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WASHINGTON, D.C., April 28, 1999 – The International Finance Corporation will provide US$1.7 million to Lanka Orix Factors Company (LOFAC) to develop its export factoring business which benefits small and medium enterprises (SMEs) in the country's dynamic export sector. Export factoring, a new financial service in Sri Lanka, enables exporters to cover financial risks and exploit international trade opportunities by providing SMEs with financing for their exports, which makes them more competitive.
LOFAC, established in 1991, is the pioneer factoring company in Sri Lanka. It advances funds against receivables and provides ledger administration, credit management and debt collection for SMEs engaged in trading, manufacturing, and services. LOFAC's expansion into export factoring will facilitate Sri Lankan exports.
IFC's financing consists of a loan of $1.5 million and an equity subscription of up to $200,000 for a 15 percent shareholding in the company. LOFAC is 64.8 percent owned by Lanka Orix Leasing Company Ltd. (LOLC), a leading leasing company in Sri Lanka.
Mr. Rashad Kaldany, IFC Director for South and Southeast Asia, noted that diversification of exports is the key to Sri Lanka's future economic performance and that export factoring is one of the most effective ways to help export-oriented SMEs to grow. He said the project would directly benefit about 50 SMEs in agri-processing, sporting goods, electronic goods, and other sectors.
IFC, which has been investing in Sri Lanka since the early 1970s, opened an office in Colombo in October 1998 to focus on growing investment opportunities in infrastructure, health, and the financial markets. IFC has already established several pioneering private financial institutions in Sri Lanka, including the first leasing company, LOLC in 1980; the first private insurance company, Union Assurance Co., in 1988; and the first domestic mutual fund, Pyramid Unit Trust, in 1992.
IFC, part of the World Bank Group, fosters economic growth in the developing world by financing private sector investments, mobilizing capital in the international financial markets, and providing technical assistance and advice to governments and businesses.