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The source of finance
Akzhol Sadeshov
In the last years, volume of the leasing market in Kazakhstan has been increased many times yearly. So, it has made up $1,2 billon for the 9 months of 2007. It is 6 times more than the rates of 2005.
At the same time, the leasing as financial instrument which makes it possible to acquire the new equipment, is of great demand among the companies of small and medium business. More than 90% of the concluded leasing contracts are related to this segment of enterprise.
The share of leasing in GDP and the basic funds of Kazakhstan is far from the rates of the developed countries yet, where the leasing instruments make up 30% of all the investment. It shows the high potential of growth of the financial leasing market.
Moreover, the continuing international financial crisis, the consequences of which had an impact on the bank sector of Kazakhstan, affected financing of the activities of the leasing companies in a negative way because the major source of funding for the private operators of market is namely bank credits.
As a result, the players of market are in search of the new sources of funding now. The further retention of growth rate of national leasing market depends on how they will solve this problem.
Credit – the foundation of leasing
The major sources of funding for the leasing companies are the credits of the second-level banks, budget and their own funds. Here, the presence of the budget source of financing is mainly due to the predominant presence of government on the market through such companies as its JSC “Kazagrofinans”.
The most widespread instrument of financing the leasing operations among the private companies is the bank credits. The loans of these organizations make up about 40% of the total volume of the sources of financing the deals.
Until recently, the leasing companies that are branch establishments of the banks had a big competitive advantage as compared with other non-governmental operators of market because they had a good chance to obtain much cheaper credit funds from their parent banks. As is known, the major competitive advantage of the operators on a leasing market is a cheap source of obtaining the funds for the leasing deals.
However, the interest rates are increased because of limited access of the second-level banks to the foreign market of capitals. It has also directly affected the rise in prices for the leasing services.
On a crossroad
At the present time, the operators of leasing market consider several versions of expanding the sources of financing. The first of them is the direct attraction of credit funds from the international financial institutes of development.
By the way, only at the beginning of 2005 the International Finance Corporation (IFC) created the Central-Asian Fund for Development amounting to $30 million for financing the leasing companies of the region. However, at the present time, it doesn’t include Kazakhstan.
At the same time, the European Bank for Reconstruction and Development (EBRD) takes interest in financing the leasing operations in Kazakhstan though it still remains at the level of drafts and intentions. However, the EBRD studied the leasing market of Kazakhstan during the several years mainly for considering the possibility of direct financing of the leasing companies. But the results of study haven’t satisfied this organization.
The EBRD doesn’t finance Kazakh leasing companies because there is a low level of business processes in them. But maybe the major obstacle for the financial cooperation of EBRD with the operators of leasing market of Kazakhstan is non-transparency of the domestic companies. According to Leyla Abdymomunova, the leading banker, Head of the representative office of EBRD in Astana, “There is a high criteria of evaluating the reputation of our debtors in our bank. These demands to a greater extent touched not the operators of market but their parent organizations. As everybody knows, the EBRD demands the full information disclosure about activity and the owners of the companies. In many cases we couldn’t conclude the contracts with most of the operators of leasing market because of closed information.”
The absence of information about the leasing market is one of the serious problems which put the brakes on process of obtaining the new sources of financing the leasing operations. Primarily, this information is necessary for the creditors, who finance the leasing operations, and also for the owners and members of the companies for strategic and day-to-day management.
Until 2005 the IFC realized the project of developing the leasing in the country, within the bounds of which the gathering, processing and providing of information about the development of leasing in Kazakhstan was carried out. But after the end of the project the market participants faced with the problem of getting objective information. There were attempts of the individual companies to arrange the gathering and analysis of the information about the development of market, but they weren’t successful.
As a result, at the present time, the operators of market try to gather information by their own strength, but it doesn’t always conform to the real state of affairs.
The market participants admit that it is necessary to work out the compulsory statistical report which will be given by all the organizations realizing the leasing operations not depending on the profile of their activity. Farida Ismagilova, the Vice-president of JSC “BTA ORIX Leasing” said: “This information is as important as air for all the leasing companies. The data about the players of market exists only at the level of rumors. We should make the offer via Association of Financers of Kazakhstan (AFK) with respect to the developing the form of the compulsory statistical report, which will be given by all the companies realizing the leasing operations not depending on the profile of their activity.
At the same time, the absence of objective information about the market negatively affects the development of such segment as the long-term financing the leasing operations. At the present time, the medium term of leasing the equipment doesn’t exceed 4 years. Moreover, the duration of long-term projects in economy makes up about 10 years. Yerhat Iskaliev, the Chairman of JSC “The Bank of Development of Kazakhstan Leasing” said: “We need to work closely with EBRD and other financial institutes of development that can afford the long-term financing”. However, the international financial institutes of development refuse to participate in financing the leasing companies because there isn’t any reliable statistics about the leasing market in Kazakhstan. The players themselves created such situation.
The intervention needed
Meanwhile, the operators of market consider the matter of obtaining the public funds apart from the direct crediting from the international financial institutes.
According to Berik Alibekov, the managing Head of JSC “BTA”, “Perhaps, the international financial institutes of development would help by crediting of import equipment, but unlikely they would finance the contracts of repayable leasing or the domestic suppliers of property. Thereupon, the public funds could give considerable support to the domestic market of leasing. In my opinion, all the players of market should concentrate their attention on this issue and work it over at the highest level as soon as possible. Particularly, the government with the second-level banks rather actively decides the issue of national funding of the same construction companies.
At the present time, two versions of obtaining the public funds are considered. The first version - is funding the leasing companies through JSC “The fund of development of small enterprise” on the analogy of the program of crediting the microcredit organizations.
In its turn the fund has already given its consent to become the public operator of financing the leasing companies. Gosman Amrin, the Chairman of JSC “The fund of development of small enterprise” states: “I have a positive attitude toward this idea. The leasing sector shows the stable growth trend. This financial instrument is aimed particularly at the segment of small and medium business and what is important is that it is oriented at the updating and obtaining the fixed assets. This in turn increases the investment potential of economy of Kazakhstan. The fund may become one of the sources of funding for the leasing companies. The government in its turn should work out and put into practice the special program to achieve it.”
The second version – is the establishment of a state company that would work according to the scheme of Kazakh Mortgage Company (KMC), but only in the field of leasing; in other words it would grant the funds for the leasing companies.
In their time, the authorities of Kazakhstan established the Kazakh Mortgage Company attaching considerable significance to the development of market of mortgage lending in the country. As time shows, this organization achieved its goals successfully. Therefore, the market participants suggest initiating the offer to re-profile the activity of KMC to the direction of leasing operations.
If the operators of market cannot expand the sources of funding the leasing operations, then most probably, there will be decline in growth rate of leasing sector. This in its turn can lead to the decline in dynamics of development of industrial sector of economy.
