Within the final 5 years, Sri Lanka’s financial system has struggled vastly. From being one of many strongest markets in South Asia, it has since fallen from grace. May fintech be the catalyst it must see a revival?
Again in 2012, Sri Lanka had the best monetary inclusion charge in South Asia with two-thirds of its inhabitants gaining access to formal monetary accounts. In second place was Bangladesh, with simply half the quantity of accounts in Sri Lanka.
Nonetheless, the nation has since gone via a really turbulent time. In 2019, there have been terrorist assaults that harmed the tourism {industry}, a serious supply of revenue. Moreover, there have been main tax cuts which additional dampened much-needed authorities revenues. The next 12 months, the breakout of the COVID-19 pandemic additional diminished the quantity of vacationers visiting and spending within the nation.
On the time, Sri Lanka had international reserves of simply $4billion and in an try to decrease the demand for {dollars}, the federal government introduced in an in a single day ban on imported fertilisers that compelled farmers to go natural in a single day.
This led to a collection of protests, inflation hovering to at least one the best on the planet, and a international reserve disaster that impacted imports of primary necessities similar to gasoline. Ultimately, President Gotabaya Rajapaksa resigned and left the nation. Hundreds of protesters ransacked the presidential palace.
A mixture of corruption, mismanagement, and loans (for instance from China) that Sri Lanka couldn’t afford to pay had been components which have left the nation in its present predicament.
Not all doom and gloom: fintech is on the horizon
Regardless of the outbreak of the pandemic, in 2020 the Central Financial institution of Sri Lanka (CBSL) launched its regulatory sandbox in an effort to spice up its fintech sector and innovation. It was additionally exploring the concept of public enter on the prospect and ideas on open banking.
In 2021, the CBSL launched the nation’s first Nationwide Monetary Inclusion Technique (NFIS) with the prime goal of facilitating extra accessible, efficient, environment friendly and reasonably priced monetary companies for companies and people. At the moment, it’s in its implementation part with the collaboration of greater than 20 key entities. It has the technical and monetary help of the Worldwide Finance Company (IFC), which is a member of the World Financial institution Group.
Since these actions had been taken, the fintech sector has continued to develop in Sri Lanka. In 2024, the CBSL introduced that it was planning on introducing a central financial institution digital forex (CBDC) to the nation. Nonetheless, no official launch date was set and there was little speak about it because the preliminary announcement.
Fintech adoption
On account of geographical boundaries, restricted monetary literacy, revenue disparities, the excessive value of borrowing and regulatory constraints, Sri Lanka nonetheless has a big underbanked inhabitants. Regardless of having a big proportion of the inhabitants with formal monetary companies accounts, the adoption of fintech has triggered an enormous uptake of economic choices.
In line with AB Journal, cellular cost apps, digital wallets and peer-to-peer (P2P) cost platforms are examples of how the common Sri Lankan has been in a position to entry a monetary service. Cost options have made impacts within the nation, with cost gateways launched by firms similar to DirectPay and PayHere.
Cellular cost functions like FriMi and Genie have additionally been making impacts in Sri Lanka. Clients can now make funds, pay payments and switch funds by way of their smartphones. As well as, digital wallets and microfinance options, particularly these concentrating on micro and small and medium enterprises (MSMEs) and poorer people have seen the likes of Payable make an affect within the nation.
This has additionally seen partnerships throughout the board between fintechs and conventional monetary establishments. As an example, simply this previous September, Temenos introduced a partnership with Bahwan CyberTek to carry localised, ready-to-use banking options to 6 different nations in Asia along with Sri Lanka, dashing up digital transformation for monetary establishments. By utilizing cloud-native know-how, the partnership goals to assist monetary establishments deploy new banking companies sooner, cut back prices, and decrease dangers.
Additionally, earlier this 12 months, Indian fintech big PhonePe launched its UPI companies in Sri Lanka, enhancing cross-border fintech connectivity.
Conventional monetary establishments are digitising
Fintechs aren’t the one ones impacting the monetary companies scene. Many business banks have additionally entered the digital enviornment with their very own aggressive functions. for duties similar to opening a financial savings account to happen on-line, in the end embracing digital transformation in varied methods.
There have been different efforts to orgniacally increase the sector within the wider monetary ecosystem. This consists of the creation of the Fintech Affiliation of Sri Lanka (FASL). FASL is an impartial, not-for-profit, and cross-industry organisation representing the Sri Lankan and international fintech group to assist the event, innovation and funding within the fintech sector.
Regardless of Sri Lanka’s challenges, fintech may assist additional increase its wider financial growth and hopefully reset it towards the trail to prosperity.
