Sri Lanka Financial Sector Modernization Project

Abstract*

The development objective of the Financial Sector Modernization Project for Srilanka is to contribute to increasing financial market efficiency and use of financial services among micro, small and medium enterprises (MSMEs) and individuals. The project comprises of three components. The first component, supporting selected mid-level reforms through results-based financing implements of selected mid-level reforms through disbursement-linked indicators... Show More

Development Objective

The Project Development Objective (PDO) is “to contribute to increasing financial market efficiency and use of financial services among micro, small and medium enterprises (MSMEs) and individuals”. The project will achieve the PDO through modernizing financial market infrastructure, upgrading the legal and regulatory framework for the financial system, and strengthening the institutional capacity of financial sector regulators (Central Bank of Sri Lanka, [CBSL]; Securities and Exchange Commission of Sri Lanka, [SEC]; andInsurance Board of Sri Lanka, [IBSL]). On account of its comprehensive approach to creating an enabling environment for robust financial development, the project is also expected to advance financial inclusion through (a) increased financial efficiency and competition and (b) the greater reach and financial connectivity of MSMEs and individuals that the new and more inclusive financial marketinfrastructure shall enable.

Key Details

Project Details

Project ID
P159303
Status
Closed
Team Leader
Tatsiana Kliatskova
Borrower 2
Democratic Socialist Republic of Sri Lanka

Country
Sri Lanka
Disclosure Date
October 4, 2016
Approval Date
(as of board presentation)
April 5, 2017
Effective Date
February 22, 2018

Total Project Cost 1
US$ 75.00 million
Implementing Agency
Central Bank of Sri Lanka,Securities and Exchange Commission of Sri Lanka,Sri Lanka Insurance Regulatory Commission (formerly known as Insurance Board of Sri Lanka )
Region
South Asia
Fiscal Year 3
2017

Commitment Amount
US$ 75.00 million
Environmental Category
C
Last Update Date
January 7, 2024
Closing Date
June 30, 2023

Consultant Services required
Yes
Last Stage Reached
BANK APPROVED

Notes
1. Total project cost includes funding from World Bank and non-bank sources in US$ millions. Active and Closed projects show current commitments. Proposed (pipeline) and dropped projects show the forecast amount. The commitment amount for projects in the pipeline is indicative and may be modified during the project preparation.
2. Borrower refers to the Borrower of a Loan or Recipient of a Grant.
3. ”Fiscal Year” is the fiscal year in which the project was approved (or dropped if the status is dropped). The World Bank's fiscal year is from July 1 - June 30. For example, a fiscal year of 1996 corresponds to July 1, 1995 - June 30, 1996.

Sectors

Themes

FY17 - Finance

FY17 - Financial Infrastructure and Access80%
- FY17 - Payment & markets infrastructure80%
FY17 - Financial Stability100%
- FY17 - Financial Sector oversight and policy/banking regulation & restructuring100%

Project Map

Interactive Map

Finances

Financing Plan (US$ Millions)

Financier	Commitments
IDA Credit	75.00

Total Project Financing (US$ Millions)

Product Line	IBRD/IDA
IBRD Commitment	N/A
IDA Commitment	75.00
IBRD + IDA Commitment	75.00

Lending Instrument
Grant Amount	N/A
Total Project Cost**	75.00

Summary Status of World Bank Financing (US$ Millions) as of February 28, 2025

No data available.

Detailed Financial Activity as of February 28, 2025

Download:

Period	Financier	Transaction Type	Amount (US$)
Jan 11, 2019	IDA-60060	Loan Disb	367,000.00
Jan 11, 2019	IDA-60060	Loan Disb	30,000.00
Jan 11, 2019	IDA-60060	Loan Disb	523,000.00
Jan 11, 2019	IDA-60060	Loan Disb	2,900,000.00
Mar 20, 2019	IDA-60060	Loan Disb	261,380.62
Apr 4, 2019	IDA-60060	Loan Disb	929,933.20
Apr 18, 2019	IDA-60060	Loan Disb	520,368.75
May 31, 2019	IDA-60060	Loan Disb	129,151.88
May 24, 2019	IDA-60060	Loan Disb	64,679.06
May 28, 2019	IDA-60060	Loan Disb	64,677.66
Mar 26, 2019	IDA-60060	Loan Disb	261,163.12
Aug 1, 2019	IDA-60060	Int Charges	7,514.30
Aug 1, 2019	IDA-60060	Int Charges	87,505.30
Aug 1, 2019	IDA-60060	Int Charges	88,604.54
Oct 10, 2019	IDA-60060	Loan Disb	128,233.13
Oct 8, 2019	IDA-60060	Loan Disb	64,039.69
Oct 8, 2019	IDA-60060	Loan Disb	64,039.69
Jan 29, 2020	IDA-60060	Loan Disb	64,454.53
Aug 1, 2024	IDA-60060	Loan Repay	1,013,518.40
Dec 29, 2023	IDA-60060	Loan Disb	-1,602.22
Feb 1, 2024	IDA-60060	Int Charges	2,019.10
Feb 1, 2024	IDA-60060	Loan Repay	1,840,526.50
Feb 1, 2024	IDA-60060	Int Charges	82,194.19
Feb 1, 2024	IDA-60060	Int Charges	47,880.35
Apr 5, 2017	IDA-60060	Loan Commitment	75,000,000.00
Aug 1, 2024	IDA-60060	Loan Repay	4,987.59
Dec 29, 2023	IDA-60060	Loan Disb	-232.11
Aug 1, 2024	IDA-60060	Int Charges	80,906.38
Aug 1, 2024	IDA-60060	Int Charges	15,294.72
Aug 1, 2023	IDA-60060	Int Charges	110,788.42
Aug 1, 2023	IDA-60060	Int Charges	47,556.69
Jun 6, 2023	IDA-60060	Loan Disb	-2,772,982.00
Oct 19, 2023	IDA-60060	Loan Disb	30,250.99
Feb 1, 2023	IDA-60060	Loan Repay	1,833,393.90
Feb 1, 2023	IDA-60060	Int Charges	80,649.55
Feb 1, 2023	IDA-60060	Int Charges	103,347.68
Jan 31, 2023	IDA-60060	Loan Disb	152,302.00
Feb 1, 2023	IDA-60060	Loan Repay	38,489.08
Apr 27, 2023	IDA-60060	Loan Disb	1,149.00
Mar 29, 2023	IDA-60060	Loan Disb	-200,544.06
Jan 26, 2023	IDA-60060	Loan Disb	495,937.75
Feb 17, 2023	IDA-60060	Loan Disb	3,733.00
Aug 1, 2023	IDA-60060	Loan Repay	1,855,498.40
Aug 1, 2023	IDA-60060	Int Charges	79,102.60
Feb 1, 2022	IDA-60060	Int Charges	153,284.94
Feb 1, 2022	IDA-60060	Int Charges	2,544.76
Feb 1, 2022	IDA-60060	Int Charges	83,549.29
Aug 1, 2022	IDA-60060	Loan Repay	263.70
Aug 1, 2022	IDA-60060	Loan Repay	1,834,515.00
Aug 1, 2022	IDA-60060	Int Charges	77,855.94
Aug 1, 2022	IDA-60060	Int Charges	177,910.48
Oct 19, 2021	IDA-60060	Loan Disb	519,158.72
Aug 1, 2021	IDA-60060	Int Charges	1,409.50
Aug 1, 2021	IDA-60060	Int Charges	88,225.92
Aug 1, 2021	IDA-60060	Int Charges	133,973.39
Nov 29, 2021	IDA-60060	Loan Disb	2,097,060.00
Feb 22, 2022	IDA-60060	Loan Disb	514,091.40
May 31, 2022	IDA-60060	Loan Disb	4,208.00
Aug 1, 2020	IDA-60060	Int Charges	1,602.42
Mar 24, 2021	IDA-60060	Loan Disb	1,067,617.50
Feb 1, 2021	IDA-60060	Int Charges	6,312.87
Feb 1, 2021	IDA-60060	Int Charges	91,056.30
Feb 1, 2021	IDA-60060	Int Charges	120,651.49
Mar 12, 2020	IDA-60060	Loan Disb	11,253.99
Dec 18, 2019	IDA-60060	Loan Disb	129,326.25
Feb 11, 2020	IDA-60060	Loan Disb	64,208.44
Feb 18, 2020	IDA-60060	Loan Disb	128,146.88
Feb 1, 2020	IDA-60060	Int Charges	1,071.21
Dec 16, 2019	IDA-60060	Loan Disb	64,803.28
Dec 16, 2019	IDA-60060	Loan Disb	64,803.28
Feb 1, 2020	IDA-60060	Int Charges	86,972.80
Feb 1, 2020	IDA-60060	Int Charges	105,748.59
Aug 14, 2020	IDA-60060	Loan Disb	8,185.00
Aug 1, 2020	IDA-60060	Int Charges	88,478.32
Aug 1, 2020	IDA-60060	Int Charges	113,283.15
Feb 22, 2018	IDA-60060	Loan Disb	200,593.70
Feb 22, 2018	IDA-60060	Fee Charges	200,593.70
Aug 1, 2018	IDA-60060	Int Charges	128,097.66
Aug 1, 2018	IDA-60060	Int Charges	2,883.85
Feb 1, 2019	IDA-60060	Int Charges	1,354.52
Feb 1, 2019	IDA-60060	Int Charges	95,490.91
Feb 1, 2019	IDA-60060	Int Charges	2,707.64

Footnotes

Ratings

IMPLEMENTATION RATINGS

Name	Review	Date
Financial Management	Satisfactory	2023-01-16
Project Management	Moderately Unsatisfactory	2023-01-16
Monitoring and Evaluation	Moderately Satisfactory	2023-01-16
Procurement	Moderately Satisfactory	2023-01-16
Overall Implementation Progress (IP)	Moderately Unsatisfactory	2023-01-16
Progress towards achievement of PDO	Moderately Unsatisfactory	2023-01-16

COMPLETION RATINGS

INDICATOR	IMPLEMENTATION COMPLETION & RESULTS REPORT: 01-16-2024
Outcomes	Highly Unsatisfactory
Risk to Development Outcome
Bank Performance	Unsatisfactory
Borrower Performance
Government Performance
Implementing Agency

INDEPENDENT EVALUATION RATINGS

INDICATOR	ICR REVIEW: 05-03-2024	PROJECT PERFORMANCE ASSESSMENT REPORT:
Outcome Rating	Highly Unsatisfactory	N/a
Risk To Development Outcome		N/a
Bank Performance	Unsatisfactory	N/a
Borrower Performance		N/a
Government Performance		N/a
Implementing Agency		N/a
Icr Quality	Substantial	N/a
M&e Quality	Negligible	N/a

Results Framework

PROJECT DEVELOPMENT OBJECTIVE INDICATORS

INDICATOR		BASELINE	CURRENT	TARGET

(1) Increased transactions of retail electronic payments on the modernized infrastructure (measured by the cards issued under NCS to total debit cards in the system– target 15%)	Value	1.00	0.63	1.00
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Increased participation (trading) in the secondary market Central Government bonds (measured by the growth in secondary market trades of Central Government Debt in value terms—target 5%)	Value	LKR 6,591 Billion	LKR 26,080 bn	LKR 2024 billion
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

(3) Increased share of private insurance companies (newly issued) insurance policies (measured by the growth of insurance premiums to GDP—target 3%)	Value	1.05	1.10	1.21
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

INTERMEDIATE RESULTS INDICATORS

INDICATOR		BASELINE	CURRENT	TARGET

Citizen engagement indicator of percentage of project beneficiaries that feel project activities/services/results reflected their needs.	Value	0.00	75.00	0.00
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Central Counter Party system established for the securities market	Value	Non operational	The policy framework was approved. The CSE is in t	non-operational
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Regulatory and supervisory framework for financial consumer protection established and in use	Value	Non-existent	Monetary Board approved the FCP regulations on 18	non-existent
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Outstanding MSME Loans from commercial banks (Note: Value of total loans granted by commercial /development banks)	Value	Published disaggregated data not N/A.(total esti	Outstanding MSME loans from licensed commercial ba	Data collection on SME sector commenced.SME defin
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

CBSL has undertaken consolidated risk-based supervision of banks on both solo and group wide basis, and performs risk assessment ona stand-alone and consolidated basis (Basel Core Principles for effe	Value	Non compliant	Bank Supervision Department completed 1 consolidat	Compliant.The CBSL produces two consolidated supe
	Date	September 1, 2016	June 30, 2023	December 31, 2021
	Comment

Year-end stock market capitalization (% of GDP) Value 27.00 18.80 25.00
Date September 1, 2016 June 30, 2023 April 5, 2019
Comment
Plans and reports are generated and discussed in a timely manner Value Procurement Plans approved Procurement Plans implemented; Operations Manual a
Date September 1, 2016 June 30, 2023
Comment

RTGS new system with multi-currency settlement and convertibility features and the Scripless Securities Settlement System (SSSS) with Central Depository System operational	Value	New system Not operational	RTGS test environment installed and testing in pro	Non-compliant
	Date	September 1, 2016	June 30, 2023	December 31, 2021
	Comment

Change in investment portfolio composition of EPF (% in government securities)	Value	90-95% in government securities	93.94	91.3 % in government securities
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Audit reports completed and submitted within six months of closing of the financial year. Value None IUFRs submitted, audit reports submitted with dela
Date September 1, 2016 June 30, 2023
Comment

SEC’s regulatory framework and supervisory practices have a significantly high level of observance of the International Organization of Securities Commission’s (IOSCO) Objectives and Principles of Se	Value	3 of 38 principles fully implemented, 13 of 38 Bro	Securities and Exchange Commission Act No. 19 of 2	3 of 38 principles fully implemented, 13 of 38 Bro
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

IBSL’s regulatory framework and supervisory practices have a significantly high level of observance of the International Association of Insurance Supervisors- Insurance Core Principles (IAIS-ICPs)	Value	Largely observed (6 of 26 principles; partially ob	Review of all ICPs are being carried out by a comm	Insurance law drafted in line with ICPs - under re
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Regulatory and supervisory framework with proportionate risk-based supervision for microfinance established and operational	Value	Non-operational	Non-compliant	law passed, department established - not fully ope
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

CBSL & LankaClear Assessment of Observance of the CPSS_IOSCO Principles for Financial Market Infrastructures completed	Value	Not assessed	CBSL completed the self-assessment of CPSS-IOSCO-P	not assessed
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Outstanding MSME Loans from commercial banks by females (% of total commercial bank loans)	Value	Not available/gender disaggregation not done	Outstanding MSME loans to females by LCBs – Rs. 49	gender disaggregation not done hence data not avai
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Outstanding Microfinance lending from licensed microfinance institutions Value None (not licensed yet) None (not licensed yet) none - not licensed yet
Date September 1, 2016 June 30, 2023 April 5, 2019
Comment

Outstanding Microfinance lending from licensed institutions to women (% of MFI loans)	Value	None (not licensed yet)	None (not licensed yet)	non - MFIs not licensed yet
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Outstanding Corporate Debt (% of GDP) Value 1.00 0.93 2.00
Date September 1, 2016 June 30, 2023 April 5, 2019
Comment

Year-end stock market capitalization (% of GDP)	Value	27.00	18.80	25.00
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment

Plans and reports are generated and discussed in a timely manner	Value	Procurement Plans approved	Procurement Plans implemented; Operations Manual a
	Date	September 1, 2016	June 30, 2023
	Comment

Audit reports completed and submitted within six months of closing of the financial year.	Value	None	IUFRs submitted, audit reports submitted with dela
	Date	September 1, 2016	June 30, 2023
	Comment

Outstanding Corporate Debt (% of GDP)	Value	1.00	0.93	2.00
	Date	September 1, 2016	June 30, 2023	April 5, 2019
	Comment