Annual Report 2019
MICROFINANCE
TOWARDS
INCLUSIVE GROWTH
Berendina Micro Investments Company Limited
Microfinance towards
Inclusive Growth
Inclusive growth makes equitable opportunities for economic
participants during economic growth where its benefits are
enjoyed by every section of the society. This is achieved through
direct links between the macroeconomic and microeconomic
determinants of the economy and the economic growth.
Being an organization providing microfinance and allied services,
we cater our clients in line with our vision “Creating an empowered,
equitable society where poverty does not exist” in which elements
of inclusive growth are already embedded. We adopt credit plus
approach by providing microfinance and enterprise development
services as a package and work in high poverty areas in the country
which has led in creating many economic opportunities for low
income people in the periphery facing numerous challenges.
These efforts have resulted in uplifting their living standards
in economic, social and entrepreneurial spheres that ushering
them out of poverty. Environmental safe guards to minimize the
harmful impacts generated from destructive business practices as
well as introduction of environmental friendly and economically
beneficial technologies further resulted in converting waste into
useful and valuable products. Through these processes, our clients
have become active participants in the economy and thereby
contributing to and benefitting from the economic growth of the
country.
Contents
ABOUT US 03
04
Vision, Mission, Strategic Goal & Objectives 05
About This Report 06
Stakeholder Engagement and Materiality 08
Financial Highlights
Non-Financial Highlights
OVERVIEW 10
13
About BMIC 14
Culture, Ethics and Values 15
Our Journey - Milestones 18
Timeline of Activities – 2019 22
Chairman’s Message
Managing Director’s Review
MANAGEMENT DISCUSSION AND ANALYSIS 28
32
Operating Environment 34
Value Creation Model 39
Manufactured Capital 43
Financial Capital 49
Customer Capital 53
Social and Responsibility Capital 58
Human Capital
Natural Capital
CORPORATE STEWARDSHIP 64
66
Profiles of Board of Directors 68
Corporate Management Team 70
Regional Management Team 75
Corporate Governance 78
Risk Management Review 79
Internal Audit Committee Report
HR Committee Report
FINANCIAL STATEMENTS 81
82
Financial Calendar 83
Statement of Directors’ Responsibilities for Financial Reporting 84
Directors’ Statement on Internal Control Over Financial Reporting 87
Annual Report of the Board of Directors on the Affairs of the Company 89
Independent Auditor's Report 90
Statement of Comprehensive Income 91
Statement of Financial Position 92
Statement of Changes in Equity 93
Statement of Cash Flows
Notes to the Financial Statements
SUPPLEMENTARY INFORMATION 122
123
Value Added Statement 124
Capital Adequacy 125
Shareholder Information 126
10 Years Summary 128
Glossary
Notice of Meeting 129
Form of Proxy Inner Back Cover
Corporate Information
Vision, Mission, Strategic Goal & Objectives
Vision
Create an empowered, equitable society where poverty does not exist.
Mission
Ensure poor have access to quality, responsible and innovative microfinance and enterprise development services at lowest
possible cost in ensuring prosperous future for this segment of society in a financially sustainable manner with a motivated
team while educating the general public on positive impact of microfinance.
Strategic Goal
To reach out to fifteen high poverty districts and to serve a minimum of 175,000 families consisting minimum 30% of
minority communities, 20% of marginalized communities and maintaining at least 75% of women, to reduce poverty by
10% among existing borrowers, to include a minimum of 90% of the clients into saving and to become a market leader in
the sustainable EDS sector, while increasing OSS to 130% by the end of 2022.
Objectives
01. Continue to be the number one brand in the microfinance sector with highest level of social acceptance.
02. Further growing the organization by increasing active borrowers and deposit holders by introducing customer
centric financial services.
03. Using new technology to optimize the operational efficiency and customer satisfaction, and to measure the impact
of the services.
04. Strengthening HR policies and practices to ensure continuous career advancement towards employee satisfaction to
retain committed and talented staff.
05. Improving impact oriented Enterprises Development Services (EDS) along with credit offered by BMIC.
06. Increasing the greener practices and occupational health and safety by BMIC and its clients.
07. Minimizing unsatisfied client dropouts and ensuring all existing clients are satisfied with BMIC services.
08. Developing a comprehensive and fully fledged audit procedure and process in order to improve compliance,
operational effectiveness, efficiency and transparency in all aspects.
09. Establishing Good Governance Structure and Compliance Policy in order to act as a responsible organization.
10. Assessing the positive and negative outcomes of the BMIC services among its clientele in a scientific manner in order
to further improve BMIC services.
11. Ensuring efficient fund management and financial sustainability.
About This Report
ABOUT THIS REPORT REPORTING ENHANCEMENTS
This year, we present our Integrated Annual Report made Every year we attempt to improve the readability,
under the six capital management reporting structures, meaningfulness and relevance of our report. In doing so, this
through which we hope to provide our stakeholders with year we have worked to demonstrate the various factors
the information needed to make an informed assessment of that contribute to the value creation process along with the
Berendina Micro Investments Company Limited (“BMIC”)’s interconnection between the capitals.
ability to create value over the short, medium and long-
term. The report presents comprehensive yet concise EXTERNAL ASSURANCE
information relating to our strategy, value creation model,
risk management, governance, performance and prospects. External assurance on the financial statements and related
notes has been provided by Messrs. KPMG, Chartered
SCOPE AND BOUNDARY Accountants. Their assurance on the Financial Statements
are presented in pages 87 to 88 of this report.
This report covers the operations of BMIC for the period
from 1st January 2019 to 31st December 2019. We adopt STAKEHOLDER ENGAGEMENT AND
an annual reporting cycle for financial and non-financial MATERIALITY
reporting; the previously published Annual Report, covering
the financial year ending 31st December 2018 is available on We use materiality analysis to assist our investors and other
our website www.berendina.org. There had been significant stakeholders to determine our value creation ability and
changes in the size, structure, ownership and services of the identify the issues of great significance to the business in
organization compared to the previous year. Central Bank the short, medium and long terms.
of Sri Lanka (CBSL) granted the first Microfinance License
under the Microfinance Act No. 06 of 2016 to BMIC on 05th CONTACT DETAILS FOR QUESTIONS REGARDING
April 2019 and accordingly now being governed by CBSL. THE REPORT
Moreover, two new branches were opened in Welimada and
Nuwara Eliya while BMIC two-pronged approach expanded We value your comments and inquiries on this Annual
towards obtaining clients’ deposits which was piloted in Report which could be addressed to:
those newly opened branches. There are no restatements of
information provided in previous reports. Name: Dilhara Jayasinghe
STANDARDS AND PRINCIPLES OF Position: Assistant Manager–
PREPARATION Address: Compliance & Corporate Relationship
Email:
The Financial Statements presented on pages 87 to 120 of No.44/3, 3rd Floor, Nawala Road,
this report have been prepared in accordance with the Sri Narahenpita, Sri Lanka.
Lanka Financial Reporting Standards and the requirements of
the Companies Act No.7 of 2007. The narrative on Corporate [email protected]
Governance stated on pages 70 to 74 of this report.
TARGET AUDIENCE
This report is prepared primarily for current and potential
investors; however, it also contains information that
is relevant to other stakeholders including customers,
employees, regulators and communities. The report focuses
on aspects that are considered material to our value creation
and the process we have adopted for determining such
material topics is given on pages 32 to 33 of the report.
4 Berendina Micro Investments Company Limited | Annual Report-2019
About This Report
Stakeholder Engagement and Materiality
Stakeholder Purpose of Mode of Frequency of Stakeholder Concerns Company Response
Engagement Engagement Engagement and Expectations
Employees Engaging in the Management On a regular Attractive remuneration, Salaries on par with industry,
value creation meeting, employee basis as well
process surveys, whistle as annually a conducive environment providing training opportunities,
blowing policy
and process, exit to maintain work- maintaining a clear channel to
interviews, open
door culture and life balanced, career investigate, raise concerns and
performance
review growth opportunities, implement necessary actions,
opportunities for direct sharing employee feedback
communication with with top management, opening
the management, up two-way communication
ethical work practices, channels to offer opportunities
expressing their concerns for growth in performance and
and satisfaction remuneration
Employees Maintaining a Intra-net/Regular On a regular Attractive Salaries on par with industry,
basis remuneration provision of other allowances,
high level of staff meetings best staff selection and rewards
Innovative products and and appreciation for longer
workforce morale services period of service
Continuous product
and efficiency development based on market
insights/customer insights
Customers Create product Village level As necessary
Customers
Customers awareness discussions/ On a regular
basis
meetings and print
On a regular
media/videos basis
Identify loan/ Branch network Improved product The branch network across six
portfolio regions to improve convenience
credit needs and and better service delivery
provide a high
level of service
Obtaining Direct customer Effective complaint Efficient customer assistance/
customer feedback, customer handling and mitigating helplines at the branch level and
feedback surveys on product issues, obtaining at the Head Office level.
(customer impact, customer information on products
complaints/ hotline and services, customized
suggestions) products to suit
customer needs
Customers Maintain Interaction at cluster Monthly Easy access to Enhanced service delivery to
Funding customer meetings as well as information, Company the customer by incorporating
Partners
interaction individually at village developing products and customer suggestions into
Regulators
and the (customer level, customer services aligned with strategy development
Government
Community relations) perception surveys customer needs
on product impact
Maintaining Dissemination of As necessary Positive impact on client Poverty level assessment using
cordial and information on our as well as life and on time servicing PPI, impact assessment survey
effective achievements and annually by lenders and on time repayments and
relations with the strategies, award reporting
funding partners, ceremonies
creating
opportunities for
future funding
Maintaining Submission of other On a regular Maintaining solvency Submission of statutory returns
and capital adequacy on time
compliance Documentation basis
requirements as per regulators’
stipulations
Executing social Maintaining a On a regular Contribution to Maintaining a clear line of
community welfare communications and fulfilling
responsibility dialogue with basis Company responsibilities as a
responsible corporate citizen
community
Berendina Micro Investments Company Limited | Annual Report-2019 5
Financial Highlights 2019 2018 Change
Total Total (%)
For the Year Ended 31st December
838,174,865 914,737,460 -8.37%
Financial Performance 786,084,413 863,038,231 -8.92%
Gross Income (LKR) 202,917,636 258,916,232 -21.63%
Interest Income (LKR) 114,305,109 -88.37%
Interest Expense (LKR) 13,294,485 -63.40%
Profit Before Income Tax (LKR) 24,868,761 67,951,153 -116.90%
Income Tax Expense (LKR) (7,370,298) 43,607,545
Total comprehensive income for the year (LKR)
2,759,790,705.00 2,835,656,223 -2.68%
Financial Position at the Year End 1,574,799,190 1,771,624,851 -11.11%
Loans and Receivables (LKR) 977,677,951 906,393,354
Borrowings (LKR) 3,148,307,895 3,232,167,749 7.86%
Total Equity (LKR) -2.59%
Total Assets (LKR)
(0.15) 0.61
Investor Information 10.85 10.95
Earnings Per Share (LKR)
Net Assets Per Share (LKR) 12.10% 10.13%
11.14% 7.51%
Key Performance Indicators 28.26%
Portfolio at Risk ( 1 Day) 20.96% 29.01%
Portfolio at Risk ( 30 Days) -0.36% 20.30%
Gross Interest Margin (%) -1.23%
Net Interest Margin (%) 1.39%
Return on Assets (%) 1.07 5.24%
Return on Equity (%) 1.61
Interest Cover (Times) 1.44
Debt : Equity Ratio (Times) 1.95
Operational Results of the Year 2,939,460,500 3,023,210,000 -2.77%
New Advances Disbursed (LKR) 721,996,000 637,000,000 13.34%
Borrowing Obatained (LKR)
Operational Self Sufficeincy Before Tax (OSS) 100.85% 110% 25.77%
Financial Self sufficeincy (FSS) 93% 98%
Capital Expenditure Incurrred (LKR)
7,548,222.80 6,001,482
6 Berendina Micro Investments Company Limited | Annual Report-2019
Financial Highlights
Gross Income Profit after Tax
LKR Mn 914 LKR Mn
839 838
1,000 120
800 100 102
80 70 80
60
640
600 46
478
400 40
20
200 0
-20 2015
0 2015 2016 2017 2018 2019 2016 2017 2018 -12
2019
Total Assets 3,434 3,232 3,148 Loans and Receivables
2,937
LKR Mn LKR Mn
3,500 3,500
3,000 3,122 2,923 2,944
2,500 2,422
3,000
2,624
2,000 2,500 2,023
2,000
1,500 1,500
1,000 1,000
500 500
0 2015 2016 2017 2018 2019 0 2015 2016 2017 2018 2019
862 906 978
Interest Bearing Borrowings 1,771 Total Equity
1,575
LKR Mn LKR Mn
2,500 1,000
2,108
2,000 1,849 800 730
1,500
1,578
600 573
1,000 400
500 200
0 2015 2016 2017 2018 2019 0 2015 2016 2017 2018 2019
Berendina Micro Investments Company Limited | Annual Report-2019 7
Non-Financial Highlights
HUMAN CAPITAL MANUFACTURED SOCIAL AND
CAPITAL RESPONSIBILITY CAPITAL
Equal Opportunity
Employees Operating Districts Poverty Outreach
396 11 38.6%
No of Staff Participation No. of Branches Impact Assessment
for Trainings 30 Surveys
882 2
Operating Estates
Staff Turnover 49 Bright Students’ Scholarship
16.53% LKR 11.89 Million
Suwasahana Benefit
LKR 9.95 Million
Non -Financial
Highlights
CUSTOMER CAPITAL NATURAL CAPITAL
Active Borrowers Biogas Digesters
84,691 30
Female Borrowers Waste Water Treatment Units
88% 7
EDS Training Participation Reducing greenhouse gas
38,852 emission by
710 kg
Loan Disbursement
LKR 2.94 Billion
8 Berendina Micro Investments Company Limited | Annual Report-2019
“Together with my husband, we started a compost
production business and we joined hands with
Berendina to further develop our business. Thanks
to Berendina, we were able to expand our business
and have obtained the fourth loan from Berendina.
Now, our compost business has been registered as
“M.V.K.Kanishka Compost Center”and also received the
Environmental Protection License from Environmental
Protection Authority in 2015. I also participated to
the training programmes organized by the Enterprise
Development Services Division of Berendina from
which I gained knowledge on various aspects related
to business management. Now, there are fifteen full-
time employees involved in our business and we are
able to earn a monthly profit around LKR 210,000. So,
we are living happily and eager to expand our business
with new market opportunities in the future.”
WasanthaKumari, Valachchenei
OVERVIEW
About BMIC
Berendina Micro Investments Company Limited (BMIC) MICRO CREDIT
was incorporated in the year of 2014 as a sister Company
of Berendina Microfinance Institute (Guarantee) Limited Micro Credit services strive to assist BMIC clients to establish
(BMI), mainly to surpass bottlenecks that arose in the new business ventures and support existing businesses
fund-raising process. This establishment was relaunched in to expand and diversify and to build up family asset base.
September 2017 as the sole microfinance arm of Berendina. Through the Micro Credit programme, BMIC disburse small
The rationale was three-fold; first, it is in adherence with sized, medium-tenured loans at low interest rates. Following
the regulatory requirement laid out by the Central Bank a strict criterion based on the Progress out of Poverty Index
of Sri Lanka to standardize microfinance entities as public (PPI) as well as the “per head family income” indicators, BMIC
companies and corporate businesses. Second, to broaden selects poorer families (clients) who need assistance and
the benefits to BMIC clients by placing extra emphasis on funds for a variety of purposes including development of
the requirement for meaningful “investments” whereby micro enterprises, construction and renovation of houses,
ensuring the prudent credit investments by the borrowers. agriculture and dairy.
Third, in order to highlight the positive sense of the phrase
“micro investments” as opposed to the negative connotation ENTERPRISE DEVELOPMENT SERVICES
associated with “microfinance”. (EDS)
BMIC remains committed to uplift underprivileged The credit plus component of BMIC, the Enterprise
communities through financial inclusion and job creation Development Services (EDS) focus on providing a wide
by providing microfinance services as well as Enterprise spectrum of skills that will usher in long-term prosperity
Development Services (EDS). Over the course of the decade, and development of BMIC clients and their communities.
Berendina Development Services (Guarantee) Limited (BDS) EDS programmes work towards providing technical skills,
has remained as our principal fund provider. Envisioning business management skills, financial literacy and leadership
prosperity for the impoverished segments of the society, trainings. EDS programmes also concentrate on providing
BMIC employs a dual strategy to extend financial and non- inspiration and motivational training to underprivileged
financial assistance to identified communities to progress communities, especially individuals in rural and plantation
on an upward and a sustainable trajectory. The two-pronged sector. BMIC staff provides business counselling services,
approaches involves the Micro Credit and Enterprise market linkage to clients who require such services as well as
Development Services. environment protection programmes.
O CREDIT • Business Start Up
MICR • Business Development
EDS • Asset Building
• Agriculture
• Dairy
• Household Assets Acquisition
• Senior Citizen Business
• Ultra-Poor Business Start Up
• Sanitary
• Entrepreneurial Skills
• Technical Skills
• Soft Skills
• Financial Literacy
• Business Counselling
• Exposure Visits
• Environmental Protection Programme
• Product Online Marketing
10 Berendina Micro Investments Company Limited | Annual Report-2019
About BMIC
BMIC CREDIT CHANNELS Etimos
BMIC uses two key modes of delivery for its credit Etimos is a transnational cooperative consortium based
disbursement. The most commonly used method is the in Italy including over 280 organizations across the globe.
Cluster-based lending which involves the provision of credit BMIC partnered Etimos in 2009 to obtain bulk loans for
to cluster members in informal credit groups. BMIC also microfinance on lending.
provides credit to plantation and estate sector workers
through the Estate Worker Housing Co-operative Society Stromme Micro Credit (Gte) Limited
(EWHCS). Additionally direct lending also carried out as 3rd (SMCGL)
delivery channel.
SMCGL is the leading not-for-profit wholesale lenders for the
Cluster Based Lending microfinance sector in Sri Lanka. The partnership with them
commenced in 2009, and since then BMIC has received both
BMIC’s cluster-based lending has been adopted by various financial and technical support from this organization.
other microfinance institutions in Sri Lanka. The model
involves a single cluster comprising 10 informal credit DFCC Bank
groups with three members each. Borrowers form groups
with individuals of their choice and these individuals receive The partnership between BMIC and DFCC commenced in
loans following an assessment of the credit worthiness of 2012. DFCC offered funding under a guarantee in the form
each member. Once the loan is given, regular follow ups are of a Stand by Letter of Credit by Grameen Credit Agricole
carried out on how the loan is being utilized. This approach Microfinance Foundation in Luxembourg. From year 2015
allows the organization to deal with well-defined, recognized onwards, DFCC Bank has been providing loan facilities
groups and enables a wider coverage as well as better without such Letter of Credit guarantee.
monitoring. Cluster members meet monthly to repay loans
and submit new loan applications. During the year under Hatton National Bank (HNB)
review, BMIC has catered to 84,691 active clients including
3,960 estate clients. BMIC joined hands with HNB in 2012. Initially, the loan facility
was given based on the security of loan guarantee from
Lending Through Plantation Co- United Prosperity; a web-based fund-raising organization in
Operative USA. From year 2014 onwards, HNB has been granting loan
facilities at very competitive terms to BMIC.
BMIC disburses credit facilities to estate sector workers
through the Estate Worker Housing Co-operative Society HelpAge
(EWHCS). BMIC was the first ever microfinance institute to
reach out to this relatively under-served community. During BMIC further expanded its coverage to senior citizens,
the year under review, BMIC served 2,664 clients in 49 another under-served community. BMIC partnered with
estates. HelpAge in 2013. The partnership has the primary objective
of empowering senior citizens through microfinancing.
Direct Lending Currently, the funds obtained through this partnership has
been utilized to provide loans towards income generating
In addition to cluster-based lending and lending through co- ventures for senior citizens who are aged above 62.
operatives, BMIC started direct lending to clients to address
continuous requests of some clients who are unable to Grameen Credit Agricole Microfinance
attend cluster meetings due to their business activities. Foundation (GCAMF)
BMIC PARTNERSHIPS The partnership between BMIC and Grameen Credit Agricole
Microfinance Foundation in Luxembourg commenced from
Over the course of the years, BMIC nurtured various year 2012. They provided Stand by Letter of Credit as a
partnerships across a cross section of local and international guarantee to DFCC Bank in order to facilitate loans to BMIC
organizations. These partners play a key role in BMIC’s efforts and have assisted BMIC by providing technical support for
to build a more equitable society through extending funding staff capacity development. Further, from year 2015 to 2018
as well as technical knowledge. BMIC received direct funding from GCAMF and again in 2018
they provided a guarantee to a loan provided by SMCGL to
Sri Lanka Savings Bank (SLSB) BMIC.
SLSB, formerly The National Development Trust Fund, is
BMIC’s longest-standing credit partner, with the partnership
dating back to 2007. SLSB provides refinancing loans to
BMIC through its Microfinance unit.
Berendina Micro Investments Company Limited | Annual Report-2019 11
About BMIC
Whole Planet Foundation (WPF) MEMBERSHIPS
BMIC has been in a partnership with WPF since 2016. The During the past decade, BMIC obtained memberships in key
partnership is to strengthen BMIC having a dedicated national and international microfinance industry associations.
contribution to set up new branches. The grant given by These associations enabled BMIC to strengthen its network,
WPF has increased the equity and profitability of BMIC. share knowledge and improve visibility. BMIC is a member of
Further, WPF provides technical advice to BMIC. the Lanka Microfinance Practitioners’ Association (LMFPA),
the coordinating body for microfinance activities in the
Youth Business Sri Lanka (YBSL) country. BMIC’s association with the Banking With The Poor
Network (BWTP) as well as financial and social performance
YBSL became a BMIC’s partner in 2015 with a loan facility reporting to the Microfinance Information Exchange (MIX)
to disburse micro loans among young entrepreneurs aged has enhanced organizational visibility in the international
between 18 to 35 years. YBSL is a National Organization community, paving the way for enhanced benefits to BMIC
helping Sri Lankan Youth to start up their own businesses, by clients. BMIC is also a member of the Start and Improve Your
providing access to credit and acting as a volunteer business Business Association (SIYB) and the Sri Lanka Evaluation
mentor in addition to providing EDS training. Association (SLEvA). BMIC is also an endorser of Smart
Campaign.
Humanity & Inclusion (HI)
Humanity & Inclusion (HI) established as a non-profit
association organized in compliance with French law of
July 1, 1901, domiciled at 138 Avenue des Frères Lumière
69008 Lyon, France, registered in Sri Lanka. BMIC started
a partnership with HI in July 2019 to strengthen business
development support for Micro, Small and Medium
Enterprise (MSMEs) in selected areas of the Central and
Uva Provinces of Sri Lanka. The European Union (EU) is the
principal donor of this project. HI support to strengthen the
Enterprise Development Service of BMIC.
12 Berendina Micro Investments Company Limited | Annual Report-2019
Culture, Ethics and Values
CULTURE
• Stakeholder engagement
• Non-discrimination based on religion, race and ethnicity
• Respect gender equality
• Participatory decision making
• Zero tolerance on mismanagement and frauds
• Low organizational cost to deliver better service to client
• Minimum inefficiencies
• Seniority recognition
• Learning culture
• Open door policy
ETHICS
• Be honest and truthful in our dealings
• Uniform treatment to all our employees
• Respect the environment
VALUES
• Integrity
• Accountability
• Innovativeness
• Inclusiveness
• Respectfulness
• Empowerment
• Transparency
Berendina Micro Investments Company Limited | Annual Report-2019 13
Our Journey - Milestones
2019 2018 2017
BMIC received the Conducting IToT program on Transfer of Total Assets & Liabilities
Microfinance EDS to RDRS, Bangaladesh from BMI to BMIC
Licence under the Official Launch of BMIC Applying for Central Bank License
Microfinance after amalgamation under Microfinance Act No. 6 of
2016
Act No. 6 of 2016 Initiated Clients' Product
Market Development Programme Gold Award at CA Annual Report
Nuwara Eliya Awards 2017
and Welimada Merit Award for Compliance at
Branches were opened CA Annual Report Awards 2018 Appreciation Award from SIYB
Association
2016
Commencement of Impact Research
Reached 100,000 client base Unit
Akkaraipattu, Kalmunai, Mullaitivu, Kilinochchi, Vavuniya, 2015
Warakapola and Gampola branches were opened
Chenkalady, Horowpothana, Arayampathy and
Initiated Environmental Protection Programme Kaluwanchikudy branches were opened under BMIC
Silver Award at CA Annual Report Awards 2016 Compliance Certificate at CA Annual Report Awards 2015
A Finalist of WPF Asia Pacific Field Officer Appreciation Award A Finalist of WPF Asia Pacific Field Officer Appreciation Award
2011 2012 2013 2014
Manupa, Kotmale, Thambalagamuwa and Valachchenai branch was Incorporated BMIC
Kahatagasdigiliya Ragala branches were opened under The
opened under BMI Companies Act,
and 2009 No. 7 of 2007
Kuchchaweli 2010
branches were Dickoya, Galigamuwa and Started using PPI
opened under BMI Mawanella, Ipalogama, Serunuwara Dehiowita branches were to assess
and Trincomalee Branches were opened under BMI poverty level of
opened under BMI clients
2007 2008
Incorporated BMI under The Companies Act, Re-registered BMI
No. 17 of 1982 under The
Companies Act,
Bulathkohupitiya, Ginigathhena and Thirappane Branches No. 7 of 2007
were opened under BMI
Timeline of Activities - 2019
January
BMIC FO Certificate 2018
Our nominated field officer, Mr. Rathnayake Mudhiyanselage
Ajith Kumara, was selected as an honorable mentioned
winner for WPF Field Officer Appreciation Award 2018 and
he was awarded with a certificate and a cash prize.
February
Donating chairs
Bulathkohupitiya branch donated 30 plastic chairs for the
Yatideriya Estate cluster to support their cluster operations
and related activities of the cluster members.
March
Norway School visit
Fifteen students and two teachers of Lundheim Folk High
School, Norway were visited BMIC Ginigathhena branch and
then observed microfinance operations in Kenilworth Estate
after following up several clients of BMIC to witness
individual loan usage.
April
CBSL License
On 5th of April 2019, BMIC was issued country’s the first
CBSLLicense microfinance license by the Central Bank of Sri Lanka under
the Microfinance Act No. 6 of 2016. The license was a
long-standing need for the organization which also pave the
way to a healthy microfinance industry.
Berendina Micro Investments Company Limited | Annual Report-2019 15
Timeline of Activities - 2019
May
Donating Plants
In May, Gampola branch distributed environment protection
related awareness boards and more than 250 plants
including mango, guava and jack to Kurunduwaththa Royal
College and Jinaraja Boys College, Sinhapitiya to encourage
students on plantation.
June
ekade
With the intention of serving rural producers including our
clients as well as non-clients, the online product marketing
website “ekade.lk” was launched in June month. This is an
e-commerce website provide an online platform for Sri
Lankan rural producers to sell their quality products and aims
to provide a world-class service with unique products of
reasonable prices.
July
Water tank donation
Under community service projects, BMIC Kahatagasdigiliya
branch donated a water tank to Kahatagasdigiliya Police
station which is useful to store drinking water for police
officers and people who are coming to the police station.
August
Scholarship Seminar
Thambalagamuwa branch conducted an educational seminar
CBSLLicense for 50 students who were expecting to sit for the Grade 5
Scholarship exam in August. The seminar was helpful in
delivering examination required knowledge and practice
through mock papers sessions during the seminar.
16 Berendina Micro Investments Company Limited | Annual Report-2019
Timeline of Activities - 2019
September
Staff Exposure Visit to Nepal
In appreciation of annual best staff selection conducted for
2016, top 9 staff members were facilitated with an exposure
visit to Nepal and were able to experience microfinance
practices of Nepal Women Community Service Center,
Chhimek Laghubitta Bittaya Snastha CBBL and Nirdhan
Laghubitta Bittaya Snastha.
October
School play ground renovation
BMIC contributed for the School Play Ground renovation of
Meepilimana Vidyalaya located in Meepilimana GN Division
of Nuwaraeliya DS Division. BMIC Nuwara Eliya branch team
handed over paints and other needed items in October 2019
to the Principal and the staff of the school.
November
Renovating the well
Under the community support initiative, BMIC branch in
Nuwara Eliya contributed for the renovation of public well
which has been used by villagers for many decades and was
in a dilapidated condition at Jayawardanapura in
Meepilimana GN Division of Nuwara Eliya DS Division.
December
Best Entrepreneurs Award
Berendina felicitated their most successful 60 clients who
have emerged as Micro and Small entrepreneurs at an award
ceremony held on Friday, 13th December 2019 at the
Auditorium of Centre for Banking Studies, Rajagiriya. Mr.
J.P.R. Karunarathne, the Assistant Governor of the Central
Bank of Sri Lanka was the Chief Guest at this event.
Berendina Micro Investments Company Limited | Annual Report-2019 17
Chairman’s Message
‘In the beginning of April, BMIC
was able to become the first
licensed microfinance company in
Sri Lanka under the Microfinance
Act No. 06 of 2016’
18 Berendina Micro Investments Company Limited | Annual Report-2019
Chairman’s Message
I am pleased to present the Annual Report and Audited Further, EDS which is a unique service of BMIC are provided
Financial Statements of Berendina Micro Investments for all customers which focuses on improving the skills,
Company Limited (BMIC) for the year ended on 31st knowledge and attitudes to enhance their entrepreneurial
December 2019. capabilities and encourage them to create income
generating activities and develop them into micro and small
Despite the year was being the most challenging year, it entrepreneurs through continuous support and guidance.
was a beginning of a new chapter of BMIC. In the beginning During the year, the Company has provided 1,903 training
of April, BMIC was able to become the first licensed programmes for 38,852 clients including technical trainings,
microfinance company in Sri Lanka under the Microfinance exposure visits, financial literacy trainings, Start and
Act No. 06 of 2016 which opened the path for the Company Improve Your Business (SIYB) and soft skills development
to start micro savings operations as collateral deposits programmes.
and also supporting to increase the brand recognition and
loyalty among customers. Further, the company also opened In addition to the prime services provided by BMIC, we
two new branches in April to expand operations mainly to also provide “Suwasahana Benefits Scheme” to our clients
estate communities and started operating completely on which is a financial assistance for them in their emergency
the ERP solution. However, with the Easter Sunday Attack situations such as illnesses or funerals, free of cost to the
took place in the same month, sluggishly deteriorating NPLs client. The scheme consist of a daily allowance of LKR 300
of the Company were started to grow rapidly and in turn for 10 days per year is given for the hospitalization of the
increased PAR. client, client’s spouse or infant below one-year-old while LKR
6,000 is given as funeral benefits in the event of a death of
SRI LANKA’S MICROFINANCE a client or an immediate family member. During the year
LANDSCAPE under review, LKR 9.95 Million of Suwasahana benefits were
distributed among 3,571 clients. Further, BMIC also provided
During the year, Central Bank of Sri Lanka started to issue LKR 11.89 Million worth scholarships for 1, 224 students
microfinance licenses under the Microfinance Act No. 06 of during the year under Bright Students’ Scholarship (BSS)
2016 and microfinance NGOs were started registering under programme entitled for the competent students of the
NGO Secretariat under the same Act. At the end of the year, clients during their studying period for Advanced Level.
there were three licensed microfinance companies including
BMIC and 13 NGOs registered under NGO Secretariat. COMPANY PERFORMANCE
FOCUS ON POVERTY ALLEVIATION The year was challenging due to Loan write off initiative of
the Government in 2018, Easter Sunday Attacks as well as
We always ensure all our operations are congruent towards the political instability throughout the year which directly
our vision of creating an empowered, equitable society impacted our performance to deteriorate within the year.
where poverty does not exist. The most significant feature The customer base of the company also recorded a reduction
of our microfinance programme is the “credit plus approach” of 15% compared to the previous year and with the curtailed
inclusive of collateral deposits where we provide loans with loan disbursement to increase the portfolio quality resulted
collateral deposits together with Enterprise Development in decrease of loan disbursements by 2.8%. Accordingly, the
Services (EDS) as poverty alleviation tools for the upliftment net loan portfolio of the company also recorded a reduction
of the rural entrepreneurs in the grass root level. The loans of 2.7%. The credit interest income which is the prime
are provided at the much lower interest rate compared to source of income reduced by 8.92% to LKR 786 Million from
interest rate cap introduced by the Central Bank and the LKR 863 Million in 2018 and generated a loss after tax of
customers can make monthly deposits as collateral deposits LKR 11.57 Million compared to the LKR 46.35 Million profit
which can be withdrawn after settling the loan. We practice in the previous year. Our PAR (30 days) was 11.14% while
monthly basis repayment method by considering the Operational Self Sufficiency (OSS) was at 99%.
difficulties faced by the clients in daily basis or weekly basis
repayment methods.
Berendina Micro Investments Company Limited | Annual Report-2019 19
Chairman’s Message
CHALLENGES ACKNOWLEDGMENT
The main challenge of the Company is to reduce the risen NPL I would like to convey my sincere appreciation to the Board
levels to increase the quality of portfolio which also impacts of Directors for their immense support extended towards
on improving the bottom line of the Company by lowering me and the BMIC team throughout the year to stand as a
the impairments made against arrears loans. We have taken strong microfinance company. I also wish to express my sin-
several measures in reducing the NPLs including strategic cere gratitude to Berendina Stichting for their continuous
recovery mechanisms by allocating higher number of staffs support delivered to us. I also take this opportunity to thank
for full time recovery. Then after, multiple borrowing and our two charitable entities, Berendina Development Services
over indebtedness of low income communities also directly (BDS) and Berendina Employment Center (BEC) for joining
impacts on our operations where the potential clients have hands and working frequently with us. I am also thankful to
borrowed from several microloan providers at higher interest all our loan and grant funding partners as well as technical
rates to repay on daily or weekly basis. We assess our clients assistance providers in supporting to carry out the business
prior to loan disbursement through feasibility analysis and consistently.
obtaining client’s declaration on other borrowings.
I also wish to express my thanks to our team of staff for their
With the severe competition among the industry, staff re- endless commitment towards the organization enabled it to
tention has become a challenge for BMIC because the rivals move forward confidently with innovative ideas based on cli-
are competing on absorbing skilled employees from the oth- ent- centric products. Finally, I thank our clientele for being
er institutions. At the same time, employees tend to prefer the backbone of our progress as well as for their continued
government jobs due to the prevalence of job security and faith on BMIC.
the negative perception on the industry.
Global emergency, the common challenge faced by the entire G Jagath Chandana
globe also impacts the Company as the businesses carried Chairman
out by our clients also possible in contributing environmen-
tal pollution. In order to provide a solution, BMIC has imple- 20th May 2020
mented the environmental protection programme by allo- Colombo
cating a separate budget annually to minimize the negative
environmental impacts generated by the clients’ enterprises.
GOING AHEAD
We are expecting to expand our piloted collateral deposit
operations to 6 branches in 2020 and to all other branches of
the Company subsequently and expecting to further expand
and customize our loan products based on the customer re-
quirements. Introducing larger loans and extend the reach of
estate community clients are key focus areas in 2020. How-
ever, the year 2020 also expects to be a challenging year with
the emergence of COVID-19 epidemic negatively impacting
global and local economy due to country wide curfew impos-
ing to control the virus.
20 Berendina Micro Investments Company Limited | Annual Report-2019
Berendina Micro Investments Company Limited | Annual Report-2019 21
Managing Director’s Review
“With the main objective of encouraging
all the clients to become successful
entrepreneurs in the future, the “Best
Entrepreneurs Awards 2019” held in
December crowned 60 BMIC clients who
expanded their horizons as remarkable
entrepreneurs in the country”
22 Berendina Micro Investments Company Limited | Annual Report-2019
Managing Director’s Review
It gives me immense pleasure to present our company’s Entrepreneurs Awards 2019” which was held in December
performance during the year 2019 which is a land mark year under the theme of “Crowning the best entrepreneurs”.
for the company and another most challenging year in the In that, 60 BMIC clients who expanded their horizons as
history of BMIC. remarkable entrepreneurs were awarded with the main
objective of encouraging all the clients to become successful
I would like to start with the long awaited news of BMIC entrepreneurs in the future.
becoming the “First Licensed Microfinance Company in Sri
Lanka under the Microfinance Act no 6 of 2016”. The license GLOBAL ECONOMY
was awarded by the Central Bank of Sri Lanka in April 2019.
As a licensed microfinance company, BMIC was able to Compared to 2018, global economic growth slowed in 2019
increase the recognition, credibility and loyalty among the reflecting the impact of heightened trade tensions among
customers while it strengthened BMIC’s position among the major economies, geopolitical tensions and dampened
other stakeholders of the organization. One of the major domestic demand in key emerging market economies.
benefits of obtaining the license for clients is the ability to Accordingly, global economic growth in 2018 was 3.6%
make savings in small amounts in the village itself as collateral which declined to 2.9% in 2019. Further, the growth across
deposits which enhances clients’ habit of savings. As a truly emerging markets and developing economies moderated
poverty focused MFI operating over twelve years, we believe to 3.7% in 2019 from 4.5% in 2018, largely due to country
that CBSL issuing licenses to microfinance companies will specific shocks that weighed on domestic demand.
strengthen the industry in many ways including contributing Reflecting subdued economic activity across the globe,
towards controlling the mission drift evident in the industry. growth of world trade volume of merchandise and trade in
BMIC is proud to be the opener of this avenue for the services moderated notably in 2019 to 0.9% in comparison
microfinance industry. to the growth of 3.8% in 2018. As trade and manufacturing
slowed significantly, commodity prices showed a significant
During the year under review, BMIC expanded the branch drop in 2019 as reflected in the decline in petroleum prices
network by opening two new branches in poverty stricken by 10.2% in 2019 compared to the acceleration by 29.4% in
areas in Badulla and Nuwara Eliya Districts locating branches 2018.
at Welimada and Nuwara Eliya towns focusing to serve
estate communities. While Nuwara Eliya branch is funded The global economy which had been on an arduous path of
by BMIC, funds for the operations of Welimada branch recovery amidst gathering economic and political headwinds
are provided by Whole Plant Foundation (WPF), a funding showed signs of a far-reaching setback with the COVID-19
partner to BMIC since 2015. pandemic. Accordingly, the global economy is expected
to experience its worst recession in 2020 since the Great
In taking advantage of the microfinance license, we piloted Depression, dwarfing the Global Financial Crisis in 2007/08.
deposits mobilization for our customers as collateral
deposits in newly opened branches in Welimada and Nuwara LOCAL ECONOMY
Eliya. With the positive feedback received from the clients
of piloted branches, BMIC expects to expand the collateral Sri Lankan economy reflected worsen sluggish economic
deposit facility to other branches in a phased out manner. growth in 2019 due to the Easter Sunday Attack which
While the collateral deposits help us to reduce the lending negatively affected on the tourism sector and reduced the
risk, it will also reduce the cost of funds of BMIC to a certain business confidence resulting a subdued growth of 2.3% in
extent. 2019 compared to the growth of 3.3% in the last year. Service
sector consecutively provided the highest contribution to
Successful implementation of our ERP system in all the the economy consisting increased wholesale and retail trade
branches as well as in the Head Office in 2019 will benefit us and financial sector activities. Improved industries sector
in increasing efficiency and effectiveness of operations while followed by increase in construction, mining and quarrying
strengthening the control mechanisms. TSS, the ERP system together with marginal turnaround in agricultural sector
consists of operational module (loans, savings and EDS backed the economic growth. In 2019, industrial sector
management), financial management and accounting, fixed recorded the highest growth by 2.7% followed by a 2.3%
asset management, HR and payroll management, inventory growth in services sector in supporting the overall economy.
management, annual planning and budgeting and mobile A subdued growth of 0.6% is recorded in agriculture
application module. Thus a large majority of functionalities sector compared to the growth of 6.5% in 2018 which
of BMIC is now automated which will lead to reduce paper was resulted from deteriorated fishing activities and poor
work and increase digitalization of the operation in going agricultural activities due to the adverse weather conditions
forward. prevailed throughout the year. With the commencement of
the accommodative monetary policy stance, the Average
Another important event we had in the year was the “Best Weighted Deposit Rate (AWDR) was reduced by a total of
100 basis points to 8.2% by end of 2019 from 8.81% in 2018
Berendina Micro Investments Company Limited | Annual Report-2019 23
Managing Director’s Review
aiming at lowering the market lending rates and boosting One of the main criticism for the microfinance sector during
credit flows to the private sector. the last few years is lending money at high interest rates.
However, as per LMFPA data publications, compared to the
MICROFINANCE SECTOR OVERVIEW NGOs and other private sector microfinance institutions,
BMIC has become the lender providing credit at the lowest
The implementation of the Microfinance Act by issuing effective interest rate. BMIC’s maximum loan interest rate
licenses for Microfinance Companies by the Central Bank of is 15% (flat basis) which is equivalent of maximum of 28%
Sri Lanka and few more NGO - MFIs by the NGO Secretariat on declining balance basis. BMIC has a product mixture with
has been a milestone achievement in the year. Three much low interest rates too. BMIC rates are much less than
microfinance companies were granted licenses under the the government introduced interest rate cap of 35%. BMIC
Microfinance Act No. 6 of 2016 by the Monetary Board of discloses the declining balance interest rate to the clients by
the Central Bank. In addition to our company, Berendina mentioning the interest rate in the client card and educate
Micro Investments Company Limited, Lak Jaya Micro Finance them about it.
Limited and Dumbara Micro Credit Limited were given
licenses during the year. In total 13 NGOs were registered as Educating clients to enhance their financial literacy is a
Microfinance NGOs at the NGO Secretariat. major activity of BMIC. This training covers different types of
interest rates charged by microfinance institutions and how
Further, Central Bank of Sri Lanka introduced an interest rate to derive their equivalent effective interest rates. During the
cap for all the micro loans at 35% per annum at the end of year under review, we provided financial literacy training to
last year which significantly impacted this year on ensuring 5,172 clients.
the low cost loans for borrowers.
During the year under review, microfinance industry in Another issue prevailed in the microfinance sector was
Sri Lanka faced with the spillover effects of Sri Lankan over indebtedness due to multiple loans. In order to control
government implemented debt relief programme to write this situation, BMIC takes a declaration from the clients
off loans of women borrowers in 12 districts in the country including information about the loans obtained from other
as well as the negative impact of the Easter Sunday Attacks. lenders; and BMIC makes the credit decisions based on such
Moreover, impacts of external factors including negative information declared by the client because there is no access
political interventions, multiple borrowing by clients leading to formal CRIB for BMIC in the present context. Even having
to over indebtedness, daily and weekly collection practices access to CRIB is not much useful for microloans because
coupled with higher interest rates loans by some lenders majority of microfinance lenders including Samurdhi and
who attempted to identify themselves as MFIs contributed Cooperatives are not reporting to the CRIB.
to damage the reputation of the microfinance sector to a
certain extent. Another criticism for the industry was collection of loan
repayments on daily or weekly basis which makes unbearable
The wholesale lenders to MFIs played an important role cash flow issues for clients. With realizing the inconvenience
in pro-poor socially oriented microfinance in the country faced by the clients in daily and weekly repayments as they
continued declining their operations. Stromme Microcredit mostly have monthly cash flows, BMIC adopted monthly
Asia (Guarantee) Limited (SMACL) provided wholesale repayment method from its inception in 2007.
lending to MFIs including BMIC since 2007 decided to close
their operations. SMACL was the lender providing loans to Generally, microfinance institutions mainly focus on provision
BMIC at the lowest interest rate and the closure of their of credit facilities to their clients rather than providing
operations will have significant impact of BMIC borrowing enterprise development services which is an integral part
portfolio.This is an extension of furthering reduced provision of microfinance in order to ensure higher utilization of
of such bulk loans started few years ago with the inactivation loans and its impact. From the inception in 2007, BMIC
of ETIMOS operations in Sri Lanka. has been instrumental in adopting credit plus approach
where Enterprise Development Services to enhance the
MAJOR CRITICISMS AGAINST entrepreneurial capabilities of the clients and encouraging
MICROFINANCE INDUSTRY AND them to establish income generating activities and develop
POSITION OF BMIC those activities into micro and small enterprises were
also provided with Credit. In order to ensure the effective
With the intention of creating an empowered, equitable implementation of Enterprise Development Services (EDS),
society where poverty does not exist, BMIC adopts a unique each branch is having a dedicated Enterprise Development
approach which makes it highly impact oriented MFI from Officer disseminating information and knowledge among
rest of the microfinance institutions operating in the the clients regarding business opportunities, technology
industry.
24 Berendina Micro Investments Company Limited | Annual Report-2019
Managing Director’s Review
associated with such business opportunities, production Officers, five Field Officers, Office Assistant and a Branch
process, product improvisation, business registration, Manager. However, branches maintaining higher portfolios
establishing marketing linkages and environmental are operating with an Assistant Branch Manager in addition
safeguard measures related to businesses. to the other staff.
Lack of provision of services other than credit facilities was The challenges encountered by the local economy and
also a criticism against MFIs. Further to EDS service described the microfinance sector during the year impacted BMIC
above, BMIC provides additional benefits for its clients to decelerate the performance unexpectedly. Our active
including offering scholarships for the education of clients’ borrowers reduced and stood at 84,691 by the end of 2019
children and paying cash allowances at the unforeseen resulting a reduction of 15% compared to 2018. While our
circumstances such as sickness or death of a family member. net loan portfolio remained at LKR 2.76 billion, a 2.7% decline
Under the scholarships programme, we pay a monthly compared to the previous financial year, the total asset base
allowance of LKR 1,000-1,500 for a bright but poor student also decreased by 2.6%. During the year under review, our
for a period of two years for the first attempt in GCE A/L or total loan disbursement was at LKR 2.94 billion reflecting
three years in case of continuation for the second attempt. a 2.8% reduction compared to the previous year. Our PAR
The “Suwasahana programme” provides LKR 300 per day for (30 days) was 11.14% due to the impact of increasing non-
10 days a year in the event of a client or client spouse or performing loan outstanding together with decreasing loan
client’s small children (less than one year) is hospitalized. In portfolio.
the event of a death of a client or client’s immediate family
member, LKR 6,000 is paid to cover the funeral expenses. During the year 2019, we trained 38,852 clients on different
disciplines recording a marginal increase of 0.7% compared
OUR SUSTAINABLE DEVELOPMENT to the previous year. At the same time, the number of
MODEL training programs were also marginally increased by 1.2% in
2019. The “Success in Money Management” training which
Berendina, the group in which BMIC is one organization, is is the advanced version of financial literacy training was one
not only a microfinance provider. As already stated, BMIC of the highest number of training programmes conducted.
does not carry out microfinance purely as a commercial
activity. Berendina group goes beyond microfinance through During the year under review, our total income was LKR 838
BMIC’s shareholder Berendina Development Services (BDS) million indicating 8.4% reduction compared to the previous
and sister organization Berendina Employment Center year. The profit after tax of BMIC transformed to a loss after
(BEC). BDS implements strategies and interventions tax resulting a decrease of profit by 124% due to increased
targeting on an array of marginalized segments in the loan loss provisions made against increased non-performing
society such as elders, patients with chronic and long term loans, reduction of interest income and increased personnel
diseases, estate workers, differently abled through three cost to manage the quality of the loan portfolio.
different strategic principles such as livelihood development,
water and sanitation, advocacy and lobbying. Further, BEC MOVING CLIENTS OUT OF POVERTY
provides educational support for bright but poor students TOWARDS PROSPERITY
pursuing GCE Advanced Level education. BEC also works
with unemployed youth through the provision of soft and In order to measure the poverty status of clients at the
hard skills training and linking them with the job market. The entry and each successive loan cycle, we use “Progress out of
main donor for BDS and BEC is Berendina Stichting in the Poverty Index (PPI)” which has been recognized as a poverty
Netherlands. measurement tool both locally and globally. Using PPI, we
were able to measure the poverty outreach of BMIC clients
When BMIC makes profits, it will invest such profits in living under different poverty lines and track the poverty
those other poverty alleviation programs of the shareholder reduction when the clients are moving from one loan cycle
BDS and sister organization BEC. This strategy is already to the next.
commenced and will be the strategy for the long term
financial sustainability of all the interventions of Berendina The rate of poverty outreach in 2019 decreased compared
in Sri Lanka. to 2018 with reference to 200% national poverty line. The
poverty outreach in 2019 was 38.6% where as it was 46.4%
PERFORMANCE OF THE YEAR in 2018. This reduction occurred due to several reasons such
as decrease in the number of clients in the 1st loan cycle
We operate in 11 administrative districts with a network of compared to the previous year. Also, the clients who were
30 branches and in addition, our operations are also carried at high poverty levels at the first loan cycle moved out from
out in 49 plantation estates located in Kegalle and Nuwara those poverty levels to lower poverty levels over the time
Eliya districts. All the branches are established following
the “Standard Branch Model” comprising of one Enterprise
Development Officer, two Administrative and Accounts
Berendina Micro Investments Company Limited | Annual Report-2019 25
Managing Director’s Review
as a positive impact of BMIC services and other factors retention remains as a critical issue for us as our target is to
affecting beyond BMIC interventions. reduce this rate of staff turnover ration to a single digit in
the near future.
The results reflect that the poverty rate of the clients
decreased when they move from one loan cycle to the next FUTURE DIRECTIONS
since the clients reduced their poverty level. Here too, BMIC
loans and other services has positively contributed for this Being a microfinance company licensed by the Central Bank
result in addition to factors beyond BMIC interventions. of Sri Lanka, BMIC will continue to comply with regulatory
requirements. Increasing savings of the clients will be one of
BMIC’s field researches to assess the impact of BMIC credit the key activities of the organization for the future. Reversal
plus approach on clients’ wellbeing and to affirm whether of the negative growth status in to positive in all the key
they moved out from the poverty, revealed that 72% clients performance indicators will be given a high priority in 2020.
were benefited from the EDS training programmes in Larger loans for client’s businesses with a growth potential
different ways through improving their business ventures and increase in individual loans to reduce the portfolio
and thus their income. concentration in group loans is among new initiatives for
product diversification and establishment of new delivery
GREEN MICROFINANCE channels.
We follow triple bottom line approach which consists of By the time of this report is prepared,the country is impacted
people, planet and profit with the intention of poverty by COVID 19 crisis and there are significant impacts from the
alleviation through eliminating the causes of poverty crisis to the clients of BMIC as well as to the organization.
including environmental degradation due to depletion of The activities commenced to help affected clients will
natural resources, creating adverse environmental impacts be continued. BMIC will work in line with the business
from the business practices and use of products accelerating continuity plan prepared to address the COVID 19 impact to
environmental pollution. BMIC adopted a series of activities the organization.
to safeguard the environment including identification of
enterprises generating adverse environmental impacts and ACKNOWLEDGEMENT
implement protection measures to minimize those adverse
impacts, identification of potential greener businesses, I take this opportunity to convey my sincere gratitude to
implementation of mechanisms to convert waste into our Chairman Mr. Jagath Chandana Godakandage and our
economically valuable products, creating awareness Board of Directors for their tremendous support extended
among BMIC clients and general public on environmental towards me and the BMIC team. I would also like to extend
conservation, conduct environmental protection activities my sincere gratitude to our founding and main funding
together with BMIC clients, implementing environmental partner Berendina Stichting for the continuous support
conservation projects in collaboration with the government, given to us. I also thank our funding partners (SLSB, Etimos,
private and non- government organizations. During the year, SMCGL, DFCC, HNB, Plan Sri Lanka, HelpAge, GCAMF, WPF,
we constructed 30 bio-gas digesters with the partial funding YBSL), our technical assistance providers (SMCGL, UNDP
of Nationally Appropriate Mitigations Actions (NAMA) – and HI) and our networks (LMFPA, SIYB, SLEvA, Mix Market,
United Nations Development Programme (UNDP) and 7 BWTP) for contributing us in several ways during the year
water treatment tanks partially funded by SMCGL. under review. I am also grateful for BMIC team’s unfailing
commitment that enabled us to move confidently towards
OUR HUMAN RESOURCE our set goals at this difficult year in particular. I also thank the
Governor of the Central Bank of Sri Lanka and the officials
A capable workforce representing a diverse human capital of at the Department of Supervision of Non-Bank Financial
base enriched with knowledge, competencies, capabilities Institutions for their support provided at all the times.
and experience plays a vital role in ensuring the healthy
growth and sustainability of the Company. BMIC in I conclude by conveying my sincere thanks to our loyal clients
comprehending this critical perspective, remains dedicated who obtained benefits through effective utilization of our
to build a workforce that not only possess the relevant skills services to improve living standards and move from poverty
and knowledge, but also maintain a sense of passion and the towards prosperity.
profound feeling of connection towards achieving this goal.
During the year under review, 43 training programs were H Athapaththuge Anura
conducted for 882 staff participants by investing LKR 2.47 Managing Director/CEO
Million.
20th May 2020
We were successfully able to reduce the staff turnover Colombo
ratio from 19.6% in 2018 to 16.5% in 2019. However, staff
26 Berendina Micro Investments Company Limited | Annual Report-2019
“I have involved in animal husbandry for more than
ten years and I joined with Berendina in 2013 with the
intention of improving my business. I obtained loans
from Berendina in four times to develop the existing
farm. Now, I have a farm in one acre with fifteen dairy
cows, five thousand broilers and one thousand layers.
I also participated for the exposure visit to “Ambewela
Farm” and health protection training programme on
animal husbandry organized by the Berendina. By
attending those programmes, I was able to gain a very
good knowledge about farm management. Now, I am
successfully managing my farm with making a monthly
profit around LKR 150,000 and providing employment
opportunities for two full-time workers and one part-
time worker. ”
Rajamanthri, Galigamuwa
(Mrs. Rajamanthri won the BEA-2019 in Animal Husbandry Category)
MANAGEMENT DISCUSSION AND
ANALYSIS
Operating Environment
GLOBAL ECONOMY which pressured the tourism sector and reduced the business
confidence resulting a subdued growth of 2.3% in 2019
Global economic growth slowed in 2019 compared to 2018 compared to the growth of 3.3% in the last year. Service
reflecting the impact of heightened trade tensions among sector consecutively provided the highest contribution to
the major economies, geopolitical tensions and dampened economy consisting increased wholesale and retail trade
domestic demand in key emerging market economies. and financial sector activities. Improved industries sector
Accordingly, global economic growth in 2019 was lower followed by increase in construction, mining and quarrying
at 2.9% compared to 3.6% in 2018. Growth in advanced together with marginal turnaround in agricultural sector
economies was estimated at 1.7% in 2019 compared to 2.2% backed the economic growth.
in the previous year reflecting subdued growth in the United
States and the Euro area despite the improved growth In 2019, industrial sector recorded the highest growth
performance in economies such as the United Kingdom by 2.7% followed by a 2.3% growth in services sector in
and Japan. Meanwhile, growth across emerging market and supporting the overall economy. A subdued growth of 0.6%
developing economies moderated to 3.7% in 2019 from 4.5% is recorded in agriculture sector compared to the growth of
in 2018, largely due to country specific shocks that weighed 6.5% in 2018 which was resulted from deteriorated fishing
on domestic demand. Among key emerging economies, the activities and poor agricultural activities due to prevailed
moderation of growth of China, India, Russia and Brazil was adverse weather conditions throughout the year. Per capita
noteworthy in 2019 over the previous year. GDP in rupee Terms consecutively recorded a slower growth
of 3.89% compared to 9.56% growth whereas GDP per
Reflecting subdued economic activity across the globe, Capita in Dollar Terms recorded a negative growth resulting
growth of world trade volume of merchandise and trade in from depreciated average exchange rate in 2019.
services moderated notably in 2019 to 0.9% in comparison
to the growth of 3.8% in 2018. As trade and manufacturing Despite the marginal increase in employed population of
slowed significantly, commodity prices showed a significant the economy by 2.1% during the year, the unemployment
drop in 2019 as reflected in the decline in petroleum prices rate has marginally increased from 4.4% in 2018 to 4.8% in
by 10.2% in 2019 compared to the acceleration by 29.4% in 2019 resulted from subdued economic activities and labour
2018. Supported by low energy prices and subpar activity, force participation of females has increased while labour
consumer price inflation in advanced economies decelerated force participation males remained unchanged. As a result
to 1.4% in 2019 from 2.0% in 2018. However, consumer price of extreme weather conditions and resultant disruptions to
inflation in emerging market and developing economies domestic food supplies affected some volatility in Colombo
accelerated marginally to 5.0% in 2019 compared to 4.8% Consumer Price Index (CCPI, 2013=100) and stood at 132.4
in 2018 reflecting the impact of supply side disruptions, compared to 126.3 in 2018. While annual average CCPI
despite the muted demand pressures witnessed across remained unchanged at 4.3%, CCPI based on year-on-year
these economies. headline inflation was recorded at 4.8% compared to 2.8%
last year.
The global economy which had been on an arduous path of
recovery amidst gathering economic and political headwinds During the year, the trade and current account balance
showed signs of a far reaching setback with the COVID-19 recorded a remarkable improvement as a result of policies
pandemic. Accordingly, the global economy is expected on curtailing import expenditure whilst significant inflows
to experience its worst recession in 2020 since the Great in the financial account strengthened gross official reserves
Depression, dwarfing the Global Financial Crisis in 2007/08. and stabilized the exchange rate. The reduction in import
The period of ‘the Great Lockdown’ resulting from the expenditure together with marginal improvements in export
COVID-19 pandemic is likely to entail a substantial shrinkage earnings resulted in lowering the trade deficit in 2019.
of global growth in 2020 followed by a partial recovery in Notwithstanding the pressure witnessed in the domestic
2021. foreign exchange market in the aftermath of the Easter
Sunday attack, Sri Lankan rupee appreciated to 0.6% against
SRI LANKAN ECONOMY the US Dollar and resulted in contraction of trade deficit.
Despite graduating to the upper middle income country
status, Sri Lankan economy reflected worsen sluggish
economic growth in 2019 owing to the Easter Sunday Attack
28 Berendina Micro Investments Company Limited | Annual Report-2019
Operating Environment
With the commencement of the accommodative monetary and NGO Secretariat has been a milestone achievement in
policy stance, the deposit Average Weighted Deposit Rate the year.
(AWDR) was reduced by a total of 100 basis points to 8.2%
by end of 2019 from 8.81% in 2018 aiming at lowering the Three microfinance companies were granted licenses under
market lending rates and boosting credit flows to the private the Microfinance Act, No. 6 of 2016 by the Monetary Board
sector. of the Central Bank; namely, Berendina Micro Investments
Company Limited, Lak Jaya Micro Finance Limited and
Government revenue as a percentage of GDP declined Dumbara Micro Credit Limited. The Licensed Microfinance
from 13.4% in 2018 to 12.6% in 2019 and the tax revenue Companies (LMFC) sector reported assets worth LKR 5.8
increased marginally by 1.3% in 2019 owing to the rise in Billion as at the end of 2019, out of which the microfinance
income tax revenue mainly from corporate taxes under loans and advances to customers accounted for LKR 4.7
the new Inland Revenue Act and debt repayment levy. Billion representing 81.7% of the total assets. The Core
Nevertheless, government revenue in nominal rates Capital level of the sector was LKR 1.9 Billion at the end
decreased by 1.5% to LKR 1,891 Billion and further, a of 2019 and all LMFCs were compliant with the minimum
decrease by 3.9% in Value Added Tax (VAT) to LKR 443.9 prudential regulations on Core Capital and Liquidity
Billion recorded during the year. requirements. Despite a significant increase in the operating
expenses, the LMFC sector reported an overall profit of
FINANCIAL SECTOR PERFORMANCE LKR 0.1 Billion after taxation as at the end of 2019. There
were 13 NGOs received microfinance license from the NGO
The financial sector expansion and performance decelerated Secretariat under the Microfinance Act No. 6 of 2016 by end
in 2019 compared to the previous year primarily due to of 2019.
subdued economic activities and the uncertainty caused
by the Easter Sunday attack and the political instability Starting from the continued spillover effects of Government
which prevailed during the year. While the banking sector debt write off programme implemented in 2018 and
displayed a moderate expansion during the year reflecting thereby risen NPL levels coupled with Easter Sunday Attack
the impact of the low demand for credit and tightened immensely affected the microfinance sector by dint of drop
credit screening in an environment of deteriorating credit in the repayment capacities of microfinance clients resulted
quality, the performance of Non-Bank Financial Institutions from sluggish economic activities and tourism industry.
(NBFIs) deteriorated during the year owing to unfavorable However, Central Bank issuing microfinance licenses
market conditions and sector weaknesses. impacted the Microfinance sector positively while ensuring
stringent policies and governance mechanisms for the
Negative credit growth, declining profitability and an industry including interest rate caps for micro loans.
increase in NPLs contributed to the weak performance of
the Licensed Finance Companies (LFCs) during 2019. The The overall microfinance industry was not performing
total asset base of the sector expanded marginally during well. There is a decline in supply of loans and thus number
the year while credit growth of the sector remained negative of borrowers served by the industry. Portfolio at risk was
in 2019. increased in many MFIs as a continuation of issues prevailed
in 2018. The profitability of MFIs was low and some made
MICROFINANCE SECTOR losses. There is a decline in microfinance operations by the
PERFORMANCE Finance Companies.
The implantation of the Microfinance Act by issuing licenses
for Microfinance Companies by the Central Bank of Sri Lanka
Berendina Micro Investments Company Limited | Annual Report-2019 29
Operating Environment
COMPANY PERFORMANCE 2020, local economy also will have a massive impact with
already dented economy due to island wide imposed curfew
The Easter Sunday attack,political instability and unfavorable to control spread of the virus. With low income levels of the
weather conditions diminished economic growth which poor community owing to the spillover effects of COVID-19
impacted BMIC as well. During the year, the company pandemic expected to create low repayment capacities
recorded a loss of LKR 11.5 million which primarily owes to among the microfinance clients and accordingly,low recovery
increase of impairment charges by 56.4% and increase in percentages and increase of NPL levels are anticipated. On
amortized cost due to the impact of SLFRS 16. Even though the other hand, halted disbursements in turn will affect the
there was a decrease in NPLs in the first quarter, aftermath revenue of microfinance companies including BMIC.
of Easter Sunday increased the NPLs thus impacted on
increasing the impairment charges. However, BMIC managed Microfinance sector of Sri Lanka still requires increased
to earn an credit interest income of LKR 786.1 million which regulation because there are several unregulated
is still 8.9% below the last year credit interest income of LKR microfinance providers within the industry who provide their
863 million. services at significantly high interest rates and practice many
unethical collection practices. It is expected that the required
BMIC maintained 58.72% share of loans and advances from policies, laws and regulations on micro credit provision will
LMFC Sector whereas interest income as a percentage of be implemented by the government to safeguard the poor
LMFC stood at 49.13%. community who need hands to improve their standard of
living. There is a new microfinance and credit regulatory
Loans and LMFC Sector BMIC % from bill prepared by the government. The objective of this act
advances LKR billion LKR billion LMFC Sector is to regulate credit provision which is unregulated in Sri
Performance Lanka. However, BMIC will guarantee better servicing to the
Interest 4.7 2.76 clientele in a responsible manner in line with organizational
Income 58.72% vision, mission and objectives.
1.6 0.79 49.13%
OUTLOOK
The company will have to operate in an economy which
was further damaged by the outbreak of unprecedented
COVID-19 pandemic which impacted all the countries
around the world. As the world is expecting a recession in
30 Berendina Micro Investments Company Limited | Annual Report-2019
OUR CAPITALS
NATURAL CAPITAL MANUFACTURED CAPITAL
PAGE 58-62 PAGE 34-38
HUMAN CAPITAL FINACIAL CAPITAL
PAGE 53-57 PAGE 39-42
SOCIAL RESPONSIBILITY CUSTOMER CAPITAL
CAPITAL
PAGE 43-48
PAGE 49-52
Berendina Micro Investments Company Limited | Annual Report-2019 31
Value Creation Model Mission
Vision
INPUTS PROCESS
MANUFACTURED CAPITAL BUSINESS CONTEXT
• Effective branch location EXTERNAL VARIABLES IMPACTING VALUES
covering poor communities
• Political instability
• Continuing ERP system • Natural calamities
implementation • Global rebound in trade
• Investment recoveries in advanced economies
• Expanding the credit and EDS • Unemployment and decent work deficits
product categories • Regularity changes in the local front
• Introducing new product types VALUE IN PURPOSE
FINACIAL CAPITAL • Alleviation of poverty
• Improvement of financial literacy among rural
• Increasing grant funding community
• Receiving the microfinance • Generation of employment
• Increasing entrepreneurship
license • Improvement of client saving habits
• Adhering to new tax rules • Reducing vulnerability of poor people for
uncertainties
CUSTOMER CAPITAL • Education for children
• Client awareness on BMIC procedure OUR PROFIT FORMULA
and benefits
Revenue Expenses
• Customer focused products
• Increased trustworthy impartiality • Interest income • Interest and similar
• EDS income expenses
as a licensed microfinance company • Investment income • Personnel expenses
• Introducing micro savings • Miscellaneous income • Other operating
expenses
SOCIAL & • Taxes
RESPONSIBILITY
CAPITAL VALUE PROPOSITION EMPLOYEES
Ensure their
• Extend support to clients via CLIENT professional
EDS development through
Ensure that client training and learning
• Establish a branch network has access to quality
spread across the country micro nance and EDS culture
at the lowest possible Ensure their work life
• Conduct research to obtain
customer feedback cost balance
• Establish customer complaint
handling system in the Head
Office level
• Assist the clients in different
times
HUMAN CAPITAL
• Continuous staff training and
development
• Staff compensation and benefits
• Unbiased recruitment process
• Retention strategies
• Performance evaluation
NATURAL CAPITAL
• Environmental impacts
assessment of enterprises
• Promoting environmental
conscious behavior
• Continuing environmental
protection measures
• Grants for environmental
protection
32 Berendina Micro Investments Company Limited | Annual Report-2019
Corporate Risk Management
Governance
PROCESS OUTPUTS
OUR MATERIAL RISKS VALUE OUTMANUFACTURED CAPITAL Funding Partners
VALUE SHARED Clients
• Increase taxes • Opened two new branches
• High inflation • Operated ERP system in all branches Employees
• Natural disasters
• Severe competition and existence of including Head Office Community
unethical microfinance entities • Launched ekade.lk Environment
• Exchange rate volatility • Increased loan sizes
• Unhealthy Government policy decisions • Introduced micro savings product 33
STRATEGIC PRIORITIES FINACIAL CAPITAL
• Serving high poverty segments in the • Gross income decreased by
community 8.37%
• Client convenience
• Client protection from unethical • Loan portfolio increased only
microfinance practices by 0.74%
• Sustainability
• Lobbing for prudential regulation • Increased investment income
• Establishing best practices for the industry by investing excess funds
OUR PRODUCTS CUSTOMER CAPITAL
• Micro Credit • Disciplined cluster meetings
• Enterprise Development • Best Entrepreneurs’ awarding
Services (EDS) • Direct customer hotline for their
COMMUNITY FUNDING PARTNERS queries
BMIC itself Ontime • ekade.lk
bene ts
the society repayments and SOCIAL &
through reporting RESPONSIBILITY
CAPITAL
its services and
contribute to • Further penetration into
sustainability interior areas with high poverty
of BDS & BEC
programmes • 2 telephone surveys to obtain
through funding customer feedback
• Provide solutions to the
customer complaints
• Measure the poverty rates in a
way applicable to the local
context
HUMAN CAPITAL
• Staff Trainings were conducted for
882 participants
• Profit share among staff
• Promotions & Increments under
staff grading system
NATURAL CAPITAL
• Environmental awareness
programs
• Constructing 30 biogas units
• Constructing 7 waste water
treatments units
• Conducting environmental
community projects
• Reducing greenhouse gas
emission by 710 kg of carbon
equivalent
Berendina Micro Investments Company Limited | Annual Report-2019
Manufactured Capital
Value Creation Activities in 2019 Outcome Challenges
• Effective branch location covering • Opened two new branches • Less expansion of operations due to
• Operated ERP system in all branches microfinance industry related issues
poor communities
including Head Office
• Continuing ERP system • Launched ekade.lk
• Increased loan sizes
implementation • Introduced micro savings product
• Expanding the credit and EDS
product categories
• Introducing new product types
The manufactured capital of BMIC consists of its physical, All the BMIC branches were established according to the
material and technological infrastructure facilitating the “Standard Branch Model” consisting of one Enterprise
organization towards effective and efficient fulfilling of Development Officer (EDO), two Administrative and
goals and objectives. Our physical infrastructure comprises Accounts Officers (AAOs), five Field Officers, Office
of network of 30 branch offices located in 11 districts and Assistant and a Branch Manager. In addition, a new
the Head Office in Colombo. Material infrastructure is position of “Assistant Branch Manager” was introduced
client loan portfolio and EDS product portfolio while digital only to four existing branches namely Ragala, Galigamuwa,
infrastructure consists of information and communication Kahatagasdigiliya, Ipalogama to expand the loan portfolio
technology. All those infrastructure facilities enhance value where four new field officer areas were started.
and quality of the services provided to our customers.
When selecting a branch location, BMIC mainly focuses on
PHYSICAL INFRASTRUCTURE useful and effective demand for BMIC services, particularly
high poverty districts and high poverty divisions within
Branch Network those districts. Further BMIC put its attention on the factors
including customer convenience and its ability to function
During the year under review, two branches were opened and carry out operations effectively and efficiently.
in Welimada and Nuwara Eliya. With that, the number of
BMIC branches increased from 28 to 30 spreading over 11
administrative districts which was 10 in the previous year.
In addition, our operations were carried out in 49 plantation
estates located in Kegalle and Nuwara Eliya Districts. Our
branch network permits to serve the customers at the
location which is closest to their residence, workplace or
business.
34 Berendina Micro Investments Company Limited | Annual Report-2019
Manufactured Capital
BMIC BRANCHES
01. Bulathkohupitiya
02. Dehiowita
03. Galigamuwa
04. Mawanella
05. Warakapola
N 06. Thirappane
07. Ipalogama
08. Manupa
09. Kahatagasdigiliya
10. Horowpothana
30 11. Ginigathhena
28 12. Dickoya
13. Ragala
14. Kotmale
15. Gampola
16. Welimada
17. Nuwara Eliya
29 20
10 18
89 21
6 19
7
22
BMIC BRANCHES 5 3 4 15
18. Trincomalee Town 24
19. Serunuwara 23
20. Kuchchaweli 25
21. Thambalagamam 26
22. Valaichchenai
23. Arayampathy 27
24. Chenkalady
25. Kalawanchikudy 1 14 13
26. Kalmunai 2 11
27. Akkaraipattu
28. Mullaitivu 12 17 16
29. Vavuniya
30. Kilinochchi
COLOMBO HEAD OFFICE
Nawala 35
Berendina Micro Investments Company Limited | Annual Report-2019
Manufactured Capital
PRODUCT PORTFOLIO BMIC became a licensed microfinance company in 2019.
With that BMIC started taking deposits from clients only in
Our product portfolio is designed with a customer centric the newly opened branches in Nuwara Eliya and Welimada
viewpoint. Hence, we offer our clientele eight types of loan as a pilot project. The compulsory saving amount of LKR
products that include; 100 per month was obtained from each client as a collateral
deposit and in return, clients were given interest for their
• Business Loans: provided to start a business and deposits at the rate of 5% per annum.
enhance the existing business
DIGITAL INFRASTRUCTURE
• Cultivation Loans: provided to commence and enhance
farming/ agricultural activities BMIC realized the importance of having a stable and agile
IT system for supporting the business strategy and growth
• Dairy Loans: provided to commence and expand dairy potential of the company.
businesses
ERP System
• Asset Building Loans: provided to build and repair
houses, construction of latrines, purchase other durable The ERP system which is called as “TSS Software” includes
assets and fulfill educational needs of the children etc. a core banking module having savings and credit integrated
with enterprise services module, fixed assets, inventory, HR
• Senior Citizen Loans: provided to senior citizens who and payroll together with accounting for all these functions.
are above 62 years of age only for income generation By the end of 2019, all the BMIC branches and Head Office
purposes because other loan products of BMIC are operated on live platform under this system. The operational
provided only to those who are less than 62 years old. activities were enhanced by enabling easy decision making
by management with up-to-date information, in-depth data
• Sanitary Loans: provided with the focus of uplifting analysis. It is expected that efficiency and effectiveness of
sanitary facilities of estate community by building BMIC will also increase due to higher staff productivity and
private latrines. reduction in duplication of work. In future, BMIC expects to
make this system more efficient by field level staff also using
• Household Asset Acquisition Loans: provided to the the hand-held devices.
estate community to purchase their basic household
assets at times of need. IT Security
An individual loan product was introduced by BMIC in BMIC updates its internal security tools and virus guards
June 2019 following the study conducted by the Research constantly to meet the best technology practices. Further,
Officer based on the dropped-out clients as findings of the BMIC enhanced its IT security by using a Firewall and Proxy
study revealed that the clients with the capacity of better Server according to the group IT Policy / industry best
repayment and effective loan utilization preferred to have an practices.
individual loan product rather than obtaining loans through
the group mechanism. COMMUNICATIONS
In addition to the individual loan scheme, BMIC increased the BMIC has recognized the importance of effective
loan sizes of majority of the existing loan products. During communication to enhance awareness among all the
the year under review, the maximum loan size offered by stakeholders of the company regarding company affairs of
BMIC was LKR 250,000 which was eligible at the 4th loan the company. This involves creation of awareness among
cycle for income generating loan borrowers while the clients about the products and services of the BMIC,
maximum asset building loan size was LKR 200,000. Further, establishment of delivery channels.
BMIC introduced a new loan scheme in latter part of June
to address the issues of the clients who had arrears due to Connecting with Clients
several reasons including misunderstanding the government
write off policy, drought conditions, loss of income owed to BMIC follows a set of action steps in line with the
special situations and any other reasons beyond their control. organizational principles in order to approach the relevant
Despite being an arrears client due to the above mentioned clientele in the operational areas.
reasons, those clients were provided with an opportunity to
apply for a new loan if the particular client has settled his/
her previous loan by the date of disbursement of the new
loan.
BMIC introduced loan rescheduling first time in the history
as a relief for those who cannot meet loan obligations as per
the contract due to lowering their repayment capacity by
impact of drought and business failures.
36 Berendina Micro Investments Company Limited | Annual Report-2019
Manufactured Capital
• BMIC Field Officers are assigned to the Grama Niladhari • Being an impact driven organization addressing the
Divisions based on the number of potential clients challenge of poverty alleviation, BMIC established its
living in those Grama Niladhari Divisions. All the Field Research and Evaluation Division in 2017 to monitor
Officers are given a reasonable number of families the impact of BMIC interventions on clients in terms
since they can provide a professional and timely service of developing their income and asset levels, changing
to them throughout the time. This overall effort is their life styles and reach out of poverty. During the
spearheaded by the Field Officer together with the year, two research studies were conducted by the
Branch Manager and Area Manager. internal research team using a randomly selected
sample of clients. Once research study was conducted
• Initially, BMIC enters into new areas by engaging to assess the impact of EDS training programmes on
respectable key individuals in the Grama Niladhari clients’ entrepreneurial capabilities while the other
Division in addition to creating awareness with in research study was conducted to identify the reasons
villages through posters, banners and leaflets. After for clients’ dropout from BMIC.
that, a common awareness creating meeting is held
prior to the formation of clusters. • BMIC also conduced “Best Entrepreneur Awards”
Ceremony in order to motivate and appreciate the best
• Afterwards, interested villagers are organized into a performing entrepreneurs.In turn,this was expected to
group called a “cluster” which is the key meeting point encourage entrepreneurs to expand their enterprises
for clients with BMIC officers. At such cluster meetings, in creating more employment opportunities for rural
information about BMIC’s products and services are community.
again made available to the participants. In addition,
at each cluster meeting, the EDO or the Field Officer The Cluster Approach
provides information about upcoming EDS training
programmes. Clusters play a vital role within BMIC operations as it is the
key entity at the grassroots level that drives the success of
• Further, in order to increase the number of participants credit operation. Cluster leaders are selected and appointed
for EDS programmes, special awareness programmes by cluster members themselves to ensure effective and
called “Village Awareness Programmes” are organized smooth operation of each cluster.
on a regular basis. During the year under review,
BMIC conducted 25 village awareness programmes Engaging with Key External Parties
connecting 722 individuals.
BMIC ensures its constant presence in key networking
• A video documentary is screened to the clients prior institutions, representative bodies and lobbying groups
to the loan disbursement. This educational video related to microfinance and enterprise development both
demonstrates about the services offered by BMIC, locally and globally. These include:
roles and responsibilities of both client and BMIC and
finally how best the client can utilize the loan and EDS Lanka Microfinance Practitioners’
to improve sustainable income generating activities Association (LMFPA)
and thereby improve his or her family’s living standards.
BMIC is a leading member of the LMFPA which is a network
• A complaint handling system has been established formed by several microfinance practitioners in Sri Lanka.
which is directly linked to the corporate management The LMFPA’s main function is to enhance the ability of its
at the Head Office. Clients complaints have now been members to provide quality financial services to grass root
centralized with the establishment of a dedicated communities. The Managing Director of BMIC serves as the
hotline at the Head Office whereby rural clients could President of LMFPA.
voice their complaints directly by a telephone call
and bring it to the attention of top management.
Thereafter, the management takes measures to
address such concerns. This system is in contrast to
the previous practice of individual branches handling
client complaints and has proven to be a more effective
exercise.
Berendina Micro Investments Company Limited | Annual Report-2019 37
Manufactured Capital
Start and Improve Your Business (SIYB) Banking With The Poor Network (BWTP)
Association of Sri Lanka
BMIC is registered with the BWTP, an Asian Association of
BMIC is also a member of the SIYB Association of Sri Lanka, diverse range of microfinance stakeholders committed to
an International Labour Organization (ILO) backed entity improve the quality of life of the poor through promoting
that contributes to the economic development and creation and facilitating their access to sustainable financial services.
of jobs in countries across the globe including Sri Lanka.
The association facilitates the development and promotion
of SIYB training products. The Enterprise Development
Manager of BMIC serves as the Treasurer to the SIYB.
Sri Lanka Evaluation Association (SLEvA) Tools of Engagement
BMIC is a member of SLEvA since 2017. SLEvA is an BMIC carries out its vision and message to various segments
association with more than 200 monitoring and evaluation of the society through effective utilization of a variety of
specialists and member organizations. SLEvA also helps BMIC communication tools. BMIC highlights key events during
to train its employees through workshops, mini trainings and the calendar year such as award ceremonies, new products
conferences. and service offerings and other special occasions using
print (leaflets, posters, newspapers) and other media
(social media and television) to keep various stakeholders
updated on the progress of the company. Further, we use
our corporate website, Facebook page, YouTube Channel
and digital newsletters as digital mediums. In addition,
BMIC has produced a video for Best Entrepreneur Awarding
Ceremony to aware BMIC clients about the importance of
entrepreneurship and encourage them to involve in more
and more entrepreneurial activities.
MIX Market
BMIC is registered with the MIX Market (www.mixmarket.
org), a global data hub through which MFIs and supporting
organizations share institutional data in order to broaden
transparency and market insight.
38 Berendina Micro Investments Company Limited | Annual Report-2019
Financial Capital
Value Creation Activities in 2019 Outcome Challenges
• Increasing grant funding • Gross income decreased by 8.37% • Sluggish economic growth
• Receiving the microfinance license • Loan portfolio increased only by • Increasing impairment charges on
• Adhering to new tax rules
0.74% loan portfolio
• Increased investment income by • Recording a loss
investing excess funds
The financial year of 2019 was the second consecutive The revenue generated from Enterprise Development
challenging year subjected to the same negative sentiment Services (EDS) was not significant compared to the main
created during the financial year 2018 due to the revenue stream; however, recorded a slight improvement
unfavourable environment in the microfinance industry. from LKR 34 Million to LKR 36 Million during the year under
Slow economic growth of the country reported in 2018 review.
could be a ramification on the fiscal consolidation process
in 2019. The economic growth of the country in 2019 was Income Composition
further slowed down and the overall growth rate was 2.3%.
Spill over effect of Easter Sunday attack further contributed LKR Mn
to slow down the economic growth. It took nearly three
months after the Easter Sunday attack to gradually start 1,000
economic recovering. The presidential election which was
held in November 2019 also impacted the economy. The 800 915 838
prevailed economic condition did not contribute to a growth 600 840
in the finance, banking and microfinance industries due to 400 479
negative sentiments created in the microfinance industry 200 640
coupled with the negative consequences of government debt
relief programme for microfinance loans granted for women 0 2016 2017 2018 2019
in drought affected districts. The financial statements of 2015
the company illustrate the performance of the Company in
relation to the above economic and political scenario. Credit Interest Income EDS Income Other Income
ANALYSIS OF INCOME ANALYSIS OF EXPENDITURE
The gross income of the company slightly decreased by The total overhead expenditure of the company other than
8.37% from LKR 915 Million in 2018 to LKR 838 Million in impairment provision for loans and receivables and all taxes
2019 due to the reduction of interest income received from slightly reduced by 0.98% and stood at LKR 660 Million in
loans and receivables. The interest income on loans and 2019, whereas it was LKR 666 Million in 2018 mainly due to
receivables as of 31st December 2019 recorded a reduction reduction in interest expenses owing to reduced borrowings.
of 8.92% and stood at LKR 786 Million whereas the interest The provision for the impairment of loans and receivables
income on loans and receivable as of 31st December 2018 increased mainly due to the increasing delinquent loan
was LKR 863 Million. The interest income on investments portfolio and the effects of SLRS 9 and accordingly,
drastically improved by 78.8% compared to the year before, impairment charges increased by 56.37% compared to
mainly due to the investing accumulated excess funds as a the previous year. The personnel expenses of the Company
result of deliberate curtailing of business operations to face increased by 11.22% and administrative costs also increased
the economic and industrial volatilities. Negative growth of by 13.59% due to the changes made in the operational
the loan portfolio and the increase of non-performing loans mechanisms to reduce NPLs of the Company.
portfolio were the main contributory factors for negative
growth in the gross income. The contribution to the total The interest and similar expenses of the Company decreased
gross income from the core business activity which was by 24% from LKR 259 Million in 2018 to LKR 203 Million in
“interest income generated from the microcredit loans 2019 as a result from the reduction of the prime lending
portfolio” remained unchanged. The interest rates charged rate, less borrowings due to curtailed lending and no foreign
for customers remained well below the interest rate cap loan repayments. The contribution to the government
declared by the Central Bank of Sri Lanka. revenue in the form of taxes was LKR 69 Million which was
44.52% reduction compared to previous year. The favourable
Berendina Micro Investments Company Limited | Annual Report-2019 39
Financial Capital
condition created after becoming a licenced microfinance Operational Self Sufficiency (OSS) after tax
company eliminated certain unfavourable provisions of the
Inland Revenue Act No. 24 of 2017 and accordingly, the %
Company was able to claim a part of the specific provision
made for loans and receivables which was not possible in the 120
previous year. However, the taxes were 120% from operating
profit before taxes in 2019 which was a 64.65% increment 100
compared to the previous year due to low profitability
in 2019. Disallowing certain personnel expenses for the
calculation of Value Added Tax on Financial Services led the
Company to pay a significant amount of Value Added Taxes.
PROFITABILITY 80 2016 2017 2018 2019
2015
Many market players are fused on the high profit of micro
credit programmes; however, having the primary objective LOAN PORTFOLIO
of the micro credit to reduce the poverty levels of targeted
communities, the Company focuses on a marginal profit The outstanding loans and receivables balance (excluding
to ensure sustainability. BMIC experienced profitability staff loans and interest receivables as at 31st December
reduction for two consecutive years and recorded a loss 2019 was LKR 2,944 Million and recorded a 0.74% increase
after tax of LKR 11.5 Million in 2019 which was a reduction compared to 2018. This was mainly due to selective loan
in profitability by 124.97% compared to the profit after disbursement procedure implemented by the company.
tax of LKR 46 Million in 2018 mainly due to increased
impairment provisions charged on a possible loss in a future Loan Portfolio
date against delinquent loans and receivables and decreased
interest income. However, having considered the industry LKR Million
performances and the impact of uncontrollable external
macroeconomic factors, the company was able to control 3,500
the loss at a low level.
3,000 3,122
2,923 2,944
2,500
2,624
Profit After Tax 2,000 2,023
1,500
LKR Mn
102 1,000
120
500
100
80 80 0 2016 2017 2018 2019
60 71 2015
As a result of quick and methodical actions taken by the
40 46 management of the Company such as maintaining quality of
20
the portfolio by tightening loan assessment process to ensure
the disbursement of healthy loans, implementing new staff
0 incentive schemes, improving credit quality management
-20
-11 process, implementing new recovery strategies, introducing
2015 2019
2016 2017 2018 new products and continuing staff capacity development to
Operational Self Sufficiency (OSS) after taxes for the smoothen the operations supported to reduce the impact of
financial year 2019 was 99% whereas 110% was recorded in
the previous financial year. non-performing loan portfolio. However, the total value of
the arrears clients was started to increase after April 2019
as a result of Easter Sunday attack.
Moreover, sluggish economic growth, the drop-in tourism
industry performance due to Easter Sunday attack and
increased unemployment rate also negatively affected on
deteriorating repayment capacity of the clients and in turn
reduced the quality of the loan portfolio. Therefore, the
Company made adequate provisions for those impaired
loans and receivables in order to cover possible future losses.
40 Berendina Micro Investments Company Limited | Annual Report-2019
Financial Capital
The policy to write-off loans which were due for more than Interest Bearing Borrowings
540 days had been continuously practised during the last
few years including the year under review and accordingly, LKR Mn
write-off ratio of the company increased to 0.30% from
0.23% compared to the previous year and LKR 6.4 Million 2,500
loan outstanding was written off during 2019. BMIC PAR (30
days) stood at 11.14% at the end of the year recording an 2,109
increase from 7.51% in 2018.
2,000 1,849 1,772
1,500
1,579 1,575
2019
1,000
Portfolio at Risk 500
% 12.10% 0 2016 2017 2018
11.14% 2015
15
10.13%
12
7.51% Reduction of the Average Weighted Prime Lending Rate
9 (AWPLR) throughout the year to increase inflows to private
sector benefited BMIC to reduce cost of funds owing to
6 borrowings made under floating interest rates. 79% of total
borrowings comprised borrowings obtained from financial
3 and other institutes.
0.91%
Funding Diversification
0
2015 2016 2017 2018 2019 LKR Million
2,000
PAR 1 Day PAR 30 Days
1,772
EQUITY AND LIABILITIES 1,500 68% 1,575
1,000 79%
Total equity of the Company as at 31st December 2019
stood at LKR 978 Million. The funds and reserves of BMIC 500 21%
rose by 109.92% to LKR 150 Million due to the grant of 32%
LKR 79 Million received from WPF to fund disbursement 2019
of loans of Welimada branch. Upon successful completion 0 Borrowings from financial & other institutions
of WPF Kaluwanchikudy Branch project, the funds received 2018
for Kaluwanchikudy branch was transferred to unrestricted
equity category. Borrowings from banks
Net interest bearing borrowings of BMIC in 2019 was LKR BMIC as the first Licenced Micro Finance Company under the
1,575 Million which was 11.11% reduction compared to the Microfinance Act No. 6 of 2016 in Sri Lanka, the Company
previous year amounting LKR 1,772 Million. This is mainly commenced motivating the saving habit of the clients by
due to the affirmative actions taken to maintain the quality accepting deposits as permitted under the Directions of
of the loan portfolio such as curtailing disbursements in the the CBSL. The pilot project was implemented only in two
areas which had been affected by different microfinance newly opened branches in Nuwara Eliya and Welimada. Total
related issues including multiple borrowing leading to low deposits accepted by the company as at 31st December
funding requirement. The Company kept same trust and 2019 was LKR 0.35 Million.
confidence level during the year which has been built over
the years by repaying due loans on time. Certain loans were
fully settled in the mid-year because of the availability of
excess funds. BMIC highly relied on local fund providers
during the year including BDS, HNB, SMCGL and SLSB as
primary fund providers.
Berendina Micro Investments Company Limited | Annual Report-2019 41
Financial Capital
FUTURE OUTLOOK income people of the country. BDS will sell and transfer all
Class A shares to BS on an agreed date at a consideration of
The ownership of BMIC is expected to change in near LKR 10/= per share. The total consideration of the transfer
future. As per the “shareholders’ agreement” made on 11th will be LKR 572,596,310. BDS and BMIC should ensure that
November 2019 between Berendina Stichting (BS), BDS the said shares are free from encumbrances on the transfer
and BMIC, BDS being the legal and beneficial owner of total date.
issued ordinary shares of BMIC has agreed with BS & BMIC
to change the shareholding structure of BMIC by converting The outbreak of COVID-19 will significantly impact the
75% of the issued ordinary shares in BMIC into ‘Class A’ shares Company’s performance negatively which is unavoidable
and to transfer those shares to BS; so that BS will hold 75% due to expected recession in the global economy in 2020
of the voting rights in BMIC. All other ordinary shares in the and deteriorating local economic growth due to country
Company were classified as ‘Class B’ shares and will be held wide imposing of curfew to control the pandemic spreading.
with BDS. The holder of a Class A shares has the right of one However, the policy changes made by the newly appointed
vote on a poll; however, shall not have the right to receive government and favourable changes in tax regulations to
any dividend from BMIC. The holder of a Class B shares has consumers will positively affect the Company profitability.
the right of one vote on a poll and the right to receive equal
share in dividends from BMIC. Thus the profits earned by
BMIC will remain in Sri Lanka for the benefit of poor and low
42 Berendina Micro Investments Company Limited | Annual Report-2019
Customer Capital
Value Creation Activities in 2019 Outcome Challenges
• Client awareness on BMIC procedure • Disciplined cluster meetings • Spill over effects of government
loan write off programme
and benefits • Best Entrepreneurs’ awarding
• Multiple borrowing
• Customer focused products • Direct customer hotline for their • Increased NPLs
• Poor repayment capacity of clients
• Increased trustworthy and impartiality queries
due to weakened economy
as a licensed microfinance company • ekade.lk
• Introducing micro savings
The customer is central to the organizational existence in generating income and 30.07% funded to build household
of BMIC. They are much closer to ‘clients’ in their behavior assets of our clientele.
who seek long term professional services from BMIC than
a ‘customer’ who buys goods and services on short term Composition of Loan Disbursement
needs. The operations of BMIC is fully focused on customer
requirements and the customer is the prime factor for 64%
business sustainability. Fostering customer relationships
is vital through fulfilling their needs to retain and attract 5%
customers while addressing gaps between the services
provided and the customer requirements.
CORE SERVICES 1%
1%
Ourcore services include Micro Credit bundled with Enterprise
Development Services (EDS) to uplift entrepreneurial 1%
capacities of our customers and micro savings is introduced
after receiving the microfinance license from the Central
Bank in this year.
Micro Credit 28%
BMIC micro credit service includes an array of facilities to Assests Building Loans Agriculture Loans
address diverse customer requirements under income Business Starting Loans Household Assets Aquisition Loans
generating and asset building purposes. Loans for business Business Developments Loans Other
startups and business expansions, agriculture loans and
loans for dairy management are sub categories of Income Enterprise Development Services (EDS)
Generation Loans. Asset Building Loans include loans for
renovating houses, household asset acquisition and for Our clients are facilitated with credit plus services under
building sanitary facilities and further allows to utilize the five different EDS product types; Type A, Type B, Type C,
loan product to children’s education of the customers. Type D and Type E in attaining the objective of developing
entrepreneurial skills, capacity, financial literacy and several
Being a customer focused Microfinance Company, we are other aspects of our clients.
committed on addressing monetary needs of customers and
accordingly customize and introduce specific micro credit Type A services include five different services including
products. Our Senior Citizen Business Loans provided for agriculture and livestock technical trainings, non-agriculture
those who are above 62 years of age and Household Assets technical trainings, exposure visits, life skills development
Acquisition Loans for the estate community provided in training focusing on financial literacy, soft skill trainings and
festival seasons are our extraordinary micro credit products enterprise development trainings provided as Viyapara Jaya
usually not served by other MFIs. Further, in order to cater the and Start and Improve Your Business (SIYB) and all the A
demand of individual loans which is beyond the cluster based type services are provided by charging a fee. While technical
approach, BMIC commenced disbursing Income Generation trainings support to learn about technical aspects in starting
Loans and Asset Building Loans for individuals going out of or expanding the enterprises, life skills development trainings
the cluster based approach in this year. enhance clients’ understanding and knowledge on aspects
Within the year, we disbursed a total of 42,194 loans
amounting LKR 2.94 Billion of which 69.57% loans supported
Berendina Micro Investments Company Limited | Annual Report-2019 43
Customer Capital
such as interest rates, family budgeting and savings which market. Conducting trade fairs of our own, make the clients
are crucial in protecting the clients from over indebtedness. participated for trade fairs conducted by external parties as
Moreover, soft skills trainings on motivation conducted by well as online platform introduced by BMIC to promote and
leading trainers in the country enhance self-confidence sell products of rural manufacturers are carried out under
levels of our clients to meet various challenges in business this D type of services. Our online platform “www.ekade.
and their life. Exposure visits enable clients to see and lk” was officially launched in June 2019 which is a dedicated
experience model farms, research institutes and industries online market place to promote the manufacturers in rural
and learn appropriate technology, methods and techniques areas including our clients and non-clients who have quality
useful for their business activities. products to sell local and international customers.
Despite the controlled disbursement due to volatile market Type E Services support and facilitate BMIC triple bottom
together with negative implications of Easter Sunday Attack, line approach. Under this service category the Company
EDS performance marginally increased compared to last adopts series of activities to safeguard the environment
year. Accordingly, both number of training programs and including identification of enterprises generating adverse
number of participants have increased to 1,903 and 38, 852 environmental impacts and implement protection measures
respectively. to minimize those adverse impacts.Accordingly,identification
of potential greener businesses, implementation of
EDS Type A Services mechanisms to convert waste into economically valuable
products, creating awareness among BMIC clients and
50,000 46,549 2,500 general public on environmental conservation, conduct
environmental protection activities together with BMIC
44,011 38,852 clients and implementing environmental conservation
2,000 projects in collaboration with government, private and non-
No. of EDS Training Participants40,0002,3332,333 government organizations are carried out.
No. of Trainings38,5871,903
2,046 Micro Savings
1,880
30,000 29,140 Savings was the key missing element in BMIC microfinance
approach so far. By having the microfinance license, BMIC
20,000 1,500 was able to obtain collateral deposits from its borrowers. The
10,000 1,355 prime importance of introducing savings products to clients
is to encourage the habit of savings among clients leading
0 2016 2017 2018 2019 1,000 to become a financially independent individual and improve
2015 the living standard which pave the path to alleviate poverty.
As a pilot project, BMIC started taking compulsory deposits
No of Trainings No of EDS Participants from clients in Nuwara Eliya and Welimada branches which
are newly opened branches this year. The compulsory saving
Type B services consist of business counselling, business amount of LKR 100 per month is deposited by each client as
follow-up, facilitation of business registration, creation a collateral deposit. These savings are paid with an interest
of market linkages, facilitation of livestock insurance and of 5% per annum calculated on daily basis and credited to
provision of business information, directing clients to the savings account at the end of each month. As at year
relevant training programmes provided by other government end, 944 of BMIC clients saved LKR 354,311 as collateral
and non-government organizations which are provided free deposits.
of charge. Enterprise Development Officers (EDOs) are
equipped with knowledge and experience to provide the We expect to expand compulsory savings for all the clients
services and assisting the coordination with relevant parties. who obtain new loans from BMIC. In 2020, the current pilot
Type C Services: Projects which are initiated by an individual phase will be expanded to 6 more branches by including one
or a group of people who make a new product using new or branch from each region and a monthly deposit of LKR 200
existing technology or for a new market while creating ten or per month collected from each new client. These savings will
more business opportunities or employment opportunities be kept as a collateral for loans and will not be allowed for
for local individuals are Type C services, creating new withdrawal until the loan is fully settled. The clients will be
opportunities for the particular business community. informed to withdraw these savings within 6 months of the
settlement of these loans in case they do not take a repeat
Type D services help to create market linkages for our loan from BMIC.
business loan clients to market their products in a wider
44 Berendina Micro Investments Company Limited | Annual Report-2019
Customer Capital
BMIC is also looking into the feasibility of introducing a loan CUSTOMER BASE
product towards the latter part of 2020, where the client Micro Credit Customer Base
has the option of placing an upfront savings deposit. Such
deposits will also reduce the risk on loans where it acts as Our clientele is widespread in 30 branches located in
a cash security against the loan. In order to encourage the 11 poverty-stricken districts which also include estate
clients to save more which in turn lower credit risk of BMIC, community (3% from total credit borrowers) who lives in 49
it is expected to see the feasibility of offering such clients a estates of which majority is in Nuwara Eliya district. As per
lower loan interest rate loans in the future. CBSL directions under Microfinance Act No. 6 of 2016, BMIC
had to limit estate loan disbursements to LKR 2 Million per
CUSTOMER FEEDBACK AND IMPACT Community Based Organization (CBO). BMIC adopted CBO
ASSESSMENT based lending methodology for plantation areas where loans
were channeled through the estate worker cooperatives
Collecting and responding to customer feedback is an in each estate. This is one of drawbacks of obtaining the
important aspect in business continuation and sustainability microfinance license where a 50% reduction of estate
as feedback of customers are necessary to improve the customers served by BMIC through cooperative societies are
value generated to our customers. Conducting cluster- expected. An alternative approach to serve this customer
based lending operations through monthly cluster meetings segment is already developed and implemented. Reduced
with the participation of cluster members is the key source disbursement due to issues of over indebtedness and results
of collecting customer feedback by our Field Officers, to reduced the total micro credit borrowers by 15% and
Branch Managers and Area Managers. Cluster meetings are stood at 84,691 at the end of 2019. This action is taken as a
interactive sessions enabling the clients to express their strategy of client protection against over borrowing.
satisfaction, dissatisfaction, grievances, suggestions and
any other concerns which are later discussed at branch level Micro Credit Borrowers
and take remedial action. Issues and concerns needing the
attention of the senior management are forwarded to the 120,000 103,374 111,562 99,201
management level at Head Office based on the gravity of 94,204 105,270 93,891
the issue. 100,000
77,450 84,691
Cluster leader conferences which are conducted once in 82,027
every two years also create an opportunity for cluster 80,000
leaders who represent their cluster members to express their
concerns and feedback at each branch level. Further, internal 60,000 69,708
research unit of BMIC conducts impact assessment surveys
to research on the impact of BMIC products and services 40,000
on the clients in the aspects of business initiation, business
expansion, acquisition of household assets, increasing 20,000 7,742 9,170 6,292
quality of life and thus reach out of poverty. During the year,
a telephone survey was conducted to assess the impact of 5,310 6,624
EDS services on the clients. Another survey was conducted
for dropout clients which helped to understand the reasons 0 2016 2017 2018 2019
for their dropouts and to identify the possible solutions to 2015
minimize future dropouts and increase customer retention.
An international tool of assessing the level of poverty; Estate Plantation Community Village Borrowers
Progress Out of Poverty Index (PPI) is implemented by Total Borrowers
BMIC to assess the poverty reduction of clients when they
are moving from one loan cycle to the next and the data As BMIC focuses on alleviating poverty and improving
are collected from each client prior loan disbursement. An living standards of customers, we encourage women in
annual assessment of poverty levels of customers and their entrepreneurial business and thus, majority (88%) of our
moving out of poverty due to our services are conducted clientele is female borrowers. Our clientele is managed
using a random sample of 2,800 clients comprising 100 under six different regions and the largest region is Nuwara
clients randomly selected from each branch. Eliya due to inclusion of estate borrowers as well as having
7 branches. Other regions have only 5 branches and the
second and third largest were Kegalle and Batticaloa regions.
North region is having only 3 branches recorded the lowest
number of borrowers.
Berendina Micro Investments Company Limited | Annual Report-2019 45
Customer Capital
Composition of Borrowers 15,194 Type A Services 4,354 7,278
14,622 4,487
Kegalle Technical Trainings-
Anuradhapura 18,106 Agriculture & Livestock
Nuwara Eliya Technical Trainings-
Non Agriculture
Exposure Visits
Trincomalee 13,943 Financial Literacy Training 5,172
Batticaloa 15,073 Success in Money 10,495
Management
Northern 7,753 Viyapara Jaya Training 2,732
10000 2,506
0 5000 15000 20000 Start and Improve 1,828
Female Male Your Business 2,000 4,000 6,000 8,000 10,000 12,000
EDS Customer Base Soft Skill Development
Training
Even though our Type A Service customer base marginally
increased, total EDS beneficiaries reduced marginally due to 0
the reduction of number of beneficiaries of Type B services
and number of beneficiaries under Type D services by 8% CUSTOMER CONVENIENCE
and 4% respectively resulted in year-end customer base at
8,503 and 655 respectively for these two types of services. In order to ensure the customer convenience, we conduct
Type D services recorded 31 clients through ekade.lk. all our business operations including cluster meetings, loan
recoveries, accepting savings and proving EDS services in
EDS Service Types 2019 2018 the village as much as possible which brings services close
to clients’ residences; however, only the loan disbursement is
Type A Services 1,903 1,880 carried out at our branches. This door step services include
No. of Trainings 38,852 38,587 the initial registration of the client, awareness meetings,
No. of Participants loan assessments, signing and accepting loan documents,
8,503 9,248 loan recovery, delivery of Suwasahana cash benefits and EDS
Type B Services services.
No. of Participants 59 57
1,852 1,642 EDS coupon system is further backing the customer
Type C Services convenience by enabling clients to pay the training fee over a
No. of Projects 31 - period of time in small installments instead of paying upfront
No. of Clients 655 685 and this can be considered as the best solution to avoid bulk
cash outflow at once from customer’s hand.
Type D Services 30 2
No. of Clients (ekade.lk) 71 ADDITIONAL CUSTOMER BENEFITS
No. of Beneficiaries
Loan Risk Fund (LRF) which is implemented by BMIC from
Type E Services the inception is a major benefit provided for any of our
No. of Bio Gas Units customers to help them with extremely difficult situations
No. of Waste Water which is built through collecting 2% from each loan amount
Treatment Tanks at the time of disbursing the loan. The clients or the family
members of the clients can take advantage of the fund at the
Under the Type A services success in money management times of client death, spouse death, permanent disability or
service with 10,495 training participants highly contributed long-term illnesses of the client or breadwinner of the family
to the total customer base of type A services and it was and allow to write off entire loan outstanding including the
followed by Non-Agriculture technical trainings with 7,278 interest using the LRF.
clients.
46 Berendina Micro Investments Company Limited | Annual Report-2019
Customer Capital
“Suwasahana” is another popular benefit among our CUSTOMER PRIVACY
clients which is provided as a monetary assistance during
hospitalization and funerals. In the event of hospitalization Under our privacy policy, we refrain from disclosing any
of the client or the spouse of the client or the child of the information relating to our customers to any third party
client (less than one year), LKR 300 is paid per day up to 10 excluding the government regulatory authorities. When
days per year while LKR 6,000 is paid in the event of death of disclosing their information is required for any specific
the client’s family member to cover funeral expenses. purpose, we obtain prior consent from the customer in
writing to ensure customer privacy and confidentiality.
Annual allocation of LKR 50,000 from each branch totaling COMPLIANCE
LKR 1.4 Million was utilized for several community projects
proposed by our clients themselves and during the year, As a licensed microfinance company under Microfinance Act
different projects were successfully completed for the No. 6 of 2016, we comply with rules and regulations provided
community upliftment including blood donation campaigns, by the Central Bank. In addition, we also adhere to all other
educational seminars and Shramadana campaigns. Further, rules, regulations, directives and guidelines stipulated by
during the year, over 100 other community projects were other regulatory bodies including the Registrar of Companies
implemented in our clients’ villages by BMIC using a grant and Inland Revenue. As a member of LMFPA, we also comply
provided by the Shareholder BDS worth of LKR 11 Million. with the Code of Conduct issued by the Association.
Our well diversified customer benefits also support for the CHALLENGES
education of our clients’ children. Under Bright Students’
Scholarship (BSS), we sponsor the bright children of the The Easter Sunday Attack in April created a colossal damage
clients’ where A/L students in Arts and Commerce streams for the income of earning capacity of our customers having
are given LKR 1,000 and students in Science stream are businesses in certain industries such as tourism and related
given LKR 1,500 every month for a period of two years and 3 industries. In addition, the overall economy had a down turn
years for students attempting for the second time. affecting almost all clients in reducing their income and
wellbeing compared to the previous years. Some customers
CUSTOMER GRIEVANCES HANDLING were over borrowing which has also facilitated increased
supply of microcredit by commercial players. Customers
We consider customer complaints as a guidance from borrowing multiple loans at higher interest rates were
customers since complaints help to improve the value evident due to which CBSL declared interest rate cap for
creation process and address customer concerns and thus, microfinance loans.
we have provided them the space to raise complaints or
any grievance at field level and also at Head Office level.
They make such complaints directly to the Branch Manager.
Contact numbers of branches have been shared with all
customers to raise their concerns at field level.
Further, the dedicated customer hotline at Head Office
uninterruptedly handles customer complaints during office
hours and the customers can make their complaints both
in Sinhala and Tamil languages and those concerns are
communicated to relevant authorities and possible solutions
are provided within a very short time period. Complaints
made to head office is recorded for ensuring the quality of
the handling such complaints.
Berendina Micro Investments Company Limited | Annual Report-2019 47
Pepper cultivation project of Galigamuwa branch
Galigamuwa branch commenced pepper cultivation training programmes in the year 2015 and conducted 9 programmes
in that year to educate 153 clients about the importance and modern agronomic practices of the pepper cultivation. After
trainings, there were 33 clients immediately joined in cultivating pepper as an intercrop in their tea gardens and as a home
garden in 2015 and another 18 clients added to the project in the year 2016. In total 51 clients were supported under
this project. They were linked to the Export Agriculture Department to provide pepper plants under government subsidy
programme. 30 pepper plants were provided to a client from Arandhara, Kinigama, Halamada, Ceherambe and Panakawa
villages on 11th September 2015. In the year of 2019, 44 out of the 51 clients had their harvests already. Clients have
increased the number of plants at later stage as per the land availability.
The clients who have benefitted in this project under inter cropping and home gardening share their stories below
L.P. PIRIYANGANI (AGE 51), K. SIRISOMI (AGE 56),
Arandhara Village Kinigama Village
I was able to participate at the Pepper cultivation I had 5 pepper plants in my garden before I joined the
programme arranged by Berendina Galigamuwa in the year training program organised by Berendina in 2015 but it
of 2015. The programme motivated me to start pepper just a bush and not maintained properly because I did not
cultivation as intercrop in my tea field. Berendina training know how to manage those plants. The pepper cultivation
programme helped me to build my technical knowledge training programme made me aware the modern
to prepare the land, planting pepper in proper manner, cultivation practices of the pepper plans. I received 30
managing the crop and pepper processing. Berendina pepper plants from government at no cost. I am a house
helped me to get the 30 plants from government for free wife and have a small land for my garden. Now expanded
of charge and now I have increased the number of plants my cultivation to 50 plants as home gardening. I was able
in my garden to 40. to harvest 48Kg of raw pepper in the year 2019 and made
an income of LKR 9,600.
I was able to harvest 36Kg of raw pepper in 2019 and
processed them to make 12Kg of dried pepper and made
an income of LKR 7,200. I have cultivated pepper in my tea
garden and now it makes an additional income for me. We
have buyers in our region, so easily we sell the harvest. I
am planning to increase the pepper cultivation and vanilla
plants too in my tea garden in the future.
48 Berendina Micro Investments Company Limited | Annual Report-2019
Social and Responsibility Capital
Value Creation Activities in 2019 Outcome Challenges
• Extend support to our clients • Further penetration into interior • High cost of EDS service provision
through EDS areas with high poverty • Difficulties in finding appropriate
• Establish a branch network spread • 2 telephone surveys to obtain personnel to conduct EDS
across the country customer feedback • High cost of research
• Conduct research to obtain • Provide solutions to the customer • Limitations of the research tools
customer feedback complaints
• Establish customer complaint • Measure the poverty rates in a way
handling system in the Head Office applicable to the local context
level • LKR 11.89 Mn scholarships provided
• Assist the Bright Students of clients’ to 1,244 students
families
Social and responsibility capital entails the long lasting for end products and supporting end product improvement
mutual networks and relationships built up with an array of through value addition.
stakeholders with the prime objective of ensuring long-term
sustainability within the community. Throughout the years, In 2018, we established marketing Division under EDS
BMIC has been able to develop mutual relationships with Department with the intention of creating market linkages
various stakeholders including clients, funding agencies and to expose rural producers and products into new market
other partners. ventures. In partnering with the newly recruited Market
Development Executive, strategies were developed to link
CUSTOMER RELATIONS rural products with the local and national market based
Customer support on which the concept of online marketing platform was
initiated. Following that, BMIC entered into e-commerce
BMIC adopts credit plus approach where the clients are and launched a rural product marketing website called
provided with Enterprise Development Services (EDS) in www.ekade.lk in June 2019. This platform is available for Sri
addition to the credit facilities. EDS are provided to the Lankan customers enabling rural producers to market their
needy clients who are willing to start new businesses or high-quality products throughout the country as a mode
expand the existing businesses. The clients are provided with of transforming rural traditional marketing channels into
an array of skills such as business management, technical modern upgraded marketing channels. Further, it is expected
skills, financial literacy, capacity enhancements in personality to study the feasibility for expanding the online marketing
development and motivation adding value to the clients in platform to international markets during next few years.
terms of personal and business prospects.
The services of EDS are designed to enhance the clients’ Therefore, our EDS mechanism plays a key role in poverty
skills in key areas including technical competency, business alleviation as it empowers rural clients to become successful
capability, networking with market players, product entrepreneurs with technical skills, business management
marketing, environmental compliance, legal requirements and financial knowledge coupled with positive attitudes.
etc. To build up those skills and competencies among
our clients, we provide them with multiple services Customer outreach
such as trainings, business counselling, business follow-
up, facilitating business registration, providing business BMIC functions its activities in 30 branches (including the
information, facilitating livestock insurance, networking newly opened 2 branches in Welimada and Nuwara Eliya)
including market linkages for both inputs and outputs of supported by the Head Office in Colombo. The branches
the business as well as protecting the environment from are located across six regions in the country namely
pollution occurred by the enterprises. A telephone interview Anuradhapura, Batticaloa, Kegalle, Northern, Nuwara Eliya,
was conducted in 15 BMIC branches by EDS Division in the and Trincomalee region. We first select the poverty stricken
Head Office during the first quarter to assess the impact of divisions in each region and afterwards establish branches
networking and market linkage services provided by BMIC in the identified areas. Each region consists of 4-5 branches.
branches. Findings of the telephone interview revealed that The branch is operated with a Branch Manager, 6-7 Field
BMIC clients were effectively supported by three types of Officers, 2 Accountants and Admin Officers, an Enterprise
market linkages including linking the rural producers with Development Officer and a Staff Assistant. Key strategy to
raw material suppliers, introducing market opportunities reach the clients is awareness meetings conducted in village
level where high levels of poverty can be observed. The
village level awareness meetings are also conducted by the
Berendina Micro Investments Company Limited | Annual Report-2019 49
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