Leasing industry poised for growth

by Shirajiv Sirimane

President of the Sri Lanka Leasing Association Dr. Dilangan Soyza is optimistic that the total revenue generated form the leasing industry would increase this year.

Speaking at the Leasing Policymakers' workshop organised by Asian Centre for Lease Education yesterday, he said that in 2004 the total leasing portfolio was Rs. 50 billion and by the end of this year it would increase to Rs. 65 billion.

He said that over 50 percent of leases were utilised to purchase second hand vehicles. This industry is a major contributor towards the government revenue and pays a key role in the development of the transport sector, especially in rural areas.

Deputy Governor Central Bank Rani Jayamaha making the key note address said that over 75% of leasing companies in Sri Lanka still concentrate on vehicle leasing while a few have ventured into diversification of products and other avenues like financing of warehouses, hospitals and educational institutions.

Operating leases have not yet picked up in Sri Lanka for a number of reasons. The present law does not provide for it but that can be easily sorted out if needed. If necessary, the Leasing Act can be amended in consultation with the industry as the present Act deals only with finance leases.

There are significant opportunities emerging in the SME sector in the post tsunami reconstruction and development.

Leasing companies should be able to cater to some of these needs and grab opportunities. It is worth consulting the newly established SME Bank.

On a sector-wise basis, as at end of 2004, Sri Lanka's leasing businesses conducted by specialised leasing companies concentrated 27% on trade, 24% on services and 21% on transportation.

"Leasing can become an important financial technique for small and medium enterprises (SMEs) which need improved access to finance especially for acquiring capital equipment and applications of new technology," she said.

"Potential growth sectors such as gems, jewellery, fruits and vegetables, IT, fisheries, light engineering goods, granite and chemicals, cement and value-added textile products can provide new business avenues," Jayamaha said.

Leasing companies must also move out of the big cities and develop new clientele in outstations. This would not only reduce risks, but serve as the basis for higher gains in terms of exploiting untapped businesses.

Leasing can also become an important instrument where government's desire the functional benefit of public/private partnerships, or joint ventures. Government is mindful of the political and legal implications of transferring title of valuable state assets to foreigners.

Leasing may provide a politically convenient way to retain ownership, but shift control and financial responsibility to the private sector.

Chairman and CEO of Amembal Associates, Sudhir Amembal, Director, Asia Centre for Lease Education, Mrs. Tamara Hearth, Association also participated.