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Leasing operations in Sindh.

The province of Sindh has played a very pivotal role in the progress of leasing industry in Pakistan -- particularly during 1984 to 1991.

Leasing companies have extended lease financing mostly for Balancing, Modernization and Replacement (BMR) plus expansion projects of existing large and medium sized industrial units of Sindh.

Out of total 29 leasing companies 18 are based in Sindh with their total investment in lease financing of Rs.24.375 billion against total lease portfolio of Rs.36.682 billion. On June 30, 2001 the paid-up capital of Sindhbased leasing companies was at Rs.3.2 billion or 65 percent of the total paid-up capital all leasing companies combined which stood at Rs.4.9 billion. This alone shows the extent of concentration of leasing business in Sindh.

The province of Sindh in general and its capital Karachi in particular has offered ample business opportunities to leasing sector. Karachi having the largest industrial base in Pakistan and home to a number of multinationals operating in the country has been the focal point of leasing business. The leasing sector has sufficiently catered to the needs of different segments of Sindh-based industrial and household sectors. The main segment that has benefitted most through leasing facilities consists of large industrial units including those in textile, sugar, energy, cement, electronics, communications and paper and steel. On the other hand, consumers including individuals, entrepreneurs and institutions have mostly been benefited through long-term leasing of such consumer products as motor vehicles, household items, computers and office equipments.

The Leasing Association of Pakistan (LAP) does not maintain statistics on province-wise break-up of leasing portfolio. But senior executives of leasing companies say most of the leasing companies -- regardless of whether they are headquartered in Karachi or not -- get business from Sindh.

A former chairman of the Association Mubashir A. Akhtar says that after the closure of DFIs like NDFC and Bankers Equity Ltd. "there is the scope for increasing Sindh's share in leasing business." He says this is the only sector capable of extending industrial leasing.

Akhtar who is chief executive of National Development Leasing Corporation says that since inception his company has a very big share in Sindh in terms of net investment in lease finance that currently stands at Rs.7.18 billion. Furthermore, NDLC also has the privilege of being the only leasing company in Pakistan to be allowed to open letters of credit for its customers. "This non-funded credit facility also gives it an edge over all other leasing companies."

With its strong equity base and a solid balance sheet footing NDLC "also leads the leasing business in Sindh in this area." There are other big leasing companies like Orix Leasing Pakistan Ltd. also that with their head offices in Karachi are catering to the needs of the Sindh-based industrial and household sectors.

Their names can be spotted easily in the list of the Karachi-based companies that follows:

* Atlas Lease Ltd.

* Crescent Leasing Corporation

* Dawood Leasing Company Ltd.

* First Leasing Corporation Ltd.

* Inter-Asia Leasing Company Ltd.

* National Asset Leasing Corp.

* National Development Leasing Corporation Ltd.

* Natover Lease & Refinance Ltd.

* Network Leasing Corporation

* Orix Leasing Pakistan Ltd.

* Pak-GuIf Leasing Company Ltd.

* Pakistan Industrial & Commercial Leasing Ltd.

* Paramount Leasing Ltd.

* Saudi Pak Leasing Company Ltd.

* Security Leasing Corporation Ltd.

* Sigma Leasing Corporation Ltd.

* Union Leasing Ltd. and

* Universal Leasing Corporation Ltd.

The outstanding lease portforio of all these leasing companies is Rs.24 billion or two third of the total outstanding lease portfolio of all the 29 leasing companies combined. Executives of leasing companies say that in terms of lease financing to small and medium sized businesses Sindh is the largest recipient among other provinces, "Consumer and auto leasing is now boosting and is the target product for leasing sector .... and in this too Sindh province has taken a lead," says Mubashir A. Akhtar.

Textile, cement, sugar and automobile manufacturing and auto engineering sectors are among the major sectors in Sindh that have benefited through leasing finance offered by Sindh-based, leasing companies. Senior executives of leasing companies say these sectors still continue to be the major recipient of lease finance in Sindh.

About a shift in business activities from Sindh to Punjab they say that the trend had started in last eighties and continued through mid nineties but now the situation is different. "Sindh has regained its earlier position (of being a major centre of industrial and business activity)," says Mubashir Akhtar adding that the province stays way ahead in leasing business as well.

But with the government decision to allow banks into leasing activity is going to impact on the leasing industry adversely.

Since most of the banks too are headquartered in Karachi they are set to focus more on Sindh province in offering consumer lease finance under the new scheme. That really would give a tough time to the leasing companies operating in Karachi and elsewhere.

Leasing companies stand to lose on this account also because they do not have large networks of branches like the banks do.

Senior executives of leasing companies say leasing companies now need to focus on specialised lease finance requiring high level of expertise. "That is the only way to survive," comments head of a local leasing company.

He says that leasing companies should also rethink of how to initiate lease financing in foreign currency. Some big leasing companies were toying with this idea in the recent past but they had to give it up because banks were not willing to offer them foreign currency loans.
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Title Annotation:includes list of leasing companies in Pakistan
Author:Aazim, Mohiuddin
Publication:Economic Review
Geographic Code:9PAKI
Date:Sep 1, 2002
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