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Leasing firms suffer for lack of facilities.

Leasing Firms Suffer for Lack of Facilities

Lack of adequate facilities has put the leasing business in predicament despite considerable efforts and representations made to the Government for various permissions as were accorded to National Development Leasing Corporation - a private sector company like other leasing companies in the country.

The benefits given to NDCL alone include the permission to accept deposits from the open market, to operate in the Inter Bank Call Money Market, direct borrowing from the State Bank of Pakistan and credit facilities for LMM refinance. Due to these advantages the company produced results beyond target, achieving an income level as high as Rs. 550.00 million mark whereas leasing companies in all could achieve net income to the tune of Rs. 15 million and above within the period of five years.

According to them, Government should take up the matter seriously, to eliminate injustice and discrimination so that leasing companies having financial strength could play their due role in the development of national economy. At present there are about 20 companies engaged in leasing business, of these 16 are quoted on the stock exchange with a combined capital of Rs. 1.028 billion. Leasing in Pakistan was introduced about five year back and now it has gained some ground. As over all investments in private sector is growing rapidly, the financial sector would be benefited accordingly, and leasing due to its inherent advantage over the conventional forms of finance will continue to increase its market share.

This business is capital intensive and needs continuous inflow of funds. In other words it is a cash hungry business. Presently the companies are using equity funds or short term finance from commercial banks. However, these banks' loans are not suitable for leasing business due to: a) Ceiling constraints on the bank and b) unsuitability of short-term loan as to

the nature of the leasing business

which require medium to long term


Sources added that the PICIC leasing business should be started on a sound footing for which Modaraba floatation, credit line from foreign banks and public deposits would be suitable.
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Title Annotation:Business Opinion; Pakistan's leasing firms
Publication:Economic Review
Date:Sep 1, 1990
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