leveraging alliance towards growth and sustenance gri 103 ... · customer loyalty and sound...
TRANSCRIPT
1
Alliances
Leveraging Alliance towards Growth and Sustenance
(GRI 103-2 and 103-3)
In today’s dynamic and competitive business climate, corporate sustainability hinges
on the social license and strength of stakeholder relationships. Following our vision
to be a top of the mind financial services provider with a deep sense of corporate
responsibility, MI always strives to maximize organizational value for each
stakeholder group through a ‘shared growth’ approach. While engaging stakeholders
in our strategic decision making process, we cement lasting bonds and relationships
which we call “Alliances”, creating win-win solutions for either party. By staying
receptive, we cater to untapped credit needs of society and also offer attractive
investment opportunities which have helped us cement lasting alliances. Going
beyond the commercial boundaries, we focus on supporting varying other needs of
society, especially those unmet needs of the poor and less privileged.
Today, MI capitalizes on the unblemished and trusted brand image built among our
stakeholders through these mutually beneficial alliances that enabled us to drive
towards this sustainable business journey of over 5 decades.
Value Criterion Attached Alliances
Creating and uplifting lasting
bonds with customers
Ethical Conduct
Constructive and trustworthy
relationships
Respecting and safeguarding
investor rights
Underpinning the fulfillment
of societal requirements
Commercial Alliances
Customer Relationships
Investor Relations
Intermediary Partnerships
Social Alliances
MI’s Shared
Growth
Approach
2
Commercial
Alliances
Personalized relationships to grow
client base
Bottom line growth by upholding
shared growth prospects
Medium-Term Goals
Increasing retail client relationships
Create pragmatic alliances with
corporate companions
Short-Term Goals
Enhance brand image and loyalty
Doubling alliances and partnerships
within the next 5 years
Long-Term Goals
Capital Inputs
Current client base
Customer loyalty and sound
relationships with business
intermediaries.
Customers’ and partners’
perceptions and inputs
Employee interpersonal
skills
Corporate culture and
relationships
Key Management Activities
Attributable to:
Customer Relationships
Building customer
intelligence
Innovative business solutions
Expanding customer reach
Responsible business
practices
Creating a legendary
customer experience
Investor Relations
Building lasting investor
relations
Intermediary Partnerships
Strengthening sustainable
intermediary networks
Being a financial services provider, the relationships we build and nurture with our clients play
a pivotal role in building repeat business and brand image. Broad based strategies have been
adopted to further strengthen commercial alliances and transform them into assets which we can
capitalize in differentiating our products and services in the market to gain a competitive edge.
Customer Relationships
Having understood the importance of a customer centric business approach, the MI Board and
management have geared its corporate strategies to build strong and mutually beneficial
relationships, by continuing to offer innovative economical financial solutions to meet evolving
customer demands, while strengthening service quality. With its unparalleled services, offered
for over five decades, MI has built trust and a vibrant brand image among customers, attracting
and retaining a loyal customer base despite the intensified market competition.
Investor Relations
Whilst our ordinary investor share base is limited, we continued to sustain lasting bonds with all
our investors through continuous engagements with them. As the primary corporate objective,
we aligned strategic direction towards maximizing shareholder wealth through sustainable
returns.
Intermediary Partnerships
We have created rewarding and sustainable business partnerships with our funding
intermediaries, vendors, suppliers and other intermediaries through our “Partnering a Shared
Growth” business proposition. Having understood the importance of their pivotal role in our
supply chain, we strive to build lasting relationships through mutually beneficial strategic
initiatives.
3
Outputs
Customer Relationships
New customers attracted >
19,000
Maintained a sound deposit
retention level over 70%
Investor Relationship
Shareholder funds Rs. 8.9
billion
Greater investor corporate
involvement
Optimal management of
portfolio
Intermediary partnerships
Effective liquidity and
gearing management
High quality products and
services
Value Adding Outcomes
For our Customers
Innovative personalized
solutions
Convenient transacting
Customer privacy and
confidentiality
Lasting trust and business
confidence
For our Investors
Sound Returns
Financial stability
Prudent decision making and
confidence
For our Intermediaries
• Shared growth prospects
Primary Impacts on Other Capitals
Trade-Offs
Although we spent large amounts to acquire, retain and nurture
alliances with customers, investors and business intermediaries,
these alliances will yield greater returns monetarily in the longer
time horizon also boosting the MI brand, trust and loyalty. The long
standing alliances we have built have enriched our financial wealth,
human resource capabilities and also, infrastructure, intellect and
nature, in the past and will continue to do so in the future.
Customer deposits mobilized – Rs. 5.4 billion
Customer lending – Rs. 19 billion
Number of training hours on competency
development 4,568 hours
Conversion of 7 service centers into branches
Enhancement of brand image
Green lending for hybrid and electric vehicles
4
Customer Relationships
Building Customer Intelligence
Operating in a highly competitive market, “Customer Intelligence Building” has become an integral
part of our business model which has paved the way for us to identify evolving customer needs and to
introduce innovative financial solutions to attract and retain customers. This enabled us to sustain our
market share with the changing perceptions and rapid advancement of digital platforms and a dynamic
economic, political and regulatory environment, while generating sustainable stakeholder returns.
While we carry out customer surveys as a key mechanism to acquire customer information, we
continuously gather customer concerns through formal and informal communication channels as a
means of enhancing our legendary service. The Marketing Department together with the IT Division
and Corporate Planning Division carried out studies on market intelligence to accumulate customer
information focusing on evolving customer needs and service expectations. This constructive process
assisted us to address emerging customer trends through product life cycle management and
marketing strategies.
Based on the customer feedback we received from ‘customer and local community satisfaction
survey-2019/20’, we focused our efforts on introducing affordable products, enhancing our delivery
speed and customer convenience, while satisfying the emerging social needs.
Innovative Business Solutions
The knowledge we gathered through our customer intelligence development process was then used to
maximize the customer value proposition, while enhancing efficiency and effectiveness of our service
through innovative business solutions. Innovation in business was supported primarily by designated
teams, including our newly set up business process re-engineering function, product development
committee and the digitalization committee. This enabled us to deliver products with greater
flexibility and convenience to our customers through unique product features that differentiated
products from our peers. During the year, we automated several key internal processes directly linked
to front end sales while streamlining supporting functions to enhance processing time and customer
convenience. Considering the growing demand for financing urgent customer needs, we introduced
“Draft on Property”, micro and auto lending to expand the product mix.
Expanding Customer Reach
This year we extended our branch footprint by converting our seven service centers into branches,
which allowed us to strengthen our customer relationships and bonds through enhanced services.
Going beyond mere physical presence, we enhanced customer accessibility and convenience through
our mobile sales teams, web inquiries and social networking, offering differentiated services to our
customers, supported by direct marketing and communications. Furthermore by re-launching our
website in 2020, we facilitated greater customer convenience and awareness. Upgrading our reach via
social networks enabled us to promote our products among the youth population while strengthening
our customer alliances and instant feedback mechanisms effectively.
With the COVID 19 outbreak, despite the challenges we faced, we extended our service even during
the lockdown to facilitate the urgent and essential financial needs of our depositors while ensuring all
the precautionary measures are taken for their health and safety. This enhanced the bonding we have
with our customers while maximizing customer convenience and satisfaction.
Facing intensifying competition
Material Concerns Addressed
5
Responsible Business Practices (GRI 417-1, 417-2, 417-3, 418-1, 419-1)
Our business operations are managed in a responsible manner that catered to the needs and
expectations of our customers. The concept of responsibility is inculcated in our products, marketing,
and operations and in IT and technology functions as part of information safety. Reflecting the
effectiveness of undertaking business operations in a responsible manner, there were no fines or non-
monetary sanctions reported against our business for non-compliance with laws and regulations in the
social and economic area, product responsibility requirements, which includes product and service
information and labelling.
Product Responsibility We ensure all products before launch is evaluated and verified by the MI’s “Product Development
Team” and if required by our “Digitalization Committee” strengthening product value addition before
taking the final product to the customers. By doing this, we ensured that we follow ethical and
responsible standards in the product planning, product designing and service delivery. We are in the
process of evaluating and finalizing borrowers in keeping to regulatory request to grant them extended
time via a moratorium, to settle dues during the COVID 19 outbreak. The lasting bonds, trust and
confidence we have built among our customers over five decades and our business success, reflect our
responsible and transparent business practices.
Product Responsibility Policy
With the objective of providing a fulfilling product that will yield maximum satisfaction to our
customers, we expect to extend a professional service that will fulfil our product responsibility
obligations. The product policies, practices and standards embraced have been developed with due
care, taking into consideration regulatory obligations and industry practice, whilst also ensuring MI
continue to be fair competitors in the market. All our marketing communication activities conform to
the highest levels of integrity and honesty, in a socially acceptable manner and do not in any way
resort to or condone unethical communications to mislead the public.
Responsible Marketing The responsible marketing practices we adopt are aimed at enhancing the awareness of our existing
and potential customers about our product offerings, product safety and terms and conditions. The
customer protection framework which was introduced in the previous year was continued this year
too, with transparent disclosures and controls in place and thus, no incidents were reported on non-
compliance in marketing communications. While ensuring that our product information is freely
available in all three languages, Sinhalese, Tamil and English, our marketing and sales teams were
educated and provided with adequate training to provide clear information to our customers.
MI does not engage in insider dealing activities or promote banned products that are socially and
publicly debatable.
Broad basing value partnerships
Material Concerns Addressed
6
Information Security and Customer Privacy In keeping with MI’s corporate values, we embedded a responsible corporate culture, with the aim of
safeguarding trust and privacy of our customers. Since we consider customer privacy as a high
priority aspect for us, we deployed effective risk mitigation strategies to assure customer information
security risk is minimized. The Board approved enhanced Information Security Policies to address
the potential risks in IT systems, security features are incorporated into the systems that control
unauthorized access and cyber-attacks including malware and virus threats, with proper back up
strategies to manage our operations without any interruptions.
We did not receive any negative feedback regarding breach of customer privacy or data integrity
during the period under review and we established counter mechanisms to ensure we are safe from
future potential threats.
Legendary Customer Experiences
“Customer Centricity” is at the heart of MI’ s business strategy and we always aim to offer an
exceptional customer experience in keeping with our tag line “Service that extends beyond”. “Think
like a customer” is central to everything we do at MI. We reinforced our efforts to maximize
satisfaction levels and to exceed expectations. Speed of delivery coupled with personalized service
has sustained lasting customer bonds for us, a vital feature in the current dynamic finance industry.
Going beyond the conventional business relationships, we provided our customers a platform to
choose a product that best suited their financial requirements and payment capacity. Our vehicle sales
showroom, after sales assistance services, insurance support and vehicle registration support in
tandem with workshops offer a one-stop experience. We have continued expanding the branch
network for the purpose of providing a diversified service to our customers while creating lasting
bonds with our customers.
During the year, our sales and marketing teams together with front line staff attended numerous
training programs aimed at enhancing service delivery and customer satisfaction levels and identified
level of customer satisfaction through customer and local community satisfaction survey conducted
during the year.
Our business success is driven by the valuable suggestions and opinions of our customers and we
follow up on feedbacks and complaints through a formal and centralized complaint resolution
mechanism across the branch network.
6%
37%
22%
35%
Depositor Loyalty Profile
Customers acquired during the year
Relationship between 1-5 years
Relationship between 5-10 years
Relationship above 10 years
7
Investor Relations
Investor Relationship Building
With a relatively small ordinary investor share base, we are able to maintain close relations with our
investors, meeting our investors, meeting their return expectations and on-going information
demands, while protecting investor rights. We utilized quarterly publications, website communication
and articles to provide general investor information, with AGM’s and special investor meetings to
communicate activities and progress of the company. We kept investors closely apprised of the
corporate strategies, actual progress against planned performance, actions to realign with the plan,
future forecasts and key strategic issues and risks. The information we provided to our investors met
their expectations accurately and in a timely manner and all material information we disclosed were
highly supportive for our investors’ decision making.
As an outcome of our efforts, in meeting shareholder expectations, we were able to generate
sustainable returns by way of dividends and capital appreciation, despite the economic slowdown and
adverse impacts after Easter events. Our unwavering commitment toward our investor expectations to
create steadfast value and sustainable growth over the years has seen MI’s investor related KPIs
moving at a healthy pace with our Earnings per Share, Return on Capital Employed and dividends at
expected levels, uplifting their trust and confidence to greater heights.
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2015/16 2016/17 2017/18 2018/19 2019/20
Investor Value Addition
Market Value Per Share (LHS) Net assets per share (LHS) ROCE (RHS)
8
Intermediary Partnerships (GRI 102-9, 102-10, 204-1)
We recognize that the relationships we build with our business intermediaries are vital in enhancing
our stakeholder value creation. In strengthening our relationships, we strived to deliver the
expectations of our funding intermediaries, vendors, suppliers and other intermediaries, through trust
and shared values. We created sustainable business partnerships through frequent engagements and
addressing their grievances. The existing supplier selection process and termination procedures were
continued as there were no dramatic changes to the size and structure of the organization and the
supply chain.
Contribution from Network of Agents, Vendors and Other Intermediaries The success of our core lending business continued to be propelled by our vehicle sales agents and
other intermediaries who contribute towards promoting especially lease financing and vehicle based
lending products, which helped us acquire different market segments and create differentiation. Thus,
we continued to build and nurture lasting bonds with them by affording shared growth propositions
with potential while recognizing their contribution towards our value creation. During the year, we
offered special promotions for our vehicle agents and tied up with intermediaries for mutual benefits.
Currently, we have joined with over 9,000 vehicle sales agents who facilitated us to reach our
markets, fuelling our business growth.
Funding Provider Partnerships With funding playing a major role in optimizing costs and liquidity, it is vital for MI to maintain
constructive relationships with our lenders which mainly comprise our banking partnerships, financial
institutions and other funding providers. Thus, we continued to earn trust and confidence of our
funding intermediaries, through sound financial results and meeting their required asset security loan
covenants on time. This enabled us to finance our lending growth at a minimal cost and offer
competitive rates to our customers, while maintaining our expected interest spread and margins.
Consumable Item Suppliers We require considerable amount of consumable supplies and general stationary to support our
operational activities with the continuous expansion of our businesses. Our centralized procurement
strategy enabled us to build lasting bonds with our key suppliers while supporting our sustainable
procurement practices. This ensured sourcing quality products and services to suit our requirement in
a timely manner with reasonable prices, to support the business operations, while minimizing
interruptions and lead times.
Our suppliers are reviewed periodically to make an assurance on the quality, cost effectiveness, and
regulatory compliance together with environmental sustainability. Our computer based procurement
system assisted us to place orders and identify reorder quantities without unnecessary delays in the
operational processes. In addition to the material suppliers, we maintained sound relationships with
our utility providers, media, and consultancy and advisory services enabling us to streamline our
operational activities. During the year, 3 new suppliers joined us, bringing the total number of
suppliers to 78.
Broad basing value partnerships
Material Concerns Addressed
9
Procurement practices and supplier spends
Type
2019/20 2018/19 2017/18
Head Office Other Locations Head Office Other Locations Head Office Other Locations
Rs.000 % Rs. 000 % Rs.000 % Rs. 000 % Rs.000 % Rs. 000 %
Electricity 18,969 6.62 18,766 7.41 17,670 6.29 17,164 7.50 18,589 7.42 17,033 9.46
Telephone 13,908 4.85 34,857 13.75 16,684 5.94 31,666 13.84 22,670 9.05 27,802 15.45
Maintenance of premises 15,802 5.51 22,753 8.98 9,131 3.25 22,030 9.63 7,122 2.84 18,355 10.2
Security Charges 18,314 6.39 6,409 2.53 15,779 5.61 6,284 2.75 13,843 5.52 6,001 3.33
Water 1,394 0.49 2,039 0.80 1,300 0.46 2,320 1.01 1,580 0.63 1,913 1.06
Stationary 15,255 5.32 19,297 7.61 15,288 5.44 17,978 7.86 23,754 9.48 13,861 7.7
Fuel 36,826 12.85 57,597 22.73 47,169 16.78 46,934 20.51 38,567 15.39 38,686 21.5
Insurance 35,869 12.51 9,805 3.87 38,675 13.76 10,474 4.58 43,376 17.31 966 0.54
Rent 3,509 1.22 62,364 24.61 4,105 1.46 56,571 24.72 3,025 1.21 48,665 27.04
Advertising & Promotions 104,151 36.33 9,761 3.85 95,650 34.03 7,012 3.06 63,914 25.5 4,304 2.39
Computer Equipment and Maintenance 22,688 7.91 9,772 3.86 19,601 6.97 10,425 4.56 14,185 5.66 2,375 1.32
Total Spending on suppliers 286,685 253,420 281,052 228,858 250,625 179,961
* All our direct suppliers were located within Sri Lanka
10
Social
Alliances
Empower people to improve living
standards
Medium-Term Goals
Support people and communities to
meet their basic needs
Periodic information submission of
large cash transactions to regulators
Short-Term Goals
Strengthen MI’s brand image across
all strata of society and increase
contribution to per-capita and GDP
Long-Term Goals
Capital Inputs
Social bonds built over 50
years
Social regulations and
obligations
Societal values and norms
Human rights
Key Management Activities
Financial empowerment
Social assistance beyond
business
Instilling cultural and
ethical practices
Continuous engagement
and community feedback
resolution
Creating Meaningful Relationships and Social Impacts
We have adopted a broader view to business, going beyond commercial boundaries for
the betterment of society. While being a responsible corporate citizen, we have
embedded corporate sustainability into our business model and corporate strategy, to
create a sustainable future for the society, by looking at various avenues to satisfy their
varying needs, empowering them to pursue their goals and raising their living
standards.
In our journey towards sustainable value creation, we strived to optimize the positive
impacts to society while maintaining our negative impacts at minimal level. During the
year, we continued to broad base our efforts in uplifting communities and securing the
sustainable well-being of our employees. With these broader social goals in mind, the
Sustainability Governance Committee is entrusted with pursuing proposed future
sustainable development goals, which form part of the next three year corporate plan.
Social Alliances Value Creation in a Nutshell
With the objective of creating a more inclusive future, where everyone has the
opportunity to prosper, we continued to build a sustainable development platform for
the community by way of greater financial empowerment, social assistance and ethical
business practices. These efforts in turn enriched our brand equity in terms of increased
brand awareness and recognition, while directly contributing to uplift the living
standards of communities towards a sustainable nation.
11
Outputs
Deep sense of corporate
acceptance and bonding
Social investment stood at
Rs. 1.8 million
Wider employee
contribution towards
building social alliances
Value Adding Outcomes
Beneficiaries meeting
needs from social projects
Development of
sustainable communities
with improved earning
capacity
Improved quality of life of
those supported
Controlling financial
crimes and adverse social
activities
Primary Impacts on Other Capitals
Trade-Offs
In creating an effective sustainable development platform, we have
already invested money, management time and effort and this will
be an ongoing journey. However, we foresee intangible positives
reciprocating back mostly in the longer term, which will enrich our
business in terms of increased brand image and reputation as a
“Responsible Corporate Citizen”
Perceived long term benefits to revenue
Number of employment opportunities created
346
Improved social awareness among employees
Lending support towards agriculture – Rs. 1.5
billion
12
Financial Empowerment
We utilized our expertise in business to cater to untapped credit needs of society by penetrating into
diverse segments, which includes low income earners who lack access to finance. We enabled
financial inclusivity by promoting credit at flexible and affordable rates throughout our branch
network. We provided financial assistance for SME based business start-ups across all major
industries, to propel sustainable development in the long run. Despite the new regulatory challenges
posed on micro financing, we strengthened our microfinance arm by introducing a Micro Auto
Product to assist low income earners in improving their lives and livelihoods. Furthermore, with the
objective of instilling the savings habit among low income earners, we introduced a micro loan
product coupled with micro savings, the bases of which grew astoundingly by 547% to Rs. 146
million from Rs. 22 million.
Social Assistance beyond Business
(GRI 413-1, 413-2)
Social Engagement We engaged with communities to understand their unmet basic needs and strived to address burning
issues by providing our assistance wherever necessary. This includes education support, creating a
more sustainable environment to meet future climate emergencies, community empowerment, better
healthcare and sanitation. This year, we initiated and completed 9 social assistance projects and the
total social investment, as a percentage of MI’s post tax profit, stood at 0.61%.
We closed branches and halted staff movements on specified days declared by the Sri Lankan
government as special holidays, in order to mitigate the spreading of Coronavirus. Our protective
approach allowed us to secure both our staff, and outsiders from being exposed to COVID 19, while
eliminating other indirect impacts on society.
18%
30%
22%
30%
Community Support Areas FY 2019/20
Education
Health
social
Environmental
Creating sustainable communities
Material Concerns Addressed
13
How the Social Needs Identification/Negative Impact Process Operates Our sustainability initiatives are derived from the outcomes of our stakeholder engagement process
and stakeholder concerns, gathered from our surveys and community networks which are routed
through the Sustainability Governance Committee, is responsible for planning and implementing the
programs. Once the project proposals are submitted, the Committee conducts a cost benefit analysis
considering both financial and non-financial aspects of the proposals, in order to ensure that the
expected outcome would be in line with the sustainability development goals of the organization.
Social Impacts The Sustainability Governance Committee closely monitored both MI’s social and environmental
impacts. The process provided the committee with a bird’s eye view of our activities and whether
anticipated benefits were achieved, without any negative societal impacts. For the year under review,
there were no material instances reported of negative impacts to communities that we operate in and
society in general. (Refer Impact Management Report web content).
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2015/16 2016/17 2017/18 2018/19 2019/20
Rs.
00
0
Community Investment
Project monitoring
Project execution Employee awareness
Sustainability Governance
Committee MI Branches
Social Needs and Negative Impact Identification
Evaluation
Fund allocation
14
Inculcating Cultural and Ethical Attributes
(GRI 102-17, 205-1, 205-2, 205-3)
The way we govern our business and the value system we practice ensure that we conduct our
activities in a professional, responsible and ethical manner, adhering to regulatory requirements and at
the same time implementing best industry practices to safeguard public assets and key interests of our
stakeholders.
To support society, we adopt stringent anti-money laundering policies that help control financial
crimes and other illegal activities that are harmful to the general public. We also uphold strong
governance practices that include a whistle blowing policy to discourage fraud and corruption and we
maintain clear communication channels to report improper activities.
Combating Money Laundering We adhered to the provisions of the Financial Transactions Reporting Act (FTRA) through the Head
of Compliance. Regulations issued by the Financial Intelligence Unit were monitored on a regular
basis and any concerns were reported to the Board. We continued to comply with our new anti-money
laundering policy approved by the Board, which entrusted up to date vigilant controls in terms of
customer due diligence and customer verification.
The enhanced Know Your Customer (KYC) policy has helped curb illegal activities that have a
negative impact on society. We placed greater emphasis on tightening our internal processes, which
extend beyond regulatory obligations. We carried out regular trainings, risk assessments and strived to
develop an Anti-Money Laundering (AML) culture, which in turn helps us detect and minimize AML
risks at the first instance.
Anti-Corruption Practices Integrity is a key value driver which is encouraged and supported by the corporate management
primarily through the company’s Fraud and Whistle Blowing Policy. Greater emphasis was placed on
strengthening internal policies and procedures while conducting training sessions to demonstrate the
importance of employee commitment towards maintaining the highest standards of ethics and
integrity in the course of their duties.
The internal audit team worked closely with the Audit Committee to detect and report shortcomings
and lapses in internal procedures, including incidents of corruption. During the year, the internal audit
team covered all material operational processes and did not come across any significant risks relating
to corruption. During the year over 20 managers received communication and training on anti-
corruption policies and procedures.
Maintaining standards of governance
Material Concerns Addressed
15
Outlook
The strength of the relationships we have nurtured with our stakeholders has become a
key differentiator to gain competitive edge in the market. Thus, it is vital that we leverage
these relationships through our shared growth approach. Therefore, we have planned to
invest further in building employee capacity levels with customized training programs for
relationship management and also provide other infrastructure upgrades that improve the
quality of alliances. Accordingly, our corporate plan up to 2022 focused on numerous HR
strategies to empower our staff with the required relationship management skills to
capitalise on future market opportunities. With the COVID 19 outbreak, we focused our
attention to create a more convenient operational platform where our stakeholders could
communicate and transact with us safely, while adhering to the best practices and
guidelines on social distancing and health and safety measures. Thus online
communication and transacting solutions and remote access payment modes will be
utilized towards capturing and nurturing relationships and providing invaluable services
that will pave the way to attract and retain our alliances in a competitive Industry.