Leasing companies operating in Pakistan have small product offerings. They are operating in their relatively small niches and dare not step outside.

ENGR. KHALED QAYUM, Askari Leasing.
Aug 07 - 13, 2006

Mention in any gathering, you are currently employed in a leasing company and you are bound to be caught up in a maelstrom of a discussion. "Look at all the traffic congestions, look at these cars on the roads, pollution, uncouth drivers, imbecile policemen... so on and so forth..." You get the blame for everything. One at some level has to agree, that there has been a phenomenal increase in the number of cars in the recent years, and mostly due to leasing. On other hand one also has to agree that there had been a large pent up demand for the cars / automobiles which was not being met and the institution of leasing only made it happen. Surely the institution of leasing cannot be blamed for all of it.

How do we see leasing? Leasing is a form of Asset Finance. It has been very successfully used to finance assets ranging from automobiles and consumer white goods such as TVs and refrigerators to airplanes and industrial equipment and machinery. Leasing is easy to understand and operate. It has been in use worldwide. There are two forms of Leasing, the Finance or Full Pay-out Lease and the other one which is called Operating Lease. The basic difference between the two is the concept of transfer of ownership. In the Finance Lease the ownership is transferred and in the Operating Lease the Ownership is not transferred at the maturity or the end term of the lease. The owner for the payment of rental only enjoys the usufruct of the asset. In this regard this is not very different than renting a video CD at the corner movie rental store.

Has the Leasing been successful in Pakistan? The answer would be how you see it. Yes it has been successful when you see that it has been able to bring a large number of products which were hitherto not in the range of the customers/ consumers. On the other hand, has it been as successful as it could have been? The answer would be No! The Leasing could undoubtedly be more successful. If one looks at the landscape of the leasing companies one can not help but notice that the leasing companies have a very small branch network compared to the branch network of banks. Similarly the capitalization of the leasing companies is rather small compared to the banks. Leasing companies operating in Pakistan have small product offerings. They are operating in their relatively small niches and dare not step outside. They have a small equity base which does not permit them to take large risks. Leasing companies have a higher cost of funds as they are not permitted to operate Savings or Current Accounts. They can only get funds in their COIs which are costlier to the Leasing Companies.

What should Leasing Companies do in order to survive the day? They have a very tough task. They are fighting the proverbial David and Goliath battle. Just like the David they have to use a similar strategy which is based on being nimble and evolving products which are more customer-friendly. They have to work on relationship marketing. Typically Leasing Companies have a "Selling Culture" which is in contrast with the "Banking Culture". This makes them more of sales people than bankers. This has its pluses. Leasing Companies must stress on innovation and try to perceive the customer needs and act earlier than the banks which because of their size would be handicapped in reacting. Today the market trend is in the favor of large banks which due to their branch network and lower cost of capital are dominating the financial landscape. This gives the banks many advantages. This has created a lopsidedness which is clearly in the favor of the banks. This may result in a reduction in the leasing companies which are operating today.

Askari Leasing Company is one of leading leasing companies of Pakistan today. The company is active in writing leases in consumer as well as industrial leases. Its Askar has become synonymous with the concept of auto-leasing and is widely recognized in Pakistan. The company has a very well diversified portfolio which covers all sectors ranging from textiles and auto to power and communication. The company has 10 full fledged branches in Pakistan, in the major business centers of Karachi, Lahore, Islamabad, Rawalpindi, Faisalabad, Multan, Peshawar, Sialkot and Gujranwala. In addition, the company has representation through SBOs (Smaller Branch Offices) in 13 smaller cities. Thus the company enjoys a country wide presence and broad brand recognition. The company has been established on a strong footing and it has been rated as 'A+' for long term and 'A1' short term by PACRA, the independent rating agency of Pakistan, in December 2005.

Mr. Nasier Sheikh is the Chief Executive Officer of the company. He joined Askari Leasing Ltd on October 1, 2002. He brings with him more than 30 years of experience in senior banking and management positions, with both local and foreign banks. His last position, prior to joining Askari Leasing Limited was being SEVP/Group Head of Askari Commercial Bank Ltd. His other assignments include senior banking positions with a prominent bank in the Gulf and Sri Lanka.

Askari Leasing Limited, a subsidiary of Army Welfare Trust (AWT), was incorporated in August, 1993 with an authorized share capital of Rs. 500 million and is listed on all three Stock Exchanges of the country. The company has generated enough resources to adequately finance its leasing operations, mainly by securing funds through Certificates of Investment, which is reflective of the confidence the COI holders repose in the company's management and its business potential.

AWT was established in 1971 by the Pakistan Army for promoting the welfare of servicing and retired personnel of the Pakistan Army and their families through a creation of income and employment generating activities. The trust has evolved into a large business group, and is currently engaged in sugar processing, real estate building, commercial banking, leasing, cement, general insurance and travel services. AWT has strong presence in Pakistan's financial sector with a commercial bank, a general insurance and a leasing company.