,000
100,000
Customer Deposits
Rs. Million
250,000
200,000
150,000
100,000
50,000
Profit After Tax
Rs. Million
30,000
25,000
20,000
15,000
10,000
5,000
2021
2022
2023
2024
2025
2021
2022
2023
2024
2025
2021
2022
2023
2024
2025
0 0 0
Executions
Rs. Million
350,000
Portfolio
Rs. Million
350,000
Revenue
Rs. Million
100,000
300,000
250,000
200,000
150,000
100,000
50,000
300,000
250,000
200,000
150,000
100,000
50,000
80,000
60,000
40,000
20,000
2021
2022
2023
2024
2025
2021
2022
2023
2024
2025
2021
2022
2023
2024
2025
0 0 0
Portfolio Composition
Region Wise Portfolio
Funding Composition
2%
2%
23%
%
50%
9%
13
1%
10%
8%
15%
13%
4% 9%
11%
5%
5%
20%
10%
6%
84%
ABOUT US
Chairman's Review
AT THE HEART OF OUR JOURNEY IN 2024/25 WAS A CLEARLY ARTICULATED STRATEGIC FOCUS: TO DRIVE SUSTAINABLE GROWTH, EXPAND
OUR REACH ACROSS UNDERSERVED REGIONS, MAINTAIN ASSET QUALITY AND CONTINUOUSLY IMPROVE OPERATIONAL EFFICIENCY. THESE PRIORITIES GUIDED EVERY DECISION, INVESTMENT AND INITIATIVE THROUGHOUT THE YEAR.
The financial year 2024/25 marked a pivotal turning point in Sri Lanka's macroeconomic journey. The shift from a high-interest regime to a more stable and predictable interstellar rate structure provided welcome relief for borrowers and opened new growth avenues for financial services sector. The recovery, however, has not been without complexity.
OPERATING LANDSCAPE
Sri Lanka's path toward macroeconomic stability has required deep structural reforms, ranging from fiscal consolidation to debt restructuring. The resulting fiscal discipline and prudent monetary policy helped to anchor inflation expectations, moderate interest rates and improve investor confidence.
Foreign inflows too showed signs of recovery, supported by renewed engagement with multilateral institutions and improved export performance. Remittances rebounded during the period under review, offering an important buffer to the external sector. These positive indicators, though still nascent, suggest that Sri Lanka is on a firmer trajectory of economic normalisation.
Nonetheless, vulnerabilities persist. Exchange rate volatility, global commodity price pressures and geopolitical risks continued to
pose challenges. Domestically, the year under consideration saw increased political clarity following two key elections. This renewed sense of policy continuity and economic direction offers a much-needed foundation for private sector investment and long-term planning. At LOLC Finance, we view this as a platform for growth - not just for our business, but for the entire financial services industry in Sri Lanka.
Looking beyond the short-term stabilisation, the financial services sector must recalibrate for a more dynamic, innovation-driven future. As the country accelerates its
journey towards greater digitisation and formalisation of economic activity, the role of financial institutions will become more strategic in driving capital flows, enabling entrepreneurship and supporting inclusive economic transformation. The convergence of technology, customer expectation and
regulatory reform is fundamentally reshaping how financial services are consumed and delivered. These shifts in the operating environment necessitates agility, strategic foresight and strong risk management for financial institutions.
OUR RESPONSE
LOLC Finance was able to leverage this shift with agility and effectively, maintaining healthy yields while expanding its lending
book across multiple customer segments. As an entity, we remained proactive in adjusting our portfolio strategies, calibrating our credit exposures, and ensuring that our funding and liquidity structures remain resilient. In this evolving context, we believe that we have a responsibility to go beyond traditional intermediation and must lead the way in setting new benchmarks for accessibility, transparency and sustainability across the
industry. Our long-term success will be defined not only by our financial performance, but by how effectively we anticipate change, respond with relevance and create value for society at large.
OUTSTANDING FINANCIAL RESULTS
This clarity of purpose translated into outstanding financial performance. In a historic first, LOLC Finance delivered a Profit After Tax of Rs. 25.1 billion - the highest-ever in the company's history. Notably, this accounted
for over one-third of the entire Non-Banking
Financial Institution (NBFI) sector's profits in the country, further cementing our status as a market leader. Our gross loan portfolio grew by Rs. 47 billion, surpassing Rs. 305 billion, while our total asset base expanded to Rs. 429.7 billion. These achievements reflect disciplined portfolio management, a robust product strategy and prudent risk practices. The company also maintained a healthy funding structure, with customer deposits growing to Rs. 225.7 billion.
Our reliance on borrowings reduced, highlighting our shift towards more stable and cost-effective sources of capital. Importantly, we achieved these milestones while maintaining strong liquidity buffers and capital adequacy ratios well above the regulatory minimums. The Net Non-Performing Loan (NPL) ratio declined sharply to 4.81% from 10.48% in the previous year. These financial milestones demonstrate the strength of our credit risk management practices and our ability to adapt in a changing macroeconomic environment, while placing us on par with the largest private sector banks in the country.
REVIEW OF OPERATIONS
LOLC Finance has long held a unique position in the financial ecosystem of Sri Lanka. Our inclusive financial model and broad product portfolio have consistently empowered individuals and enterprises at the grassroots, while simultaneously enabling growth in the SME sector. This dual focus continues to define our identity and fuel our momentum.
At the heart of our journey in 2024/25 was a clearly articulated strategic focus: to drive sustainable growth, expand our reach across underserved regions, maintain asset
quality and continuously improve operational efficiency. These priorities guided every decision, investment and initiative throughout the year.
LOLC Finance remains deeply committed to the communities it operates in and extended its branch presence to areas that had previously seen little to no access to formal financial services. Through the rationalisation and relocation of the branch network in Hettipola and Badalkumbura towns, we made a conscious effort to bring financial inclusion to regions historically underserved by both state and private sector players.
DIGITAL INNOVATION REMAINS CENTRAL TO LOLC FINANCE'S GROWTH STRATEGY, DRIVING ENHANCED ACCESSIBILITY, SPEED AND TRANSPARENCY ACROSS ITS SERVICE ECOSYSTEM.
FLAGSHIP PLATFORMS SUCH AS LOLC REAL TIME AND IPAY HAVE TRANSFORMED THE WAY CUSTOMERS ENGAGE WITH FINANCIAL SERVICES, BRIDGING CONVENIENCE WITH RELIABILITY.
Net Assets
Rs. 149,524 Mn
Our customer-centric commitment was equally reflected in our digital initiatives. Among the most significant of these was the digitisation of our gold loan offering to enhance convenience for customers. We also introduced alternative financing solutions such as factoring and expanded our Islamic Business Unit's gold-backed products, ensuring that our offerings remain relevant, diversified and inclusive.
GOVERNANCE, RISK AND SUSTAINABILITY
In a dynamic environment, stronger governance and risk oversight remain central to our operations. We continued to strengthen our governance framework, welcoming a new independent non-executive director to the Board during the period under consideration, while enhancing the diversity and skills mix
of our Board leadership. Steps were taken to deepen our risk management practices: a dedicated risk function was formalised to drive accountability and ensure our internal controls remain agile and forward-looking.
We believe this is essential to safeguarding stakeholder value in an evolving risk landscape. Recognising the growing importance of data privacy and compliance, we began preparations for the implementation of the Personal Data Protection Act (PDPA), appointing a Data Protection Officer and initiating internal alignment processes.
On the sustainability front, we expanded our strategic focus to include electric vehicle (EV) financing and strengthened our
Environmental, Social and Governance (ESG) roadmap. Many of our initiatives now align with national sustainability objectives and global development frameworks. Our new partnerships with EV importers, the launch of super dealer networks and rural outreach
efforts are all underpinned by this broader commitment to environmental and social sustainability.
Our success would not be possible without our dynamic team. While the financial services sector continues to grapple with talent shortages, we have taken proactive steps to invest in our future leadership. The rollout of a structured Management Trainee Programme and a Management Development Programme in the next financial year will enable us to build internal capacity and nurture future-ready leaders. Furthermore, we are proud of the strides we have made in improving diversity
at the leadership level, with increased gender representation on our Board. These steps are part of our longer-term vision to foster a high-performing, inclusive workplace culture that reflects our values.
LOOKING AHEAD
The road ahead presents a multitude of opportunities. As import restrictions ease and vehicle financing markets re-open, LOLC Finance is well-positioned to capture emerging demand. We are already laying the groundwork through strategic partnerships, product innovation and channel expansion. Digital innovation remains central to LOLC Finance's growth strategy, driving enhanced accessibility, speed and transparency across its service ecosystem. Flagship platforms such as LOLC Real Time and iPay have
transformed the way customers engage with financial services, bridging convenience with reliability. Recognised as Sri Lanka's leading pass-through digital wallet, iPay continues to lead the market in adoption and usage.
Its consistent performance has earned LOLC Finance multiple honours at the LankaPay Technnovation Awards, including the coveted
Overall Gold Award for an unprecedented six consecutive years. Our continued investment in next generation digital solution will enable us to scale operations, deepen customer engagement and unlock new revenue streams.
ACKNOWLEDGEMENTS
I extend my heartfelt appreciation to the Board of Directors for their strategic guidance. To our senior management team, and our entire staff for their dedication and execution excellence across the country, your dedication, resilience and commitment have been the driving force behind our success.
I also take this opportunity to thank all our stakeholders, shareholders, regulators and customers for their continued trust in the company.
I would also like to recognise Mr. K.K. Sundararaj, who transitioned from the Board of LOLC Finance to take on new responsibilities within the LOLC Group. We thank him for his invaluable service and extend a warm welcome to our new Board appointee, Mrs. K.T.C. Priyangani, whose insights will undoubtedly strengthen our journey ahead.
We are proud of our achievements in 2024/2025 and remain committed to delivering even greater value in the years ahead and shaping the future of financial services in Sri Lanka and beyond.
F K C P N Dias
Chairman
ABOUT US
Director/CEO's Review
LOLC FINANCE PLC RECORDED THE HIGHEST PROFIT IN ITS HISTORY, SURPASSING RS. 25 BILLION IN PROFIT AFTER TAX, ALSO THE LARGEST PROFIT EVER DECLARED BY A NBFI IN SRI LANKA. THE RESULT REFLECTED NOT ONLY THE ROBUSTNESS
OF OUR OPERATING MODEL BUT ALSO OUR RESPONSIVENESS TO EVOLVING MARKET CONDITIONS AND CUSTOMER NEEDS.
FY 2024/25 marked a momentous chapter for the Sri Lankan economy at large, as following prolonged disruption, the nation began charting a more stable and deliberate path to recovery. Notable, important macroeconomic indicators showed clear improvement: GDP growth reached 5% in the 3rd quarter of 2024/25 - the highest in three years - while foreign reserves stabilised at USD 6.1 billion and inflation eased to around
-1.7%. These tailwinds invigorated market sentiment and ignited a resurgence in credit demand.
The much-awaited recovery stemmed from a confluence of fiscal consolidation, tightened monetary policy and sustained progress on external debt restructuring. Strengthened foreign inflows, driven by tourism and worker remittances, helped to reinforce the balance of payments and provide a firmer footing for medium-term stability.
Nonetheless, the external operating landscape remained complex, with geopolitical instability, fluctuating commodity prices and climate risks continuing to exert pressure. Yet, a cautious optimism emerged as businesses and consumers in the local context gradually
re-engaged with the financial system and capital markets.
NBFI SECTOR PERFORMANCE
The financial services sector experienced renewed traction within this evolving macroeconomic context. The easing of policy rates, coupled with improved liquidity and expectations around the potential relaxation of vehicle imports, catalysed demand for credit. Lending activity surged across the banking and non-banking financial sectors, with the latter playing a critical role in supporting underserved and grassroots markets. LOLC Finance PLC's record profit of over Rs. 25 billion underscored the sector's capacity for performance and resilience.
The NBFI sector continued to demonstrate its relevance as a catalyst for inclusive finance. Institutions such as LOLC Finance PLC remain integral in facilitating access to capital for micro and small-scale enterprises, many of which were still in the process of returning to profitability post the pandemic and the economic crisis. This role extended beyond financial intermediation, encompassing broader contributions to social and economic development.
COMPANY PERFORMANCE
Amidst these dynamics, LOLC Finance PLC recorded the highest profit in its history, surpassing Rs. 25 billion in Profit after tax, also the largest profit ever declared by a NBFI in Sri Lanka. The result reflected not only the
robustness of our operating model but also our responsiveness to evolving market conditions and customer needs. Our performance was anchored in a well-diversified business portfolio, rigorous risk management and a disciplined cost structure. Improved asset quality, prudent lending and a steady reduction in non-performing loans contributed to this outcome.
I am proud to state that the portfolio remained resilient, supported by engaged customers and a dynamic internal capability set that continued to evolve in step with changing expectations.
We maintained a sharp strategic focus on Small and Medium-sized Enterprises (SME) and
microfinance, segments that anchor much of the nation's working population. Since our merger
in 2022, we have committed to enabling access to capital for these sectors, which continue
to generate strong outcomes. Our lending solutions, including factoring, Islamic finance, operating leases and gold-backed products offered flexibility and adaptability to a wide spectrum of clients. A global surge in gold prices further stimulated demand for gold loans, which contributed to portfolio growth.
We closely monitored core financial indicators -net interest margins, cost of funds, bottom-line performance and non-performing loan ratios
- to refine our approach in real time. Strong governance, combined with a commitment to customer centricity, underpinned sustainable value creation and operational excellence.
DIGITAL ROADMAP
Technology served as a central enabler of performance during the year. We made substantial progress on our digital roadmap, automating key processes and rolling out AI-led solutions across lending, onboarding and collections. Our gold loans transitioned fully to a digital self-service platform, while our iPay
e-wallet is poised to deliver most of our lending services in the future. These developments reflect our intent to lead as a digitally enabled financial institution.
HONING HUMAN CAPITAL
Concurrently, we invested strategically in human capital. Structured training programmes, leadership development pipelines and targeted talent retention strategies positioned us to meet evolving demands. Our people continue to serve as the backbone of our success, and we remain committed to cultivating an environment that supports learning and growth.
LOLC Finance PLC's physical footprint was rationalised to 203 branches as of 31st March 2025, reaffirming our reach across underserved regions. Performance across the network remained positive, supported by an 8% profit-to-portfolio ratio that affirmed operational efficiency and strategic execution.
COMMITTED TO SUSTAINABILITY ON ALL FRONTS
Our sustainability agenda gained further momentum in 2024/25. Flagship initiatives such as the Deniyaya Forest Restoration, mangrove rehabilitation in Anawilundawa
wetland and widespread tree planting campaigns underscored our commitment to environmental stewardship. Further details on these projects can be found in the Sustainability Report on page
25. At LOLC Finance PLC, we view sustainability not as a regulatory obligation, but as a strategic imperative and a source of long-term value.
During the year under review, we advanced our Environmental, Social and Governance (ESG) priorities, integrating them into credit
Profit After Tax
assessment frameworks and developing products tailored for women-led enterprises, informal sector workers and rural communities. Moreover, ESG reporting mechanisms were strengthened in tandem with data privacy governance while commencing preparations for compliance with the Personal Data Protection Act, which will come into force in 2025.
DURING THE YEAR UNDER REVIEW, WE ADVANCED OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) PRIORITIES, INTEGRATING THEM INTO CREDIT ASSESSMENT FRAMEWORKS AND DEVELOPING PRODUCTS TAILORED FOR WOMEN-LED ENTERPRISES, INFORMAL SECTOR WORKERS AND RURAL COMMUNITIES. MOREOVER, ESG REPORTING MECHANISMS WERE STRENGTHENED IN TANDEM WITH DATA PRIVACY GOVERNANCE WHILE COMMENCING PREPARATIONS FOR COMPLIANCE WITH THE PERSONAL DATA PROTECTION ACT, WHICH WILL COME INTO FORCE IN 2025.
WAY AHEAD
Looking ahead, we remain focused on emerging growth segments, particularly vehicle financing and small business lending. These areas align with our operational strengths and market insights. Regionally, we are exploring digital partnerships and cross-border opportunities that leverage our scalable platforms and inclusive finance model.
We acknowledge the complexity of the operating landscape, yet remain confident in our capacity to adapt, innovate and deliver. Our strategic clarity, executional discipline and stakeholder alignment position LOLC Finance PLC to continue creating sustainable value.
APPRECIATION
I extend my sincere gratitude to our employees, the Board of Directors, shareholders and partners for your continued support throughout this transformative year.
As we look to the future, your continued
Rs.
25,085 Mn
engagement will be vital in shaping LOLC Finance PLC's journey - one that is defined by innovation, resilience and sustainable growth for a transformative year ahead.
D M D K Thilakaratne
Director/CEO
ABOUT US
Board of Directors
MR. F K C P N DIAS
Chairman/Non-Executive Director
Mr. Conrad Dias was appointed to the Board on 01st March 2020. He holds a masters in business administration (MBA) from University of Leicester UK, and is a Fellow Member of
Chartered Management Accountants UK (FCMA), Chartered Global Management Accountant (CGMA -USA). He is also a Fellow of Certified Management Accountant of Sri Lanka (FCMA) and Fellow Member of British Computer Society (FBCS).
His experience spans over 3 decades as a visionary thought leader in business technology and his C-Level experience spans over 20+ years.
A fintech enthusiast who has innovated many financial technology products and solutions and he is the Founder of iPay, a revolutionary
platform beyond payments and Founder of OYES, another fintech platform that makes every day
a payday.
His thought leadership on technology contribution in the field of ICT to the industry, society and at LOLC Group have been recognised with many local and international awards including prestigious Computer Society of Sri Lanka CIO of the year 2016. He was also awarded the Chartered Management Institute of Sri Lanka Professional Excellence Awarded 2017. Further he was inducted the Global CIO Hall of Fame 2020 of IDG (USA) CIO100 and is the only Sri Lankan to get this accolade.
MR. D M D K THILAKARATNE
Executive Director/CEO
Mr. Krishan Thilakaratne is a Board Member of Seylan Bank PLC and LOLC Southeast Asia covering Philippines, Indonesia and Pakistan. Further, Mr. Thilakaratne is a Director of LOLC Central Asia covering Kyrgyzstan, Kazakhstan, Tajikistan and Uzbekistan. He serves on the
Boards of LOLC Moliya in Tajikistan, OJSC Micro Finance Company "ABN" in Kyrgyzstan and
is appointed as the Director of R Finance in Kazakhstan. He is an Advisor to Lombard Micro Finance Company in Tajikistan. He has also served as a Board Member for Credit Information Bureau of Sri Lanka (CRIB),
Commercial Insurance Brokers (Pvt) Ltd, Sri Lanka, and Prasac Microfinance Institution Ltd, Cambodia. Additionally, Mr. Thilakaratne has served as the Chairman of the Finance Houses Association of Sri Lanka (FHASL), the apex body for Non-Bank Financial Institutions (NBFIs) Sri Lanka.
He is a Passed Finalist of the Chartered Institute of Management Accountants (CIMA) UK and Associate member of the Institute of Bankers
of Sri Lanka (AIB). He has followed the Strategic Leadership Training Programme in Micro Finance at Harvard Business School, USA and counts over 30 years of experience in Management, Credit, Channel Management, Marketing, Factoring, Portfolio Management and Islamic Finance. He conceptualised and introduced Islamic Finance to LOLC Group in 2007 and is a Guest Speaker at International Islamic Finance Forums.
MR. B C G DE ZYLVA
Non-Executive Director
Mr. Brindley de Zylva is a Non-Executive Director of LOLC Finance PLC. He also serves as the Chairman of LOLC (Cambodia) PLC and Serendib Microinsurance PLC, and as the Managing Director of LOLC Myanmar Micro-Finance Company Limited. Brindley joined the
LOLC Group in 2003 and brings over 40 years of extensive experience in the Non-Bank Financial Services Industry (NBFI). His expertise spans licensed finance companies, specialised leasing, microfinance, and microinsurance across South and Southeast Asia.
Mr. De Zylva is a Fellow of the Sri Lanka Institute of Credit Management, where he has also served as Honorary Secretary. He has been actively involved in the Council of Management of the Finance Houses Association of Sri Lanka, serving as a member for nine years, including four years as Vice Chairman. Additionally, he has held the position of Director at the Financial Ombudsman Sri Lanka (Guarantee) Limited
P A WIJERATNE
Senior Independent Director
Mr. P A Wijeratne was appointed as an Independent Director on 26th May 2017 and has over 20 years of experience in Accounting,
Financial reporting, Investment of internal funds, Foreign loan disbursements and repayments, Auditing, Public debt management and
Administration as an ex Officio of the Central Bank of Sri Lanka. He joined CBSL in 1991 and worked in the Finance, Public Debt Management and Internal Audit departments till his retirement in year 2016.
He holds a BA degree in Economics (Special Field - Commerce) from University of Kelaniya and a postgraduate Diploma in Accounting and Financial Economics and a MSc in Accounting and Financial Economics from the University of Essex, UK.
A J L PEIRIS
Independent Director
Mr. Luxman Peiris retired as Additional Director of the Central Bank of Sri Lanka ("CBSL") and was appointed as an Independent Director pursuant to the merger with LOLC Development Finance PLC with effect from 31st January 2023. His career at the CBSL spanned 25 years, during which he worked in several different departments in the CBSL, including Economic Research, Management Development Centre, Governor's Office (Chief Protocol Officer), Domestic Operations and Payments and Settlements.
Mr. Peiris holds a BSc (Physical Science) with a First-Class Honours from the University of Kelaniya, Sri Lanka, a MSc and a Postgraduate Diploma in Agricultural Economics from the University of Reading, UK and a MSc and
a Postgraduate Diploma in Quantitative Development Economics from the University of Warwick, UK.
Mr. Peiris served as the Vice President of the Clearing Association of Bankers (CAB). He was also the coordinator - CBSL SEACEN Financial Statistics. He is a member of the Sri Lanka Economic Association. He served in the Sri Lanka Army Volunteer Force attached to the 2nd Sri Lanka Army Service Corps as a Commissioned Officer too. He was adjudged as the Best Officer Cadet in the Intake one in the Sri Lanka Army Volunteer Force in 1981. Presently he is an Exco member of the Sri Lanka Army Service Corps Ex-Servicemen's Association.
MRS. K T C PRIYANGANI
Independent Director (Appointed w.e.f. 23.01.2025)
Mrs. Chamila Priyangani is a fellow member of Institute of Chartered Accountant of Sri Lanka. She holds a Masters in Business Administration (MBA) from the University of Sri Jayewardenapura and an Accountancy and Financial
Management (Special) Degree of University of Sri Jayawardenapura. She has extensive
experience in the private and state sector while demonstrating exceptional expertise in financial management and governance. .
MR. S LANKATHILAKE
Independent Director
Mr. Sunil Lankathilake is a former Deputy Governor of the Central Bank Sri Lanka. He was appointed to the LOLC Finance Board, pursuant to the merger with LOLC Development Finance PLC with effect from 31st January 2023. He holds a Masters degree in Economics and a Postgraduate Diploma in Economics from the University of Manchester, United Kingdom and a B. Com degree with 1st Class honours from the University of Peradeniya.
Mr. Lankathilake has more than 32 years of experience in CBSL in the areas of Economic and Price Stability, Financial System Stability and Agency Functions. Prior to joining the Central Bank in 1986, he has worked as an Assistant Lecturer at the University of Peradeniya.
During his 32 years career in CBSL, Mr. Lankathilake has participated in large number of foreign training programmes conducted
by reputed training providers such as the IMF, World Bank, ADB, University of Cambridge, etc. in the areas of Macroeconomic Management, Macroeconomic Modelling, Financial Programming, Trade Policies, Competitiveness, Project Management, Foreign Investment, Strategic Planning and Management, Human Resource Management and Communication Policy. Mr. Lankathilake has also served as a member of the Board of Directors of Sri Lanka Export Credit Insurance Corporation, Board
of Management of the Title Insurance Fund of Registrar General's Department, National
Labour Advisory Committee, Securities Exchange Commission and several other committees in the past. Mr. Lankathilake has authored many articles and published them in reputed international and local journals and CBSL publications particularly in the areas of economic issues, small-scale industries, international trade, gem industry, apparel industry, etc.
MR. K SUNDARARAJ
Independent Director (Appointed w.e.f. 23.01.2025)
Mr. Kandiah Sundararaj counts over 29 years experience in Accounting, Auditing and Tax consulting. He started his career as a Chartered Accountant in 1998 and is currently serving
as the Tax Partner in M/s Amerasekera and Company, Chartered Accountants.
Mr. Sundararaj is a fellow member of the Institute of Chartered Accountants of Sri Lanka and holds a Master of Business Administration in Finance from the University of Colombo.
GENERATING GROWTH, ACCELERATING IMPACT
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Review Review of Operations Lending
LOLC Al-Falaah Savings and Deposits Credit Cards
Ipay
Gold Loans Factoring Operating Leasing Operations Recoveries Branch Network
Customer Relationship Management HR Report
Branch Operations Marketing Communications Sustainability Report Information and Technology
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Review
OVERVIEW
The financial year 2024/25 marked a historic milestone for LOLC Finance PLC (LOFC) as the company recorded its highest-ever Profit after tax of Rs. 25 billion, a significant double-digit growth from the previous year. This performance reflects the strength of LOFC's diversified business model, prudent risk management and a clear strategic focus on financial inclusion, digital innovation and scalable growth. With a Gross loan portfolio exceeding Rs. 305 billion and a Deposit base of over Rs. 225 billion, LOFC has firmly established itself as the largest Non-Banking Financial Institution (NBFI) in Sri Lanka.
Key achievements during the year include a sharp reduction in the net NPL ratio to 4.81%,
Movement of Interest Income in last Consecutive Five Years
Rs. Million
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
20/21 21/22 22/23 23/24 24/25
INTEREST EXPENSES
Interest expenses declined by 29% year-on-year to Rs. 26.2 billion in 2024/25, from Rs. 37.0 billion in 2023/24. This reduction was primarily driven by the downward movement in market interest rates, which lowered the cost of funds across all categories.
Conventional deposits continued to dominate the composition, accounting for 84% of total interest expenses, followed by alternate deposits and borrowings at 8% each. All three segments recorded notable reductions,
reflecting the company's dynamic and effective fund management strategies in a declining rate environment.
continued leadership in digital finance space The following charts illustrate the year-on-
through platforms like iPay and maintaining company's position as one of the highest capitalised organisations in the financial service industry with a Capital Adequacy Ratio exceeding 25%. The successful execution of recent mergers has expanded the company's reach and unlocked operational synergies across lending, leasing, alternate finance and credit cards. With a commanding market share of over 20% in
total assets, liabilities and profits, a customer-centric digital ecosystem and a strong capital base of Rs. 149 billion, LOFC has emerged as
a systemic force in Sri Lanka's financial sector well-positioned to support national development and economic resilience.
A comprehensive analysis of the company's financial performance covering key indicators such as income, expenses, profitability,
asset quality, liquidity and capital adequacy is presented in the following sections of this Financial Review.
INTEREST INCOME
Interest income declined by 9% to Rs. 68.3 billion in 2024/25, compared to Rs. 75.0 billion in the previous year, primarily due to the overall reduction in market interest rates.
Interest Income Comparison
Rs. Million
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
Interest on leases
Interest on
loans
Income from factoring portfolio
Interest income from Margin
Trading
Interest from credit cards
Income on placement &
others
0
Loans and leases remained the key contributors, accounting for 77% of total interest income.
Income from loans fell to Rs. 36.5 billion, while lease-related interest declined to Rs. 16.6 billion. Other income streams such as margin trading, credit cards and placements also saw slight reductions, aligning with market trends.
Despite the dip, the company maintained a well-diversified income base, reflecting its resilience and adaptability in a declining rate environment.
year movement and composition of interest expenses, offering a clearer picture of the shift in funding costs.
Interest Expense Composition - FY 24/25
84%
8%
8%
Interest Expense Comparision
Rs. Million
30000
25000
20000
15000
10000
5000
0
Conventional Deposits
Islamic Deposits
Borrowings
NET INTEREST INCOME, OTHER OPERATING INCOME, IMPAIRMENT AND OVERHEAD EXPENSES
During the financial year 2024/25, Net Interest Income rose to Rs. 42 billion, marking an 11% increase from the Rs. 38 billion recorded in the previous year. This growth came despite a 9% drop in interest income, primarily due to the overall decline in market interest rates. The significant 29% reduction in interest expenses from Rs. 37 billion to Rs. 26.2 billion was largely driven by the natural maturing of high-cost deposits and new deposits being mobilised at competitive rates, in line with the market trend. This performance reflects LOFC's ability to maintain a healthy interest margin despite an easing interest rate environment.
Net fees and commission income recorded a growth of 24%, driven by higher service fees on loans in line with increased disbursements, along with enhanced income from credit card services and other ancillary services.
Other Operating Income, excluding the one-off derecognition loss of Rs. 3.7 billion arising from the restructuring of Sri Lanka International Sovereign Bonds (SLISBs), amounted to Rs.
5.3 billion for the year ended 31st March 2025, compared to Rs. 10.7 billion in the previous year. This decline was primarily driven by a 61% reduction in fair value gains from investment properties, which reduced from Rs. 7.1 billion in the previous year to Rs. 2.7 billion in the current
year. Additionally, the reduction in fair value gains from government securities also contributed to the overall reduction.
Impairment provisions on the lending portfolio recorded a significant turnaround during the year, with a net reversal of Rs. 7.7 billion in FY 2024/25 compared to a charge of Rs. 4.7 billion in the previous year. This reversal was primarily
and workforce expansion. Depreciation and amortisation also saw a moderate increase, while other operating expenses recorded a 7% growth, reflecting inflationary pressures and increased business activity.
PROFITABILITY
The company continued its upward momentum in profitability, recording a Profit After Tax (PAT) of Rs. 25.1 billion for the year ended 31st March 2025 representing 36% of the total PAT of the NBFI sector. This marks a healthy 16% growth compared to the previous year. The steady increase in earnings over the past five years reflects the company's strong core performance, improved margins and better asset quality.
Supported by disciplined cost management and strategic focus, this year's results underscore the company's ability to deliver sustainable value in a challenging operating environment. This positive trend is clearly illustrated in the chart below, which highlights the company's profit growth over the last five financial years.
Profitability
Rs. Million
30,000
16%
25,000
20,000
15,000
10,000
5,000
0
20/21 21/22 22/23 23/24 24/25
ASSET BASE
LENDING PORTFOLIO
During the year ended 31st March 2025, the gross lending portfolio expanded notably, reaching Rs. 305 billion, up from Rs. 258 billion in the previous year reflecting a solid year-on-year growth of 18%. This increase was driven primarily by strong performances in key product segments, particularly loans and advances, gold loans and alternate finance.
The portfolio remains well balanced, with no single product category accounting for more than 25% of the total exposure. Loans and advances continue to be the largest component at Rs. 179.9 billion, followed by lease receivables at Rs. 71.1 billion and gold loans at Rs. 39.4 billion.
From a sectoral perspective, the portfolio remained well-diversified. Wholesale and retail trade led the exposure, accounting for 17% of the total portfolio, followed by consumption
at 13% and agriculture and fishing at 12%. Notable exposures were also seen in transport and storage (11%), construction (10%), and healthcare, social services and support services (7%). This distribution reflects the company's continued focus on supporting real economic activity across a broad spectrum of industries while maintaining a prudent risk profile.
Lending Portfolio
2% 1%
13%
23%
1%
59%
driven by a provision reversal of Rs. 7.3 billion related to the derecognition of restructured Sri Lanka International Sovereign Bonds (SLISBs). Impairment on loans and advances sharply declined by 96%, from Rs. 1.6 billion to Rs. 62 million, reflecting improved credit quality and prudent risk management practices.
Operating expenses increased by 10% year-
on-year, reaching Rs. 23.2 billion in FY 2024/25 compared to Rs. 21.1 billion in the previous year. The rise was mainly attributed to higher personnel expenses, which grew by 15% in line with salary adjustments to account for inflation
Total assets of the company increased by 14% to Rs. 429.7 billion as at 31st March 2025, compared to Rs. 377.5 billion in the previous year. This growth was primarily driven by the expansion in the loan book, which rose from Rs. 249.6 billion to Rs. 297.5 billion, reflecting focused lending strategies and improved credit demand. Investment properties also saw a notable increase of 14% year-on-year, reaching Rs. 55 billion fuelled by new strategic additions and value appreciations.
MANAGEMENT DISCUSSION AND ANALYSIS
Financial Review
Comparison of Key Components in Lending Portfolio
Rs. Million
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
Lease
Loans and advances
Factoring Receivable
Gold Loans
Credit Card
Margin Trading
0
Movement of Deposit Base over the past 05 Years
Rs. Million
250,000
200,000
150,000
100,000
50,000
0
20/21 21/22 22/23 23/24 24/25
by retained profits, reinforcing the company's resilience and its ability to meet regulatory capital thresholds of 10% for Tier I and 17% for Tier II.
Capital Funds to Deposit Ratio
On 31st March 2025, the capital funds to deposits ratio stood at 48%, significantly surpassing the required minimum of 10% set by the Central Bank of Sri Lanka.
Liquid Assets
The mandated minimum liquid assets remain at 10% of time deposits, 15% of savings deposits, and 10% of outstanding borrowings, excluding secured and unsecured foreign currency borrowings, as per the Finance Business Act Direction No. 07 of 2020. The company's
Deposit Composition FY 24/25
FUNDING - DEPOSITS AND
liquid assets amounted to Rs. 33.9 billion, well exceeding the minimum requirement of Rs.
24.2 billion. These liquid assets are prudently
BORROWINGS
As at 31st March 2025, the company's funding structure continued to be primarily driven by customer deposits, which accounted for a significant 90% of the total funding base, up from 89% in the previous year. Borrowings, including debentures, bank loans and finance leases made up the remaining 10%, down from 11% in FY 2023/24, reflecting the company's strategic shift towards more stable and cost-effective funding sources.
Total funding (Deposits and Bank Borrowings) increased to Rs. 241.4 billion in FY 2024/25, compared to Rs. 226.1 billion in the previous year, supported mainly by the expansion in deposit mobilisation.
Customer deposits grew by 9% year-on-year, reaching Rs. 225.7 billion from Rs. 206.4 billion. Fixed deposits remained the dominant product, contributing 94% of the total deposit base. Within this, conventional fixed deposits accounted for 84%, while alternate fixed deposits accounted for 11%. Savings deposits made up the remaining 5%, with modest contributions from both conventional and alternate segments, as well as foreign currency deposits.
The following charts illustrate the year-on-year movement of deposits and the composition of the deposit base as at 31st March 2025.
11%
5%
84%
In contrast, total borrowings declined to Rs. 15.7 billion from Rs. 19.7 billion in the previous year. This reduction was mainly attributable to the settlement of long-term borrowings, which fell to Rs. 4.4 billion from Rs. 9.1 billion. Short-term borrowings saw a moderate increase to Rs. 6.1 billion, while debentures remained flat year-on-year at around Rs. 5 billion.
REGULATORY RATIOS
Capital Adequacy Ratio (CAR)
The company continued to maintain strong capital buffers, comfortably exceeding regulatory requirements. As of the reporting date, the Core Capital Adequacy Ratio (Tier I) stood at 26.18%, compared to 23.01% in the previous year, while the Total Capital Adequacy Ratio (Tier II) reached 25.92%, up from 23.00% in 2023/24. This significant improvement was primarily supported
managed in government securities and deposits with banks and financial institutions, optimising returns.
Net Non-Performing Loans and Advances (NPL)
Notably, another standout financial indicator reported by the company during the period is its Net Non-Performing Loan (NPL) ratio which stood at 4.81%, an outstanding improvement from 10.48% reported during the year prior.
Strategy and Outlook
LOLC Finance continues to pursue a forward-looking strategy focused on digital transformation and financial inclusion.
Anchored in an innovation-first philosophy, the company is accelerating its shift toward a paperless, AI-integrated future to deliver smarter, more seamless financial solutions.
These advancements are aimed at expanding access to financial services, particularly for the underbanked and underserved segments of the population. Strengthening its digital footprint and operational agility, LOLC Finance aspires to position itself as the most digitally inclusive financial institution in Sri Lanka, supporting long-term sustainable growth and customer-centric excellence.
Review of Operations
OPERATING ENVIRONMENT
Macroeconomic Environment
Sri Lanka entered 2024 on a path of steady recovery following the most severe economic crisis in its post-independence history. A combination of decisive fiscal consolidation, tight monetary policies and structural reforms initiated since mid-2022 began yielding tangible outcomes, setting the stage for renewed economic growth and macroeconomic stability. Supported by the successful implementation of the International Monetary Fund's Extended Fund Facility (IMF-EFF) and significant progress in external debt restructuring, Sri Lanka's economic landscape improved across multiple sectors.
Investor confidence returned gradually, bolstered by enhanced policy transparency and improved sovereign credit ratings.
A key highlight of 2024 was the dramatic turnaround in inflation dynamics. The country experienced a sustained disinflation trend, driven by reduced global commodity prices, prudent monetary policy actions and a significant decline in administratively determined energy prices. In fact, inflation turned negative from September 2024, marking a temporary period of deflation that helped ease living costs and reduce input costs for businesses. Monetary policy was accommodative throughout the year, triggering
a broad-based decline in market interest rates. This, in turn, reinvigorated credit demand from both consumers and businesses, especially in the second half of the year. Lending activity picked up across sectors, reflecting improved credit appetite and renewed private sector participation in the economic rebound.
On the external front, Sri Lanka recorded an external current account surplus for the second consecutive year. This was driven by a strong rebound in tourism earnings, increased workers' remittances and improved foreign exchange inflows. These inflows not only enhanced liquidity in the domestic forex market but also enabled the Central Bank of Sri Lanka to purchase a record volume of foreign currency, bolstering gross official reserves. The Sri Lankan rupee appreciated for the second consecutive year, reflecting the strengthened external position.
Fiscal consolidation efforts bore fruit as well, with the country recording a positive primary balance in 2024. Improved revenue collection, underpinned by enhanced tax administration and economic revival played a vital role. The combined effect of fiscal prudence, external
sector improvements and monetary stability created an enabling environment for growth, and restored Sri Lanka's credibility in the eyes of global investors and rating agencies.
Performance of the Financial Sector
The financial sector exhibited a robust performance in 2024, recovering steadily from prior-year vulnerabilities. Both banks and
non-bank financial institutions demonstrated resilience and adaptability in the face of economic headwinds. The banking sector maintained stability throughout the year,
with capital and liquidity buffers well above regulatory requirements. Asset growth was supported by increases in both investments and credit, while deposit mobilisation continued to strengthen. The quality of loan portfolios showed improvement, evidenced by a reduction in the Non-Performing Loans (NPL) ratio. Profitability across banks improved markedly due to
higher net interest income and the reversal of impairment provisions following the restructuring of International Sovereign Bonds (ISBs). This led to enhanced financial performance and balance sheet resilience, enabling banks to support the broader economic recovery.
Non-Bank Financial Institutions (NBFI)
The NBFI sector demonstrated resilience, maintaining adequate capital and liquidity buffers. The asset base expanded, driven primarily by growth in the loans and advances portfolio. However, investment in government securities saw a decline, as institutions focused more on lending in response to lower market interest rates. Asset quality indicators improved and profitability increased during the year. The Central Bank of Sri Lanka continued to modernise the financial infrastructure, promoting digital payments and integrating domestic payment systems with international
networks. Reforms were also initiated to improve financial consumer protection, inclusion, anti-money laundering compliance and systemic resolution mechanisms.
The NBFI's played a pivotal role in channelling financial services to underserved and semi-urban communities during 2024. Despite broader economic uncertainties, the sector demonstrated commendable stability and growth. The improved interest rate environment spurred credit growth across leasing, SME lending and microfinance segments.
NBFIs benefited from improved asset quality, better operational efficiencies and an uptick in profitability. However, challenges related to elevated NPL ratios and legacy impairments remained. Regulatory oversight ensured continued compliance with capital adequacy
and liquidity standards. Many NBFIs strategically realigned their portfolios, reduced exposure to high-risk segments and adopted digital channels for customer engagement and risk management.
The outlook for NBFIs in Sri Lanka is cautiously optimistic. With macroeconomic fundamentals stabilising, interest rates moderating and consumer demand picking up, NBFIs are well-positioned to leverage growth opportunities in 2025.
The broadening of economic activity, especially in agriculture, services and SME sectors presents fertile ground for targeted credit expansion.
Further, ongoing digital transformation within the sector can enable better operational efficiency, customer acquisition and credit assessment.
However, risks including potential asset quality pressures, regulatory tightening and global macroeconomic uncertainties linger, which may impact external funding and refinancing costs. Institutions must therefore continue to focus on robust risk management, digital innovation and customer-centric lending practices.
As Sri Lanka embarks on a trajectory of recovery and reform, the role of NBFIs will remain integral in deepening financial inclusion, supporting grassroots entrepreneurship and sustaining momentum in the broader financial system.
MANAGEMENT DISCUSSION AND ANALYSIS
LENDING
LOLC Finance's lending portfolio spans a wide array of products that are tailored to the
diverse needs of Sri Lankans - from grassroots entrepreneurs to emerging middle-income segments and established SMEs. Across the board, the lending business continued its momentum during the year under review, underpinned by innovation, customer insight and a commitment to inclusive growth.
One of the most significant segments under the lending umbrella is Personal Finance,
previously known as microfinance. This business has been strategically rebranded to better reflect its evolving scope and broader appeal. It caters primarily to grassroots-level customers (individuals operating small-scale or micro businesses) through both loans and leases. As of 31st March 2025, the personal finance loan portfolio stood at Rs. 24 billion, supporting over 110,000 customers. Notably, approximately 90%
of these facilities have been extended to women-led enterprises, reinforcing LOLC Finance's role in promoting female entrepreneurship.
In addition to financing, the company actively invests in the development of its customers. Training programmes - ranging from general business practices to technical knowledge - are conducted in partnership with government and private sector institutions. A key collaborator in this effort has been the Vidatha Centres, housed within Divisional Secretariat offices, which provide valuable resources to small businesses. By facilitating access to such institutions and linking customers to markets, LOLC Finance enhances the overall sustainability of these enterprises.
Personal finance also covers housing loans for underserved communities. Many of these clients are unable to access traditional banking services due to small loan requirements, lack of formal documentation or inadequate collateral. LOLC Finance offers simplified, fast and cost-effective housing loan products with streamlined legal and valuation processes, ensuring affordability and ease for customers. These loans cover home building, renovations and completions, and are primarily offered through the company's rural branch network where the need is greatest.
During the year, a specialised agricultural loan product was also launched under the personal finance portfolio. Recognising that income in agriculture is seasonal, these loans offer flexible
repayment options that align with harvest cycles. Initially rolled out in the North Central Province, the product is being gradually expanded to
other agricultural regions, offering much-needed financial tools for cultivators of paddy, vegetables and other crops.
Product design is informed by rigorous customer feedback and satisfaction surveys, allowing
for continuous refinement of offerings. The agriculture loan's seasonal repayment structure is one such example of insights from the field translating into product innovation. Moreover, initiatives such as the partnership with the Sri Lanka Rupavahini Corporation for International Women's Day further underscore the company's commitment to empowering women in business.
In the SME Finance space, LOLC Finance focuses predominantly on vehicle-backed facilities.
The company remains the market leader in agricultural equipment financing, continuing its longstanding support for mechanisation and productivity improvements in the farming sector. Financing options span tractors, harvesters and related implements - further reinforcing the company's presence in rural development.
With the reopening of the vehicle import market after a five-year hiatus, LOLC Finance swiftly responded to rising demand. A dedicated Electric Vehicle (EV) financing product was introduced, marking a significant step towards sustainable mobility. This new offering includes unique features that provide peace of mind
to customers, such as post-warranty battery replacement financing, which is not commonly offered by competitors. The EV product covers both four-wheel, three-wheel and two-wheel vehicles, aligning financial inclusion with environmental responsibility.
The company's Al-Falaah Islamic Finance unit also saw robust performance, disbursing Rs.
29.06 billion across 22,048 contracts. This vertical recorded a portfolio growth of Rs. 7.75 billion for the year.
The Operating Lease business, which had been dormant due to vehicle import restrictions, was actively relaunched during the year. Although operating in early-cycle mode, the business achieved grants of Rs. 1.07 billion across 60 contracts and a portfolio growth of Rs. 833 million. A new product was developed to cater to pre-owned vehicles while capitalising on
the recent resumption of new vehicle imports.
Looking ahead, the company anticipates tripling this portfolio in the upcoming year.
Factoring services also contributed meaningfully to lending operations, with an execution value of Rs. 1.37 billion and portfolio growth of Rs. 790 million across 129 clients.
Meanwhile, gold-backed lending continues to be one of LOLC Finance's flagship offerings, with total lending of Rs. 95.27 billion and a portfolio growth of Rs. 10.8 billion during the
year. Over 5,095 new customers were onboarded, averaging 425 new customers each month - a strong indicator of the product's appeal and accessibility.
The credit card business recorded impressive growth, with 27,394 new cards issued - among the highest in the market, even when compared to banks. This translated into a portfolio growth of Rs. 1.38 billion, underlining the company's successful penetration into the digital payment space.
Each of the lending verticals within LOLC Finance is supported by digital interfaces that improve accessibility and customer experience. Plans
are in place to further digitalise operations across business units - with initiatives such as automated SME refinancing and multi-channel strategies. These efforts are complemented by the implementation of cross-selling modules via the call centre, maximising customer value without increasing headcount.
LOLC Finance is working towards offering fully digital lending solutions to minimise the need for physical branch visits. While digital and assisted channels (such as eKYC and video KYC) are being adopted, some products and high-value facilities still require in-branch interactions.
Macroeconomic conditions improved significantly during the latter part of the year, with interest rates dropping from 33% to 8-9%, boosting lending. The government's opening
of letters of credit (LCs) to the tune of USD C1.2 billion also spurred demand, especially for vehicle financing. Furthermore, LOLC Finance benefited from the Central Bank's consolidation programme, merging four entities into one, enabling stronger market dominance. Overall, the company contributed over 20% to industry lending and portfolio growth, reflecting its leadership in a recovering financial landscape.
As LOLC Finance continues to expand its footprint, the company's lending framework remains agile, inclusive and digitally progressive - reinforcing its position as a trusted financial partner.
LOLC AL-FALAAH
LOLC Al-Falaah, the Alternate Financial Services Unit of LOLC Finance PLC, retained its position as the leading Islamic banking & financial services provider in Sri Lanka's NBFI sector during the financial year ending 31st March 2025. Building on its strong legacy, the Business Unit recorded robust growth across all key performance indicators while continuing to expand its
diverse portfolio of Shari'ah-compliant financial products and services.
LOLC Al-Falaah delivered outstanding results with revenue increasing by 6.20% year-on-year to Rs. 7.02 billion. Profit from operations nearly doubled, rising by 83.92% to Rs. 3.01 billion, while Profit Before Tax (PBT) surged by 82.53% to reach Rs. 2.38 billion. The Business Unit also strengthened its balance sheet significantly with the lending portfolio (Net) growing by 30.23%
to Rs. 37.90 billion, while total assets stood at Rs. 39.63 billion at year-end. Retained earnings increased by 35.41% to Rs. 9.08 billion, reflecting the strength of its operating model. The Non-
Performing Loan (NPL) ratio was maintained at a healthy 3.89%, significantly below industry
averages, while Return on Equity (ROE) improved to 30.08%.
The liability portfolio also demonstrated resilience, with overall growth of 3.43%. The Mudharabah Fixed Deposit base increased by 40.52% to Rs. 7.36 billion, and Mudharabah Savings rose by 26.70% to Rs. 2.09 billion.
Wakalah Fixed Deposits declined slightly by 11.02%, to Rs. 14.32 billion.
On the assets side, the advances portfolio expanded by 27.38%. Diminishing Musharakah property & project finance accommodations continued to be the largest contributor, growing by 19.78% to Rs. 24.92 billion. Ijarah lease assets rose by 26.36% to Rs. 6.65 billion, while the Murabaha, Musawamah, and Wakalah working capital finance segment increased by 129.72% to Rs. 3.44 billion. Notably, the Wadi'ah gold-storage advances portfolio more than doubled with a 84.85% increase, reaching Rs. 2.84 billion
- a significant milestone that makes LOLC Al-Falaah the first NBFI in Sri Lanka to achieve this level of performance in Wadi'ah-based advances.
FY 2024/25 also marked a year of firsts in product innovation. The Business Unit became the first NBFI in the country to launch the Ijarah Operating Lease, an asset rental arrangement that enables customers to access vehicles or equipment for a fixed period through regular rental payments. Another major milestone was the scheduled launch of Wakalah Future-Cash in Q4 of the year, a pioneering alternate factoring and working capital solution aimed at unlocking receivables for businesses. These innovations reinforce LOLC Al-Falaah's commitment to offering a 360-degree alternate finance product portfolio.
In recognition of its sustained excellence, LOLC Al-Falaah continued to receive industry-wide accolades during 2024/25. LOLC Al-Falaah was named Winner - Islamic Leasing Provider (Global) at the prestigious IFN Awards. At the SLIBFI Awards held in Sri Lanka in the period under review, the Business Unit secured Silver Awards in the categories of NBFI of the Year, Window of the Year, and Entity of the Year, along with a Merit Award for Social Upliftment. Furthermore, at the 9th South-Asian regional industry practitioners IFFSA Awards, LOLC
Al-Falaah was also recognised with Silver Awards for NBFI of the Year and Window of the Year categories, Bronze for Best Digital Product/FinTech Offering and Merit Award for Social Upliftment. These accolades affirm LOLC Al-Falaah's leadership in the alternate
financial services domain, driven by prudent risk management, a strong compliance framework and a consistent focus on digital innovation.
As the first NBFI to launch several Shari'ah-compliant financial instruments, the Business Unit continues to break new ground in meeting the evolving financial needs of individuals and businesses alike. With a track record of strong performance, pioneering products and customer trust, LOLC Al-Falaah is well positioned to further consolidate its position as the benchmark for alternate financial services in Sri Lanka.
SAVINGS & DEPOSITS
Against the backdrop of a stabilising macroeconomic environment and a low interest-rate regime, LOLC Finance's liability
management strategy remained sharply focused on strengthening its low-cost funding base while enhancing operational efficiencies through digital transformation. This strategic alignment enabled the company to raise Rs. 21.9 billion
in total funding during the year, comprising Rs.
17.9 billion in fixed deposits and Rs. 4 billion in savings deposits. Despite industry constraints and regulatory limitations, the savings portfolio achieved a significant milestone, reaching
a turnover of Rs. 4 billion. Crucially, LOLC Finance became the first non-banking financial institution (NBFI) in Sri Lanka to surpass Rs.
200 billion in fixed deposit mobilisation, marking a historic moment in the industry and setting
a benchmark for peers. This achievement is particularly noteworthy given that LOLC Finance, as a NBFI, does not operate current accounts
- typically a major source of low-cost funds for banks. As a result, this performance is a
testament to the company's dedicated push to grow savings products as an alternative source of affordable funding, thereby reducing the overall cost of funds and bolstering profitability.
A key operational milestone during the year under review was the relaunch of LOLC Super Savings - a savings product that offers increasing interest rates as the deposit balance grows. Although not a unique product in the market, it is designed to provide liquidity with higher returns based on deposit levels, without locking in funds as in traditional fixed deposits. The LOLC Super Savings was revitalised with improved features to encourage higher savings accumulation. In addition to this, the company rolled out several niche offerings, for example, Salary Saver, a product tailored for salaried individuals, offering benefits aligned with monthly income flows;
Faced with tight regulatory constraints and a dynamic market environment, the FD and Savings team responded with ingenuity
to enhance customer engagement and convenience. With Central Bank directives limiting traditional promotional tools and mandating rate disclosures, the team turned to QR code-based promotional material as a smart, adaptive solution. This digital approach
enabled real-time updates of Treasury Bill-linked rates, eliminated the need for frequent reprints and ensured full regulatory compliance. Beyond solving an immediate challenge, the initiative also aligned with LOLC Finance's sustainability goals by reducing paper waste.
Further enhancing operational efficiency and customer convenience, debit card upgrades were introduced to transition from stripe-less cards to EMV chip-based cards. This upgrade enabled enhanced security, increased daily
MANAGEMENT DISCUSSION AND ANALYSIS
withdrawal limits and seamless integration with the company's IPay lifestyle app, allowing customers to manage their accounts, perform online payments and access a wider range of services digitally.
Card activation via call centre systems was rolled out during the period, simplifying onboarding and enabling remote account access without requiring branch visits. From a branding
and customer engagement perspective,
LOLC Finance once again received national recognition, winning the Lankapay Technnovation Award, for the sixth consecutive year, affirming its leadership in customer-centric outreach and financial literacy initiatives.
A cornerstone of its ongoing transformation journey is the company's concerted push toward digitalisation, aligned with its Environmental, Social and Governance (ESG) goals. The past year marked the formal initiation of a company-wide digital task force, involving teams from cashier counters to branch-level staff, with the singular objective of reducing physical documentation across all touchpoints. The initiative, led by the Digital and Marketing teams in collaboration with the liability management function, targets a fully paperless environment. Every customer-facing interaction (from FD receipts, savings account statements and offer letters, to simple account updates) is being redesigned to be fully digital. As part of this initiative, FD receipts, Renewals, Account Activations, FD Activations will now be issued digitally (SMS), with customers receiving acknowledgements directly to their mobile phones. This not only streamlin operational processes but also reinforces the company's commitment to environmental sustainability.
Looking ahead, the focus will remain on expanding digital account opening capabilities, enhancing system controls to prevent fraud and maintaining customer-centric services across both digital and physical channels. While the company recognises that digital transformation is key to future-readiness, it is equally cognisant of the importance of human interaction, especially in rural and semi-urban markets.
LOLC Finance will continue to maintain a hybrid service model, where brick-and-mortar presence supports a more personal customer experience, complemented by increasingly sophisticated digital interfaces.
Amidst an evolving political and economic landscape, the company is proud to report a total
liability base of over LKR 200 billion. This liquidity strength is a reflection of the trust placed by depositors and affirms LOLC Finance's standing as a cash-rich and financially resilient institution. Notably, the company chose to consciously not engage in aggressive deposit rate competition, instead optimising cost of funds through strategic savings mobilisation and prioritising sustainable profitability by avoiding excessive interest outflows.
Overall, the Savings and Deposits business unit successfully balanced strategic growth, regulatory compliance, digital innovation and sustainability to ensure that the funding base remains robust, future-proof and aligned with
the evolving needs of its diverse customer base.
CREDIT CARDS
During the year under review, the credit card business demonstrated strong momentum, recording a profit of Rs. 758 million and achieving a portfolio increase of Rs. 1.38 billion. Notably, over 27,000 credit cards were issued in 2024/25, with the Savi Credit Card accounting for approximately 70% of total credit card issuance. In another significant achievement, non performing loans (NPLs) were brought down to single digit by end of the financial year under consideration. Moreover, approximately 70% of customer repayments were made via digital channels, up from 60% the previous year.
This shift was driven by a series of initiatives to onboard customers to digital platforms at the point of card issuance, including extensive customer education on using digital payment methods. In a positive development, LOLC Finance onboarded M-Cash retailers to help
minimise physical cash inflows, thereby reducing the need for branch visits and improving operational efficiency.
Yet another standout innovation during the period under review was the introduction of Sri Lanka's first Large Language Model (LLM)
AI-powered chatbot for the card business. This pioneering solution has led to a noticeable drop in call centre traffic and brought the call drop ratio down to an impressive 1%, directly
contributing to enhanced customer satisfaction and operational efficiency. Customers can access the chatbot through multiple touchpoints, including WhatsApp links, SMS messages and
QR codes embedded in statements. The chatbot responds to both open-ended and specific queries in a human-like manner, allowing users to ask anything from 'How do I apply for a credit card?' to 'How do I update my travel plan?'
LOLC Finance expanded its promotional campaigns, increasing the number of partnered merchants from 450 to approximately 600.
Unlike in previous years, campaigns were not limited to festive seasons. Instead, year-round promotions covered essential categories such as supermarkets, clothing, dining and leisure. This consistent customer engagement strategy further reinforced brand visibility and utility.
LOLC Finance's credit card offerings were also notable for their wide accessibility. Beyond the traditional branch network, multiple application channels were enabled including online forms, QR-based applications and through agents embedded in communities (for example, representatives at group loan centres). These efforts ensured that credit cards were not just for professionals or high-net-worth individuals but also accessible to small and micro businesses (SMEs/MSMEs) with smaller credit limits.
Two products led the innovation and inclusion agenda, namely, the Savi Credit Card exclusively for public servants. The Savi card is a lifetime-free product aimed at offering financial inclusion and convenience to government employees.
The Savi team further executed a nationwide appreciation of the best performers of the Grade 5 Scholarship exam, with 500 children of Savi credit cardholders being recognised and rewarded under this initiative. In addition, the Swairee Credit Card, dedicated card for
women, featured a design that reflects feminine aesthetics. The card is supported by women-focused campaigns (e.g., salon discounts, women-only events) and incorporates a Women Empowerment Fund that is utilised for broader women empowerment activities.
In a first in Sri Lanka's credit card industry, LOLC Finance introduced the Blind Notch Mastercard Credit Card, manufactured to ISO standards. This innovation allows visually impaired customers to identify and differentiate cards (credit, debit and stored value) through a tactile notch, enabling greater independence and accessibility.
The Credit Card unit is strategically positioned for future growth, with several innovative products currently in the development pipeline. The LLM Chatbot will also be enhanced and will soon support Sinhala and Tamil in addition to English, making it more accessible to the mass market. Finally, an SME Credit Card product specifically targeting the SME segment, in partnership with Mastercard, will be rolled out to the market soon.
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