Sri Lanka’s current macroeconomic environment has posed many challenges to the export sector, primarily with currency issues and global supply chain challenges. Seylan Bank PLC International Deputy Managing Director Dilan Wijegoonawardena is an industry veteran with 30 years of experience. As a business leader leading one of the bank’s most crucial functions, he shares his perspective on the export industry and the national duty to support the sector now more than ever.
How has the export sector behaved in recent months?
Exporting companies have seen robust activity in the second half of 2021. Since August (2021), the country’s monthly exports have consistently reached over $1 billion. The sector prospered overall, with apparel and agriculture performing exceptionally well.
However, as a country, we are highly dependent on remittances from inbound workers, exports and tourism respectively for foreign currency. Currently, there is a sharp decline in the remittance sector. With the arrival of the pandemic, the tourism industry was affected, and then the pandemic also spread to the remittance sector. In 2020, workers’ remittances brought in US$8 billion to the country, or about 8% of our GDP. In 2021, it fell 22% and hovered around US$5.4 billion. That in itself paved the way for the current crisis we are facing.
Usually the majority of our tourists come from Russia, Ukraine, India and China. There was no tourism revenue last year, but tourism started to pick up in January. However, there were no Chinese tourists, as they are not yet allowed to travel. And unfortunately, because of the war, the arrival of Ukrainian tourists stopped. So we don’t know what will happen to Russian and Ukrainian tourism in the future and it will reduce our tourism income. Therefore, an improvement in remittances is uncertain in the near future.
Therefore, as a country, we will have to rely solely on exports. And, as a bank, we view export support as a national obligation. Not only do we facilitate exports, but we also facilitate imports for these exporters. For example, garment exporters are also importers because much of their material, such as thread and buttons, is imported. We also lend to the indirect export sector which has gone largely unnoticed. They import the necessary materials for the exporters and we also try to meet all their requirements since they are an integral part of the export industry. So, as you can see, we facilitate the whole export process, to get the machinery running.
How does Seylan Bank’s international hub facilitate exports?
Facilitating business transactions is our core business. Functionally, we are the liaison factor between the agencies and the credit units. Customers request various business facilities in branches, which reach the credit unit for assessment and confirmation of the suitability of the request. This is where we come in as an international division. We facilitate commercial demand, dispense our know-how, organize international correspondent banking relations, provide exporters with information on buyers, help them to structure payments and documentation in the best possible way.
At Seylan Bank, how do SMEs fit into the global export landscape?
Seylan Bank primarily supports the small and medium enterprise (SME) sector. While our client base is a combination of large corporations and SMEs, our strength is the SME sector. Our branch network all over the island, our accessibility and our credit hubs throughout the country support and fuel the dynamics of SMEs.
We have several ways to facilitate exporting companies. For example, we provide pre-shipment loans to exporters based on confirmed orders, which is equivalent to working capital for them to run their business. Once they have dispatched their goods, we also offer post-shipment facilities such as discounted payment on their invoices, the bank taking on the risk and allowing SMEs to fund their working capital as they receive immediate a cash payment. Seylan Bank works with over 500 international correspondent banks worldwide to facilitate international trade with any sector and receive export earnings on time and as such is able to support SMEs globally in their exports.
We are also working on a new product, a dedicated line of credit for exporters, helping direct and indirect exporters to obtain more working capital. We hope to make it available soon to further support domestic exports.
A good number of new companies regularly enter the export market with unique products. How can these start-ups benefit from Seylan Bank’s products and services?
Based on the current macroeconomic situation, exporters are facing many challenges such as rising freight costs and rising insurance costs. Borrowing costs have also increased following recent political announcements, which will in turn affect their working capital cycle. Until recently, they were also affected by exchange rate anomalies between the formal and informal sectors. Since we consider export support a national obligation, we have made sure to offer exporters the best possible rates to ensure they can remain competitive.
We also extend information services to exporters who wish to make a risk assessment on potential buyers. Our relationship with information providers in various international markets enables us to obtain detailed status reports on buyers, which we then share with exporters, enabling them to make informed decisions at the most granular level, understanding the possible business opportunities and threats.
Finally, as a bank that has always worked with SMEs, what do exporters and start-ups in the sector need to know to work with Seylan?
The bank with a heart is our golden theme. Any start-up client should feel very comfortable entering one of our branches spread across the island or at the Seylan head office. You’ll get the same award-winning service at all of our locations thanks to our dedicated team members. You may not have the required working capital or know-how. Your initiative is enough to accompany you and raise you to the rank of good exporter. This is the responsibility that we will assume as the Heart Bank.
We will finance them, give them technical know-how and organize and facilitate trade so that they can reach the level of established exporter.