Stable funding environments and easing monetary policies support NBFIs in Sri Lanka and other emerging Asia-Pacific economies amid global uncertainty
Supportive domestic liquidity and accommodative monetary policies are easing refinancing pressures for non-bank financial institutions (NBFIs) across Asia-Pacific emerging markets, including Sri Lanka, according to Fitch Ratings. In its latest assessment, Fitch highlights that steady local funding conditions are helping these institutions navigate global economic uncertainties and high refinancing needs.
The rating agency noted that NBFIs in China, India, Indonesia, Thailand, and Sri Lanka are expected to benefit from stable domestic liquidity and monetary easing, including interest rate cuts. These factors are keeping short-term borrowing costs in check and supporting local-currency bond issuance.
Fitch observed that NBFIs in the APAC region typically hold more short-term debt compared to their counterparts in EMEA, Latin America, and North America. However, this is mitigated by robust access to domestic liquidity and support from shareholders or governments. For example, Chinese asset management firms are backed by strong domestic banks, while Indonesian issuers are managing refinancing challenges with shorter-term instruments and shareholder support.
In Sri Lanka, most NBFIs are deposit-funded, which reduces their exposure to refinancing risks even amid ongoing macroeconomic pressures. Thai institutions, meanwhile, primarily rely on domestic sources due to favorable local borrowing rates, though some have explored offshore funding for diversification.
Fitch further highlighted that Indian finance companies have well-aligned asset-liability maturity profiles and benefit from a broad mix of funding sources, while Chinese securities firms maintain significant liquid asset buffers that offer flexibility in managing obligations.
Despite market volatility and elevated US dollar interest rates slowing offshore bond issuance, Fitch believes APAC NBFIs with diversified funding strategies are well-positioned. Many are tapping into alternative financing avenues such as offshore bank loans and non-US foreign-currency funding, while domestic bank lending remains a reliable fallback option.
Overall, Fitch’s report underscores the resilience of NBFIs in the region, supported by stable local financial systems and proactive monetary policy responses.