Tackling relief efforts in Sri Lanka after resilient year

After surviving an almost 30-year civil war that ended in 2009, Sri Lanka as a nation is quite accustomed to adversity. However, the impact of COVID-19 proved to be unlike anything else the country has witnessed before


Sri Lanka’s first localised COVID-19 case was detected in March 2020 right around the time the official declaration by the WHO confirmed it as a pandemic. As nations around the world began shutting down en masse in a desperate effort to rein in surging infection rates and control the mounting death toll, the Sri Lankan government also announced an island-wide lockdown that lasted from March until May in a bid to control its first wave.

The timing of the decision however could not have been worse, as it came at a time when the local economy was only just recovering from the spillover effects of the April 2019 Easter Sunday terror attacks that had threatened to unravel the country’s delicate social fabric and derail years of solid economic progress.

In the weeks and months that followed, the country was left grappling with the toll on human life and livelihoods, as the tourism industry came to a standstill and the disruption to industry, commerce and trade raised concerns regarding widespread job losses.

Volatility in equity and capital markets and the low level of foreign direct investment were a few of the other notable pandemic-related setbacks. Against this backdrop, Sri Lanka’s economy contracted by an unprecedented four percent in 2020, while available data suggests that unemployment shot up to 5.2 percent in 2020 from only 4.8 percent in 2019.

However, some noteworthy action by the government provided a much-needed boost to help businesses and individuals to tide over the difficult times. The broad-based economic stimulus package, which included the Saubhagya COVID-19 Renaissance Facility and the Debt Moratorium scheme, both for the benefit of COVID-19 affected businesses and individuals, were launched alongside a combination of fiscal and monetary policy measures.

These included restriction on imports, a low interest rate environment and the decision to lower the statutory reserve ratio (SRR) for licensed commercial banks as well as the involvement in the domestic foreign exchange market. These measures taken together aimed to stimulate economic activity and preserve the stability of the country’s financial system.

Caught in the crosshairs of the pandemic-induced economic slowdown, the local banking industry also experienced what can only be described as an exceptionally tough year. The performance of the banking sector fell below expectations in 2020 as asset quality and profitability were both compromised due to the higher credit risk. On a positive note however, the banking sector did continue to operate with adequate capital and liquidity buffers and coverage ratios throughout the 12-month period that ended on December 31, 2020.

Building resilience
While the COVID-19 outbreak has brought several issues to the forefront, one area that has been in the constant spotlight in recent months is organisational resilience. For Sampath Bank, building resilience is not a new theme triggered merely as a reactionary response to the pandemic, but rather a consistent long-term effort that goes hand in hand with the annual strategic planning cycle. The Triple Transformation (TT2020) Agenda is the latest in a series of resilience building initiatives that was developed in conjunction with Sampath Bank’s latest strategic planning cycle.

The TT2020 agenda forms part of a long-term strategy to transform three core areas – technology, business and people – to serve as the fundamental building blocks towards building overall resilience for the next three to five years. Having begun the implementation of the TT2020 agenda in the latter part of 2019, the first phase, which focused on augmenting the bank’s digital capabilities, was well underway when the pandemic hit the country in March 2020.

Preemptive thinking to strengthen digital competencies held the bank in good stead throughout the pandemic, for it was without doubt the most critical tool for enhancing the transactional capability of Sampath Vishwa (Retail and Corporate) platforms to allow customers to perform their banking needs during the lockdown period.

Preemptive thinking to strengthen digital competencies held the bank in good stead throughout the pandemic

It is also thanks to the early adoption of digital technology that Sampath Bank was able to create an omni channel environment to provide seamless connectivity across multiple platforms and give customers an even better banking experience than they would otherwise have experienced through our physical channels. Some notable examples include: the ‘cash-in-a-flash’ delivery service, the mobile ATM facility and the ‘Doorstep Banking’ facility, all launched in the midst of the two-month island-wide lockdown to assist retail customers to perform mainstream banking transactions without having to visit a branch. On this basis, the bank was able to divert over 90 percent of the average monthly routine transactions to digital channels during the initial lockdown period. Thereafter, approximately 80 percent of routine transactions continued to be performed digitally, a further testament to the versatility of Sampath Bank’s digital initiatives in meeting the customers’ expectations.

Proving its commitment to support its customers at their time of need, the bank also initiated proactive efforts to give eligible corporates and SMEs the opportunity to access the government-led relief measures such as the Saubhagya COVID-19 Renaissance Facility offered at a concessionary rate of four percent and the debt moratorium scheme. Accordingly, phase one of the debt moratorium was granted to approximately 50 percent of customers on the loan book, while phase two was extended to approximately 30 percent of the bank’s loan book.

Keen to play its part in supporting Sri Lanka’s post-pandemic economic recovery, Sampath Bank went beyond the regulatory mandated relief measures and mapped out its own relief efforts under the theme ‘Revive Sri Lanka.’ This initiative was kicked off in mid-2020 with the launch of the ‘Sampath Diriya,’ a bank-funded special loan scheme to enable manufacturing and export-related SMEs to access funding at a concessionary interest rate. To complement these efforts, the bank launched ‘Evolve,’ a robust ecommerce platform for SMEs.

Community commitment
Meanwhile, with banking operations declared an essential service as per the COVID-19 emergency laws, the safety of employees took on a whole new meaning. Prioritising the physical safety of employees was crucial and staff were asked to work from home where possible. All recommended health and safety guidelines were implemented for the safety of employees, including detailed work schedules for branch teams and corporate management, along with special transport arrangements accompanied by a comprehensive COVID-19 monitoring system. Furthermore, no pay cuts or retrenchments were announced and all confirmed employees were granted their full entitlement earned under the performance-based bonus scheme for the year 2019.

A new learning management system was also rolled out to ensure training activities would continue unhindered. In an effort to build overall resilience and help the bank to manage the long-term impacts of COVID-19, risk management systems were further strengthened with the implementation of sophisticated early warning systems along with a series of machine learning tools for the detection of potential non-performing advances. Business Continuity Planning (BCP) controls were also tightened to ensure cognizance of the varying risk profiles of different branches. In addition, after a comprehensive bank-wide vulnerability assessment, it was decided to further strengthen the independent disaster recovery site framework currently in place as an additional BCP measure.

At the same time, seeing the pandemic as an opportunity to reiterate its commitment to attend to underserved communities, the bank continued with its flagship CSR initiative – the ‘Wewata Jeewayak’ tank restoration programme. Two major tank restoration projects were undertaken and completed in 2020, bringing the total number of tanks restored to nine, since the initiative was first launched in 2001. The bank also teamed up with two leading corporates to jointly donate a fully equipped PCR laboratory to the army hospital in Colombo, adding a considerable boost to the country’s overall COVID-19 testing capacity. The donation was made via the ‘Hope for Life’ fund, an internal fund maintained by Sampath Bank to fulfill its purpose of uplifting public healthcare standards in Sri Lanka.

Continued growth
Meanwhile, at a time when many in the local banking industry were struggling to cope with the impact of the economic downturn, Sampath Bank demonstrated its tenacity by continuing to grow in 2020. The bank’s asset base crossed the historic Rs 1trn mark to reach Rs 1.1trn ($5.5bn) as of December 31, 2020, denoting a 15.4 percent expansion from the Rs 962bn ($4.8bn) reported at the end of the previous financial year. Surpassing the one trillion mark in total assets in just over 33 years represents a significant milestone in the bank’s journey to date as it places Sampath Bank in the local banking record books as the youngest bank to reach this remarkable landmark. Fuelled by robust asset growth, the bank recorded PAT of Rs 8bn ($40m) and PBT of Rs 11.2bn ($56m) for the FY 2020, which enabled the declaration of a cash dividend to shareholders at a 39 percent dividend payout ratio. These are all very credible achievements that demonstrate without a doubt Sampath Bank’s resilience and further prove the bank’s ability to consistently meet stakeholder expectations even in times of economic adversity.