Sarvodaya Development Finance Strengthens Financial Profile as ‘BBB-’ Rating is Reaffirmed

Colombo, Sri Lanka: Lanka Rating Agency Limited (LRA) has reaffirmed the entity rating of Sarvodaya Development Finance PLC (SDF) at ‘BBB-’ with a Stable Outlook, recognizing the company’s improving financial profile, strong capital position, expanding loan portfolio, and enhanced profitability during the financial year ended 2026.

The reaffirmation follows the rating upgrade announced in November 2025 and reflects SDF’s continued progress across several key financial indicators. According to LRA, the company’s loan portfolio increased by approximately 55.3% to Rs. 29.8 billion in FY 2025/26, compared with approximately Rs. 19.2 billion in FY 2024/25. 

This growth was broadly in line with the wider licensed finance company sector and reflected relatively strong performance compared to many companies in the sector, supported by SDF's expanding presence in microfinance, small and medium-sized enterprise lending, society bulk loans and agriculture-related financing.

SDF’s profitability also strengthened during the year, with earnings increasing to approximately Rs. 820.1 million from Rs. 473.8 million in the previous financial year. LRA attributed the improvement to lower funding costs, strong portfolio growth and stable interest spreads.

Asset-quality indicators recorded further progress, with gross and net non-performing loan ratios declining to approximately 4.9% and 2.9%, respectively. The improvement was supported by loan recoveries and the expansion of the company’s overall lending portfolio.

SDF maintained a strong capital position, recording a Capital Adequacy Ratio of approximately 22.1% in FY 2025/26, compared with 20.6% in FY2024/25. The ratio remained above the industry average and provides the company with sufficient capacity to support its anticipated portfolio expansion during FY 2026/27.

The company’s deposit base grew by approximately 7.9% to Rs. 10.6 billion during the year and represented around 30% of its funding mix. SDF continues to offer a diversified portfolio of services, including deposit mobilization, microfinance, SME lending, leasing, housing finance, gold-backed lending and digital financial solutions.

Through its longstanding affiliation with the Sarvodaya Movement and its network of connected societies, SDF maintains a distinctive position within Sri Lanka’s financial services sector, with a strategic focus on agriculture financing, rural entrepreneurship and inclusive access to finance.

The rating presentation was attended by Mr. Mahesh Jayasanka, Head of Strategic Planning at SDF; Ms. Ruwanthi Sylva, Head of Corporate and Capital Market Ratings at LRA; Dr. Kenneth De Zilwa, Chief Executive Officer of LRA; Mr. Channa De silva, Chairman of SDF; Mr. Nilantha Jayanetti, Chief Executive Officer of SDF; Ms. Manori Wannigama, Head of Finance at SDF; and Ms. Nipuni Mihirangi, Analyst – Corporate and Capital Markets at LRA.

LRA stated that the sustainability of SDF’s earnings, together with the continued maintenance of asset quality and capital strength, would remain important to the company’s future rating performance. Further improvements in profitability and SDF’s relative position within the sector could positively influence the rating over the medium term.