PEOPLE'S MICRO-COMMERCE LTD

CREDIT RATING REPORT | Oct-26

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Rating History
Dissemination Date Rating Outlook Action Rating Watch
09-Oct-26 BBB+ Stable Initial -
About the Entity

People's Micro-commerce Ltd was incorporated on 3 September 2010 as a private limited company under the Companies Act No. 07 of 2007, initially as People's Micro Finance Ltd. It was renamed to its current title on 4 January 2019. The Company's product suite spans group loans, individual and SME business loans, hire purchase and equipment financing, educational loans, mortgage loans, and gold-backed lending, complemented by non-financial services such as skills development and business advisory support for micro-entrepreneurs. Distribution runs through an island-wide network of 37 branches, serving a customer base exceeding ~14,000, supported by a staff complement of ~368.

Rating Rationale

Sri Lanka's Microfinance Sector is undergoing a significant regulatory overhaul. The Microfinance Act No. 6 of 2016 has been repealed and replaced by the Microfinance and Credit Regulatory Authority Act No. 9 of 2026, under which only four institutions had been registered with the Central Bank of Sri Lanka (CBSL). The new Act seeks to formalize a sector that has thus far remained largely fragmented and informal, introducing a two-tier licensing framework for microfinance credit providers.

People's Micro-Commerce Ltd ("PML" or "the Company") is a non-deposit-taking microcredit provider incorporated in 2010, with over 15 years of operating history in Sri Lanka's underserved micro-credit segment. PML is wholly owned by People's Leasing & Finance PLC ("PLC" or "the Parent"), which is in turn majority owned by People's Bank, one of Sri Lanka's largest state-owned commercial banks. This layered, state-linked ownership structure provides PML with strong parentage, oversight and access to the funding and institutional support. The Company benefits from board level guidance from its Parent. PML has historically operated outside CBSL's licensing and regulatory perimeter for microfinance institutions, funding its lending operations entirely through debt. Under the newly enacted Act, PML intends to formalize its regulatory status. The Company has represented that it has the requisite internal systems and controls in place to pursue licensing under the new regime. The rating draws comfort from PML's strong sponsor, stable earnings profile, relatively higher spreads, secured portfolio and strong asset quality indicators backed. PML's Net interest income (NII) improved by ~106% to LKR ~1.6Bn in FY26, from LKR ~796Mn in FY25, despite core spreads normalizing to ~20.8% in FY26 (~22.3% in FY25) on account of portfolio expansion. The Company has moderate profitability as it posted net profit of LKR ~295Mn in FY26 (FY25: LKR ~153Mn). Core income is further supplemented by other income and processing fees. Total loans and advances reached LKR ~12.7Bn in FY26 (3MFY27: LKR ~12.9Bn), a growth trajectory that outpaced the industry average and is expected to moderate over the remainder of FY27. The lending book remains concentrated in the hire-purchase segment spanning both registered and unregistered vehicles, which constitutes ~97% of the portfolio. The recent portfolio mix has tilted toward smaller-ticket two-wheelers (now comprising ~67% of the portfolio) as compared to three-wheelers. The Company also intends to grow its unsecured micro-lending book going forward. NPLs in this segment are higher than the overall portfolio NPL ratio of ~1.3% at end-FY26 (~1.9% at 3MFY27). Given the underlying borrower base's vulnerability to income shocks, PML's ability to sustain close customer engagement and continuously strengthen its systems and controls will remain critical to preserving asset quality. Looking ahead, PML aims to grow both interest and non-interest income through new initiatives, including micro-insurance. The rating is constrained by PML's very highly leveraged capital structure, adequate coverages and high cost of borrowings. Leverage increased to ~90.6% in FY26 from ~80.9 % in FY25, driven primarily by a significant rise in borrowings to fund growth. The interest and debt coverages remain modest exposing the Company to rollover risk. Reducing the Company's leveraging and improving coverage ratios is critical. The management envisages capital infusion from the Parent in the short-term to mitigate these risks. The assigned rating already factors in the expected capital infusion from the Parent. As the rating is forward-looking, the actual receipt of these funds will not, in itself, trigger a rating upgrade, but remains imperative to sustain the current rating level.

Key Rating Drivers

The rating is dependent on the Company's ability to sustain its margins and robust asset quality while achieving its growth targets. Meanwhile, effectively reducing leveraging through timely capital infusion by the Parent remains crucial.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

METHODOLOGY

  • Methodology | Microfinance Institution Rating | Jun-24

RELATED RESEARCH

  • Sector Study | Microfinance | Jun-26

RATING ANALYST

  • Vidula Wanigasekara
  • vidula@lra.com.lk
  • +94 114 500099
  • lra.com.lk

PEOPLE'S MICRO-COMMERCE LTD

rating analysis

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Profile
Structure
People's Micro-commerce Ltd was incorporated on 3 September 2010 as a private limited company under the Companies Act No. 07 of 2007, initially under the name People's Microfinance Ltd, and was renamed to its current title on 4 January 2019 under Section 8 of the Act. PML is a wholly owned (100%) subsidiary of People's Leasing & Finance PLC (PLC), a CSE-listed licensed non-bank financial institution that is itself ~75% owned by People's Bank, one of Sri Lanka's two state-owned commercial banks. PML therefore sits within a state-linked financial conglomerate alongside sister subsidiaries including People's Insurance PLC and Alliance Finance PLC, Bangladesh. Notably, PML does not appear on CBSL's registers of Licensed Microfinance Companies, Licensed Finance Companies, or Registered Finance Leasing Establishments; as a non-deposit-taking entity, its microcredit and hire-purchase business falls outside the licensing perimeter of the Microfinance Act No. 6 of 2016.
Background
PML was established to extend financial and non-financial support, including technical knowledge sharing, to grassroots communities in Sri Lanka that are underserved by formal banking channels. Over its 15-year history, the Company's growth has tracked the broader evolution of the domestic microfinance sector, including periods of strong rural credit demand, and it has evolved into a prominent non-deposit-taking microfinance and hire-purchase providers in the country, with a particular focus on women-led entrepreneurship.
Operations
PML's product suite spans group loans, individual and SME business loans, hire purchase and equipment financing, educational loans, mortgage loans, and gold-backed lending, complemented by non-financial services such as skills development and business advisory support for micro-entrepreneurs. Distribution runs through an island-wide network of 37 branches, comprising 14 standalone PML branches and 23 branches co-located within the parent's own branch infrastructure; the most recent standalone branch was opened in Dehiatthakandiya in July 2026. The Company serves a customer base exceeding ~14,000, supported by a staff complement of ~368 and 8 regional offices, and reported a net loan portfolio of LKR ~12.7bn as of FY26. PML continues operational reliance on parent-group resources for its day-to-day functioning.
Ownership
Ownership Structure
People's Leasing & Finance PLC ("PLC" or "the Parent"), holds 100% of the Company, a shareholding that has been unchanged across FY23 through 3MFY27. The ultimate beneficial owner of PML is the Government of Sri Lanka (GoSL), which holds an effective aggregate shareholding of ~77.8% as of June 2026, comprising a ~75% stake in the Parent held through People's Bank and a further ~2.8% held through the National Savings Bank ("NSB"), both state-owned institutions.
Stability
The GoSL's effective ~77.8% indirect shareholding in the Parent lends considerable ownership stability to PML, positioning it within a government-related financial conglomerate.
Business Acumen
The Parent provides PML industry-sepcific industry knowledge and strategic decision-making capabilities as the only shareholder. The Parent's experience also extends to PML’s segment, with PLC maintaining an active lending portfolio.
Financial Strength
The Sponsors remain among the top Licensed Finance Companies on the Island in term of deposit and advances. Financial muscle of the Parent remains robust.
Governance
Board Structure
PML's Board comprises seven directors, chaired by Mr. Dulinda Perera. Six directors, including the Chairman, are non-independent, non-executive directors, drawn from the parent's senior management and People's Bank. Prof. R.A. Seetha P. Bandara is recognized as an independent director, and she brings both academic and industry experience to the Board.
Members’ Profile
The Board draws on relevant expertise across finance, risk management, banking, and economics, closely tied to the parent group and People's Bank.
Board Effectiveness
The Board has formed four sub-committees: Audit, Remuneration & Governance, Integrated Risk Management, and Related Party Transaction Review. With Related Party Transaction Review Committee being the only sub-committee that has independent chairmanship available to it.
Transparency
PML's financial statements for the year ended 31 March 2026 were audited by Ernst & Young and also have been approved by the National Audit Office, as required given PML's state-linked status.
Management
Organizational Structure
PML's structure is organized into core, non-core, and independent departments, with Internal Audit, Risk & Control, and Compliance reporting directly to the Chairman and Board, and other functions reporting through the CEO.
Management Team
The management team is led by Mr. Wasantha Gunawardana, CEO/General Manager, with over 34 years of microfinance and community development experience and ~16 years at PML, supported by Mr. Buddika Nuwan, Chief Operating Officer. The Company maintains a detailed management succession plan that identifies the key responsibilities and a designated successor for each senior role, thereby supporting operational continuity.
Effectiveness
The Company operates four management committees covering Credit and Administration, Compliance, Finance, and Human Resources. In addition, an Asset and Liability Committee (ALCO) was established in June 2026 and an Executive Integrated Risk Management Committee (EIRMC) in September 2026.
MIS
PML's core banking, back-office, and payment systems are provided and maintained entirely by the parent through PLC CORE, an integrated enterprise system; PML operates no standalone IT department.
Risk Management framework
PML's risk governance follows a three-tier defense model anchored by the Board Integrated Risk Management Committee (BIRMC) and Executive Integrated Risk Management Committee (EIRMC), with independent Risk & Control and Compliance functions reporting directly to the Board, though both are staffed by a single person each.
Technology Infrastructure
Information security across PML's systems is anchored at the group level through the parent's ISO 27001 certification, extending to PML's own data and operational environment. The parent also supports these systems with cybersecurity controls, including endpoint detection and response, perimeter controls, and ongoing vulnerability and penetration testing.
Business Risk
Industry Dynamics
The Microfinance and Credit Regulatory Authority (MCRA) Act No. 9 of 2026, effective 20 March 2026, brings an estimated ~15,000 previously unregulated microfinance operators under formal licensing and supervision for the first time. The licensed microfinance (LMFC) sector, of which PML is not part, held total assets of LKR ~19.2bn as of CY25.
Relative Position
PML's total loans and advances reached LKR ~12.7bn in FY26, up ~188.6% YoY, with total assets of LKR ~13.5bn and total equity of LKR ~1.1bn, supported by a collection ratio of ~98.7% and an asset-backed lending focus.
Revenue
Total income rose to LKR ~2.72bn in FY26 (3MFY26: 931mn) from LKR ~1.22bn in FY25, driven by loan book growth and fee income, which rose to ~14.8% of total income in FY26, predominantly from one-time facility processing charges. Net interest income moderated to ~70.1% of interest income in FY26 (3MFY27: ~63.4%) as funding costs rose.
Profitability
Profit after tax grew to LKR ~295mn in FY26 (~93.1% growth), driving ROE to ~32.2%, though ROA moderated to ~3.2% as the asset base outpaced earnings growth. A major contributor to profitability was the strong growth in fee and commission income, driven by the Company's shift away from three-wheeler lending toward motorcycles; the resulting decline in average ticket size has been accompanied by a higher volume of loans disbursed, lifting total income from the one-time facility processing charges levied on each loan. This shift toward smaller, more numerous loans is also reflected in advances concentration, with the top 20 advances accounting for just ~0.4% of the portfolio as of 3MFY27.
Sustainability
PML's strategy centers on geographic expansion, digital transformation, product diversification, and deeper dealer partnerships, moderating toward a three-year asset CAGR of ~8.9%. The Company's transition under the MCRA Act's new licensing regime represents the most material event risk. A key risk factor is management's plan to expand PML's pure microlending portfolio, as gross NPLs for this product stand at ~8.2% as of 3MFY27, significantly above the overall portfolio's gross NPL ratio of ~1.9%. This calls for prudent lending going forward. However, as stated by the management they do not intend to increase exposure beyond ~2% of the total loan portfolio going forward.
Financial Risk
Credit Risk
The gross NPL ratio improved from ~12.2% in FY23 to ~1.3% in FY26 before rising to ~1.9% at 3MFY27, an uptick concentrated in small unsecured product lines rather than the dominant, collateralized vehicle loan book. The Impairment Coverage Ratio strengthened to ~173% by 3MFY27, and portfolio mix has shifted from three-wheelers toward motorcycles (~67% at 3MFY27), while top-20 advances concentration fell to ~0.4% by 3MFY27 from ~1.1% in FY24.
Market Risk
The Company has significantly reduced its investment portfolio in mutual funds from LKR ~115.6mn in FY26 to LKR ~0.7mn in 3MFY27. Market risk arising from securities holdings or trading positions is therefore minimal.
Funding
PML relies exclusively on borrowing for its funding, with total funding of LKR ~11.12bn at 3MFY27, up from LKR ~2.33bn in FY23. The average cost of funding currently stands at ~12.6%, and with the increasing interest rate environment, management is planning to raise average lending rates going forward. As of 3MFY27, short-term funding, comprising short-term loans and bank overdrafts, accounts for ~26.3% of total funding. Of the Company's outstanding funding of LKR ~10.5bn as of 3MFY27, bank lending accounts for ~81.3% while LFCs account for ~18.7%; within this, lending from the parent company accounts for ~9.3%. A repayment of ~39.2% of the outstanding amount as of 3MFY27 falls due within year one, creating high rollover risk.
Cashflows & Coverages
Collateral cover pledged to borrowers has narrowed to ~1.0-1.3x from ~1.5x.
Capital Adequacy
As an unlicensed institution, PML carries no regulatory minimum capital requirement. Management's internally computed CAR stood at ~7.37% at 3MFY27, while the Debt/Equity ratio increased to ~10.0x in 3MFY27 from ~4.3x in FY25, reflecting the leverage build-up accompanying the Company's growth. However, the management expects this to drop to near moderate levels (around ~6x) in the short term, following the capital injection by the Parent.
 
 

Oct-26

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PEOPLE'S MICRO-COMMERCE LTD

rating analysis

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(LKR mln)


 Jun-26
3M		 Mar-26
12M		 Mar-25
12M		 Mar-24
12M
A. BALANCE SHEET
1. Total Finances - net 13,100 12,813 4,416 2,700
2. Investments 1 116 130 -
3. Other Earning Assets 288 259 177 114
4. Non-Earning Assets 757 496 244 108
5. Non-Performing Finances-net (190) (146) (3) 20
Total Assets 13,957 13,538 4,963 2,942
6. Deposits - - - -
7. Borrowings 11,225 10,288 3,330 2,147
8. Other Liabilities (Non-Interest Bearing) 1,616 2,189 859 172
Total Liabilities 12,842 12,477 4,189 2,319
Equity 1,115 1,061 774 623
B. INCOME STATEMENT
1. Mark Up Earned 912 2,314 1,076 886
2. Mark Up Expensed (334) (678) (280) (388)
3. Non Mark Up Income 19 408 143 53
Total Income 598 2,044 939 550
4. Non-Mark Up Expenses (339) (1,428) (666) (429)
5. Provisions/Write offs/Reversals (138) (126) (18) 65
Pre-Tax Profit 121 491 255 186
6. Taxes (54) (196) (102) (75)
Profit After Tax 67 295 153 111
C. RATIO ANALYSIS
1. Performance
Portfolio Yield 28.1% 30.7% 31.8% 32.4%
Minimum Lending Rate 24.4% 24.8% 25.3% 25.1%
Operational Self Sufficiency (OSS) 114.9% 122.0% 126.4% 124.8%
Return on Equity 24.7% 32.2% 21.9% 19.6%
Cost per Borrower Ratio N/A N/A N/A N/A
2. Capital Adequacy
Net NPL/Equity -17.0% -13.8% -0.4% 3.2%
Equity / Total Assets (D+E+F) 8.0% 7.8% 15.6% 21.2%
Tier I Capital / Risk Weighted Assets 7.4% 6.3% 13.3% 17.1%
Capital Adequacy Ratio 8.6% 7.5% 14.6% 18.3%
Capital Formation Rate [(Profit After Tax - Cash Dividend ) / Equity] 25.3% 38.1% 24.5% 17.8%
3. Funding & Liquidity
Liquid Assets as a % of Deposits & Short term Borrowings N/A N/A N/A N/A
Demand Deposit Coverage Ratio N/A N/A N/A N/A
Liquid Assets/Top 20 Depositors N/A N/A N/A N/A
Funding Diversification (Deposits/(Deposits+Borrowings+Grants)) 0.0% 0.0% 0.0% 0.0%
Net Advances to Deposits Ratio N/A N/A N/A N/A
4. Credit Risk
Top 20 Advances / Advances 0.4% 0.4% 0.8% 1.1%
PAR 30 Ratio 1.9% 1.3% 5.0% 8.2%
Write Off Ratio 0.0% 0.4% -0.0% -0.1%
True Infection Ratio 1.9% 1.6% 4.9% 8.1%
Risk Coverage Ratio (PAR 30) 173.0% 185.2% 101.4% 91.6%

Oct-26

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PEOPLE'S MICRO-COMMERCE LTD

rating analysis

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Oct-26

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PEOPLE'S MICRO-COMMERCE LTD

rating analysis

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