LOLC has been engaged in Development Financing since late 90’s. It commenced development finance by participating in SMAP loan scheme funded by Asian Development Bank. LOLC became a Participating Financial Institute (PFI) for ADB funded Tea Development Project (TDP) in 2001. This was a landmark achievement in the history of LOLC because LOLC was the first to be recognized as a PFI by ADB among non banking financial institutes. Tea Development Project was aiming at developing the tea smallholder sector in Sri Lanka commenced in 1998 and LOLC became a PFI three years later in 2001.

LOLC is the largest financier of refinance loan schemes among non banking financial institutes. In 2005, LOLC became a PFI for ADB funded Plantation Development Project. The main objective of this scheme is to develop the plantation sector through concessionary funding for their capital investments.

The range of refinance loan schemes aiming at developing variety of sectors provided LOLC with the opportunity to adopt a holistic approach to Development Finance. LOLC development of a 3 year strategic plan in 2006 resulted in creating a separate business unit for Development Finance with in the Auto Business Unit. The vision of LOLC Development Finance Unit (DFU) is to be the most sought after Development Finance Institute in Sri Lanka by 2010 & be operational in all districts of Sri Lanka including the north & the east.