Announcement of Loan of Four Million in Ceylon on November 17, 1967

• 18 18 H 5 TREE T, N. W., WA 5 r1 ING TON ·o. C. 2 0 4 3 3 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 67/53 Subject: Loan of $4 million Novemb~r 17, 1967 in Ceylon 7}he World Bank has approved a loan equivalent to $4 million to the Develop- ment 7Finance Corporation of Ceylon (DFCC). The loan will provide the Corporatio::L with foreign exchange for lnvestments in projects undertaken by private industria~, agricultural and commercia,:l enterprises in Ceylon. Partly as a result of the recommendation of a World Bank survey mission, DFCC was established by st.atute in 1955 by private Ceylonese and foreign investors with the support of the Government of Ceylon. At present, 38.6% of DFCC's share cap- ital of 8 million rupe~s is held by private domestic investors, 36.4% by foreign ~ investors and 25% by Government-owned institutions. During its eleven years of operation, the Corporation has remained a relatively.small-scale, soundly managed institution. It has invested some Rs. 54 million ($11.3 million) in 71 firms, helping to bring to fruition total investments of over twjce that amount. Its investments, mainiy loans,, have been spread among variouis types of enterprise including chemical, rubber, metal and electrical products, building materials, textiles, engineering, printing and packaging, food and beverages and agricul- ture,;· It has paid dividends at an increasing rate since 1960. At August 31, 1967, DFCC's total resources amounted to Rs. 34.2 million ($7.2 million equivalent). This included, apart -from its share capital, a Government loan of Rs. 16 million and a line of. credit from the Bar,k of Ceylon of up to Ra. 4.5 million. DFCC also has access to a medium and long-term re- financing scheme of the Central Bank of Ceylon.  - 2 - The slow growth of the Corporation reflected the limited progress made by private industry i~/ Ceylon, which was due partly to the absence of protection from imports in the 1950s. Tariff prc)tection was introduced in 1960 and, during • the last two years, :lt has been the Government's policy to support the develop- ment_ of private industry. However, a continuing foreign exchange shortage has allowed only small exchange allocati·ons for the import of raw materials and machinery. With the present better business climate, the prospects for private industry should improve, although the shortage of foreign exchange is likely to continue. In this situation, the demand for institutional finance is likely to increase and DF'CC, with its local currency resources supplemented by foreign exchange from the Bank loan, could play a more active role. DFCC expects a substantial increase in its loan coilllilitments over t·he next two years; they are expected to amount to Rs. 30 million ($6.3 million) of which $4 million would be ·in foreign currencies, to be financed from the Bank loan8 ti· In order to cope with the larger volume of business, DFCC has engaged an ad- viser ..and has begun to augment its very small staff at all levels. This will be the Bank's fourth loan in Ceylon, and the first since 1961. It will be for a term of 17 years, with repayments beginning on February 1, 1970. The- Bank and DFCC will from time to time change the amortization schedule to conform substantially to tpe aggregate of the repayment schedules applicable to DFCC§s loans and i~vestments financed from the proceeds of the Bank loan. The rate of interest will be the Bank's rate for similar loans curreht at the time of( each credit to the loan account. The loan will be guaranteed· by the Government of Ceylon. •