LFCs urged to shift from consumption lending to industry-focused finance: LRA

SRI Lanka's licenced finance companies (LFCs) need to pivot from traditional consumption-led lending towards financing industrial and export-linked activity if they are to remain relevant in a changing economy, the Lanka Rating Agency (LRA) said in its latest sector review.

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The Agency argues that LFCs have the balance sheet strength and risk frameworks to play a more direct role in capital formation, as firms seek investment to raise productivity, add value, and compete internationally.

The LRA says the sector's future influence will depend on expanding beyond vehicle loans and personal credit, and into areas such as project finance, industrial upgrading, supplychain finance, and working capital for export production.

These shifts, the Agency notes, would diversify LFC balance sheets while supporting national efforts to rebuild productive capacity. Moving into outward-oriented financing would also help strengthen corporate balance sheets, as Sri Lankan firms attempt to scale into regional markets and generate foreign currency earnings.