Some small finance companies are hiding large nonperforming loan portfolios and they are susceptible for liquidity problems they said.
The recent addition to the Golden key, CIFL, Sakvithi, Pramauka, Fiance and Gurenee, Industrial finance, ETI Finance etc saga was the lesser known small micro finance company named Sen-Hiru, which has defrauded over Rs 800 mn of funds in deposits.
Two financial institutions Sen-Hiru Micro Credit and Sen Hiru Lands and Credit, offered a range of services to the public, including the offering of business loans, instant credit facilities, acceptance of deposits and vehicle leasing facilities.
Asanka Premachandra, his wife, Niluka Sanjeewani and another named Suranga Hiddallarachchi have been serving as directors of these companies, several depositors alleged.
Suranga Hiddallarachchi, who is an SLFP member of the Pradeshiya Sabha of Dodangoda, denied those claims saying that he was only a depositor.
Stakeholders of the financial institution said, Asanka Premachandra and his wife Niluka Premachandra closed their company, and left the country.
Faced with rising dud loans and tightening margins, owners and managers of such small finance companies’ gamble for salvation, taking even greater risks.
They will conceal non-performing loans in the expectation that the prices of assets backing them will somehow recover, that these loans can somehow be packaged as a security and sold, or in the expectation the financial firm itself can be sold while the muck remains hidden, analysts said.