Chief Executive
Officer's Review
Dear stakeholders, I am pleased to report that 2024 marked a turning point for SDB Bank in the post-economic crisis era, with a significant revival in the Bank's business activities. Improvements in the overall economic conditions were a catalyst for business growth, as SDB Bank's traditional customer base, the SME and agriculture sectors, as well as the underbanked sectors of the economy, had been badly impacted by the economic crisis. The sustained reduction in interest rates as well as political stability and policy predictability, all converged towards creating a conducive environment for SDB Bank to embark on a new growth trajectory.
Retaining Our Sustainable Growth Focus
While driving business growth, we continued to support our traditional focus areas of cooperatives and rural economies and ensured that business expansion was driven by our core values of rural upliftment and poverty alleviation, while facilitating the underbanked and empowering women. We remained fully committed to the UN Sustainable Development Goals (UNSDG), and our activities were built upon the five SDGs of zero hunger, gender equality, decent work and economic growth, climate action, and partnerships for the goals.
In the financial sector of Sri Lanka, SDB Bank is unique in its very formative principles as a Bank for the cooperative sector. In 2024, we reinvigorated our relationships with cooperative societies all over the country, and in particular with the Sanasa Movement, in order to facilitate faster rural and MSME recovery, as both sectors are closely interlinked with the country's cooperatives. A wide range of engagements were conducted with the cooperatives, as well as the Department of Cooperative Development, to expand the capacity of cooperatives for future growth. Please refer to the Social and Relationship Capital chapter for details on these activities. Cooperatives are also a vehicle for SDB Bank to channel larger credit lines for redistribution amongst their members in agriculture and production activities.
SDB Bank has a distinct identity as a private development bank in Sri Lanka, making rural development a core obligation. In 2024, we introduced the 'SDB Bank Rural Upliftment Program', aimed at facilitating inclusive growth mainly through agriculture financing and value chain development. Currently, nearly 16% of the Bank's lending has been directed at diversified agriculture, dairy and fisheries, demonstrating our commitment towards supporting domestic agriculture, where women are a majority stakeholder group. Our value chain development initiatives are directly at building SME capability to connect to larger supply chains, particularly in export industries.
Performance in Context
The SDB Bank team has been actively expanding its marketing activities during 2024, and the groundwork is now in place for business acceleration in 2025. The Bank's increased activity levels in 2024 are also reflected in the growth in fee income by 35.9% to Rs. 584.32 Mn, signifying the higher transaction volumes accommodated during the year, although net advances declined by 4%. However, the Bank's continued support for our most vulnerable segments continued to exert pressure on the bottom line, and profitability declined by 12% to Rs. 409.5 Mn. I would like to stress that our relief measures for these segments have been crafted while keeping in mind the welfare of our depositors and other stakeholders. I believe SDB Bank has been effective in balancing the risks while providing significant relief to the most deserving by identifying and prioritising customers.
During the year, we also focused on expanding our savings base, at the expense of our fixed deposit base, in order to contain the cost of funding. Consequently, SDB Bank's overall deposit base declined marginally by 1%, but the savings base grew by almost 24%.
Retaining Our Talent Base
Despite the economic unpredictability that prevailed even during 2024, the Bank continued to invest in its employees and in retaining the talent pool. Although faced with a comparatively higher cost-income ratio due to the decline in portfolio growth over the recent years, all employee benefits and market-competitive remuneration packages were maintained. In addition, the Bank's HR policies and practices were reviewed and realigned with current market trends to strengthen our human capital base.
Going Forward
With a wealth of learning behind us, we are currently in the process of developing SDB Bank's strategic plan for 2026-2028, with technical expertise from Rabo Partnerships B.V., a subsidiary of Rabobank Netherlands. Rabo Partnerships is a world leader in developing networks and innovative solutions to facilitate financial inclusion, rural development and sustainable food security. While deepening our relationships with the agriculture sector and the cooperative sector, the new growth strategy will also support SDB Bank's business expansion through diversification into new economic segments, while remaining within our cooperative principles. I believe this approach will enhance value for all stakeholders and provide opportunities for the Bank to acquire new skills, which is imperative for organisational sustainability in the rapidly changing world.
A key enabler of the strategic growth plan is digital expansion and innovation, to expand the coverage of underbanked segments and significantly enhance value for the agriculture and SME sectors through innovative new products to facilitate the efficiency and profitability of small farmers and small businesses. Technology will also be the channel to build closer relationships with all our customers and to diversify our customer base, cost-effectively. Already, SDB Bank's UPay app has been enhanced for much greater customer value, and our technology infrastructure has also been upgraded to support planned capacity expansion.
We are also addressing the development of leadership and skills for strategy execution, which is another essential aspect to sustain our growth. We are developing succession plans and investing in making our staff and senior management future-ready. Upskilling and reskilling staff will be a priority going forward.
While we do not anticipate further physical branch expansion in the coming year in favour of digital expansion, we will continually increase the effectiveness of our existing branch network through improved branding and relocations for customer convenience and business enhancement. With greater emphasis on digitisation, our existing products and services will also be upgraded to add value and reach a larger, diversified range of customers. We will also continue to support the rehabilitation of our customers affected by the economic crisis.
With many of our plans ready to unfold, I can promise our stakeholders an exciting 2025 with many new benefits and facilities, as we lay the foundation to transition into a fully-fledged bank from the current specialised bank status. SDB Bank is ready to support the inclusive recovery of our country, and we hope to become a significant stakeholder in this journey by building on the relationships we already have with the agriculture, SME and cooperative segments.
In conclusion, I would like to thank our major shareholders for their commitment and support and especially FMO and BIO, for assisting us in our collaboration with Rabo Partnerships. I fully appreciate the prudent guidance provided by the Board of Directors and the hard work of management and staff who have taken on extreme challenges to enable this successful outcome. Our customers are our biggest strength, and we look forward to partnering with them in their growth aspirations in the new financial year.
We are now ready to achieve bigger and better things, and I call on your continued support as we enter a new era of growth and opportunity.
Colombo, Sri Lanka