Topics to be Covered

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V  simple definition of lease is ͚ 


 

The parties involved in Leasing contract include

V Lessor is a person who is the owner of the assets

V Lessee is the person or party that undergoes for

the lease contract
 
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V The concept of leasing originated as far back as in
Sumerian Southern Babylon over 5000 years ago

V 1850͛s some of the earliest joint stock Companies

were established in England to lease Railway
wagons

V During the last few decades the leasing business

grew rapidly in both Europe and Japan.
 
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V ñn 1980͛s number of ñnnovative leasing
products were introduced

V Financing assets like ñndustrial machinery,

Ships, ircraft, utomobiles and Commercial
buildings.
   
 
ëperating (Service) lease

V This is a contractual arrangement where the

lessee agrees to make the period less than the
useful life of an asset as the lease is not fully


 , the Lessor expects to recover all
costs either by subsequent renewed payments
or by releasing the equipment
   
 
Financial (Capital) lease:

V This is a kind of lease in which a moveable

asset is leased for its full useful life. The Lessor
receives actual payments that are equal to full
price of the leased equipment, plus a return
on investment
   
 
Leveraged lease:

When there are more than two traditional

parties (lessor and lessee) it is called leveraged
lease. The lease agreement is signed between
the lessor and the lessee and the Financial
ñnstitution acts as a long term/ short term
credit provider
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V Loan from local banks/NBFñ͛s

V Loans from foreign lending agencies

V Raising deposits through Cëñ͛s (Certificates of

ñnvestments)

V Getting banks guarantees and against that raising

finds from other Financial ñnstitutions
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V The leasing firms are controlled by the laws
and regulations formulated for Non Banking
Financial ñnstitutions.

V The SBP gets guide lines in the form of

Prudential Regulations relating to capital,
asset quality, management, profitability,
liquidity and solvency
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V Capital requirements Rs200 million

V Exposure LimitsuLiabilities excluding contingent

liabilities, for the first two years of operation
should not exceed seven times equity of the NBFñ

V Creation of reservesull NBFñs shall create a

reserve fund in which an amount not less than
20% of its post-tax profits shall be credited
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V Æaintenance of Debt/Equity ratiou
NBFñs shall ensure that current ratio of the borrower does
not fall below the minimum of 1:1

V Limitations of NBFñs exposureu

Total exposure of any NBFñ to a single borrowing entity or
group shall not exceed 20% of its equity

V nderwriting Commitmentsu
ll underwriting commitments are required to be fully
backed by available funds or firm standby lines of credit or
other funding arrangements
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V Æaintenance of liquidity against certain liabilities:
ºot less than 15% of the NBFñs liability shall be
invested in government securities
V Linkage between borrowers equity and total
borrowing from NBFñ͛su
While granting any facilities, NBFñ shall ensure
that the total facilities availed by any borrowers
from NBFñs do not exceed 10 times capital and
reserves
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V Return on deposits:
ll NBFñs shall allow a uniform rate of return
for a given maturity to all its depositors and
Cëñ holders
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V ñn Pakistan leasing was comparatively a new
concept, being introduced in 1984 when
attempts were being made to make the
Financial System run on ñslamic Principles.

V The first leasing company came up 1984

V Second company to come up was sian

Leasing Corporation
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V From 1991 to 2002 28 Leasing Companies
were in operation.

V Paid up capital limit is Rs 200 million

V This hampered the growth of leasing ñndustry

V Later on LP was formed to promote leasing

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V ñn Pakistan leasing Companies are providing four
types of lease financing.

V ñndustrial lease.

V Consumer/Household lease.

V Vehicle lease.

V ëfficial Equipment Lease

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 number of reasons have been attributed to the
slow growth of Leasing Sector in Pakistan

V Æushroom growth of Leasing Companies

generally unrelated to market  

V Deviation from Primary purpose of financing BÆR

projects.

V Lack of understanding of Leasing Concept

 Some key Leasing Companies
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V Subsidiary of ërix corporation

V ñncorporated as a public Ltd company on

December 23, 1987

V ssets are worth of Rs 27.81 Billion and a

net worth of Rs. 2.60 billion as at June 30,
2008
 Some key Leasing Companies
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V PCR has rated ëRñ Pakistan with a credit
rating of 
for long term unsecured
creditors and the highest ranking of 1
for
short term senior unsecured creditors

V ñts success can be attributed to reasons like

marketing expertise, funding ability Branch
network, diversified product lines and
technical abilities
 Some key Leasing Companies
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V Their area of operation include auto leasing
SÆE sector, short term rental of diesel and gas
generators micro credit and gri leasing

V Nearly 70% of the company͛s leasing activities

are made of consumer finance
 Some key Leasing Companies
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V ñt commenced its operation on January 28,
1997

V Paid up capital is of Rs. 100 Æillion and

equity base is of 260 million

V Sigma leasing provides full payout financial

leases against plant and machinery office
equipment and vehicles
 Some key Leasing Companies

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V ñncorporated in ugust 1993 with a capital
base of Rs. 100 million

V s on June 30, 2007, its equity and reserves

stood at Rs. 1.1 Billion and total assets were
Rs. 12.00 billion

V ñt has 10 Branches
 Some key Leasing Companies
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V ñt was formerly known as (Standard
Chartered Æercantile leasing company Ltd)
was incorporated in January 1991

V ñn 1997 SPñCë acquired the entire 30% of

shareholding of Standard Chartered Bank

V The preferred assets for leasing are

machinery, computers, vehicles etc
 Some key Leasing Companies
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V ñt was incorporated in Pakistan in ugust
1995

V uthorized share capital of Rs. 200 Æillion

V The two major problems that the company

is facing now is dearth of long term
Resources and challenge to sustain required
growth rate against depressed economic
conditions