ALLIANCE FINANCE COMPANY (AFC)
Q: Alliance Finance Company (AFC) is the oldest such entity in Sri Lanka – it is one of only four financial institutions in the banking and finance sector globally to be certified under the holistic sustainability standards and certification initiative for value driven financial institutions developed by the European Organisation for Sustainable Development (EOSD). You have adopted a purpose statement and three bold high impact goals, which are unseen or unheard in the profit oriented commercial world. How does such a strong commitment to social and environmental matters help in driving the business to create shareholder value?
A: Alliance Finance being the oldest finance company in Sri Lanka has always had a pioneering spirit; it has changed and adapted over the 65 years of its existence to meet the needs of the people – needs that are relevant in the world today.
We have always focussed on serving smaller customers and underserved segments of society. This was the ethos from the days of our founders.
It was therefore a natural extension of these values that led us to adopt a triple bottom line approach, which we believe needs to be commonplace in every business around the world.
We now have a very powerful purpose statement and set of values, which put the environment and society that we operate in at the highest level of priority. Our business plans and corporate strategies revolve within these parameters and evolve into budgets, and products and services.
By doing this, all stakeholders that we interact with are benefitted. Our customers, even from marginalised communities, have their social needs met; and they’re met in a way there is no environmental damage.
We’re socially and environmentally responsible; and we integrate this into the very fabric of our business model. This is definitely a business philosophy that adds value to all stakeholders including shareholders, employees and the general public.
Q: AFC has been successful in raising foreign funding even under the present challenging circumstances where the Sri Lankan Rupee is under tremendous pressure. Why are reputed foreign funding agencies placing their trust in AFC when the country rating has been downgraded and foreign investments are hard to come by?
A: The answer to this is twofold. Firstly, the socially and environmentally conscious investors that we work with, and the funding they provide, reflect the confidence they have in building rural economies. Despite the macro situation in the country, they still have faith in the development of these economies.
It also reflects the confidence they have in AFC’s ability to execute and operate in that environment, by adding value to such communities and the environment. AFC has a proven track record of weathering many storms including different governments, different policies, a near 30 year civil war and much more.
Despite all this, we continue to grow – and they have immense confidence in our business philosophy and abilities to manage these funds in the rural economies in line with the national development agenda, as well as the United Nations Sustainable Development Goals (SDGs).
This makes the financing truly transformative and it becomes a catalyst for sustainable development. These investors are partners in our journey and their technical capacity is also greatly valued as it enables us to make important structural changes within the organisation that helps us evolve further.
Q: Could you outline the history of your organisation?
A: AFC was incorporated on 18 July 1956 with an issued share capital of Rs. 150,000. The original board comprised the late Eardley de Silva (Founder Chairman), Heyward Fernando (Managing Director), Fred Perera, Hayes Jayasundera and N. M. Appuhamy, all of whom were distinguished and respected gentlemen in the business community.
The first office was located at 43 Campbell Place in Colombo 8 and consisted of five employees. ‘Earn before you spend’ was its motto; ‘Others before self’ was another.
Q: When looking at the organisation’s timeline since inception, what were the most significant milestones?
A: Over the decades, AFC has made a significant contribution to the industry and the nation at large, by introducing some of the most innovative and timely products and services. Among the many awards and accolades that AFC has won recently, a few stand out.
In 2013, AFC won the Best Innovation in Sustainable Financial Services Merit from EOSD Global Sustainable Finance Awards, Germany; and in 2014, the company was adjudged Green Leadership Winner at the Asia Responsible Entrepreneurship Awards in Singapore.
In 2019, AFC won a Merit Award under the Outstanding Development Project Awards at the ADFIAP Awards held in the Philippines; and in the same year, it received a Merit Award for Local Economic Development at the ADFIAF Awards, Oman.
In 2015, AFC obtained its inaugural strategic foreign funding line from triple bottom line based prestigious DFI, Triodos Bank (Netherlands); and in 2016, the company obtained ESMS from Steward Redqueen (Netherlands). The following year, for the first time in the history of the Colombo Stock Exchange (CSE), AFC managed three issues covering subdivision of shares, capitalisation of reserves and rights issue of shares respectively.
AFC also signed the Karlsruhe Resolution pledging its contribution towards the UN SDGs and Paris Climate Agreement in 2017. As a follow up to this, more than 176,000 trees were planted on World Environment Day in 2018 with over 371,000 children representing 990 schools participating. The ‘AFC Thuru Mithuru’ tree planting programme pledges to plant one million trees by 2023.
In 2020, AFC became the first financial institution in the banking and finance sector in Sri Lanka and Southeast AsiaÊto be accepted into the Development of Financing 4.0 – a digital platform designed to transform finance into a force for good.
Financial year 2021/22 has been the most historic year for AFC in terms of both financial and sustainability performance. The year recorded the highest profit and portfolio growth in the history of AFC while being recognised with six awards for its commitment to sustainability.
The flagship project ‘AFC one million trees for unity’ won two international awards at the Karlsruhe Sustainable Finance Awards – 2021 (organised by the European Organisation for Sustainable Development in Germany) and ADFIAP Awards 2021 (organised by the Association of Development Finance Institutions in Asia and the Pacific in the Philippines).
In addition, AFC’s annual sustainability report has won three awards in the category of best sustainability report at the ADFIAP Awards 2021. It was also the winner in the Finance Services and Insurance category at the ACCA Sri Lanka sustainability reporting awards 2021 (organised by the Association of Chartered Certified Accountants) and second runner-up joint winner at the SAFA Best Presented Annual Report Awards 2020 (organised by the Institute of Chartered Accountants of India).
The also company received an appreciation award at the RDA Appreciation Night 2021 for being the Most Contributing Non-Governmental Institution, recognising its contribution to the ‘Maga Depasa Thuru Sevana’ two million tree planting programme with more than 150,000 plants, and financing the website and mobile app developed for progress tracking.
Q: Can you elaborate on AFC’s business performance?
A: Successfully navigating many obstacles due to the pandemic, we delivered exceptional business performance during the period – by recording AFC’s best performance in recent history.
While the pandemic has crippled many industries and companies, our sustainability driven unique business mandate helped us navigate this period of heightened uncertainty. The company doubled its profit for the first half of financial year 2021/22 by recording a profit after tax of Rs. 351 million while reporting a robust growth of 13.8 percent in total assets, which surpassed 38 billion rupees.
We also reported an NPL of 7.12 percent, which is far below the published industry average, while reporting a total capital ratio of 14.95 percent – which is well above the regulatory minimum of 11 percent.
Our strong business performance is reflected in AFL’s share price, which has tripled since the beginning of the financial year, thereby delivering superior returns to shareholders while adding significant value to all our other key stakeholders – such as customers, depositors, employees, business partners and society at large.
