Feb 04 - 10, 2008

Over the years micro financing has received overwhelming attention of economic managers throughout the world because of its proven role as an economic growth agent regardless of the prevalent conditions. Whether be it developing or developed economies low income segment of society has always been encouraged to participate in mainstream of economic activities. Rather, main demand and supply interaction takes place within this group. Since its very beginning micro financing has been arousing entrepreneurship to respond to burgeoning middle class and to meet monetary needs of small and medium sized commercial transactions. Pakistan has realized the importance of SME sector of late and inducted financial assistance programs in economic development policies to follow international trade pattern. Late come though come! Equalizing its efforts to meet the need of small and medium sized sector, government introduced asset based financing exclusively designed to concentrate on prospering them and to extend lending facilities. Sagacious and timely was its policy decision in making finance accessible to cash strapped informal and formal sectors. In order to extend the coverage of micro financing, the government approved supports of those, who in any extent forwarded their cooperation.

FIELD SPECIALIZATION: The dawn of year 2003 dichotomized financial sector regulatory authority. Two apex bodies namely SBP and SECP started managing financial sector thereon. It is believed that the transfer or share of mandate to SECP contributed significantly in engineering present state of lease finance industry. The intention of government is, however, not in question. Permission authorized to commercial banks, afterwards, to increase its product range squeezed off "area of specialization" phenomenon. Leasing industry that was established to cater to pre-defined set of customers was put in shambles due to inundation of dominating rivals. Enumerating aftermaths of the power shifting, Farukh Ansari, CEO, Saudi Pak Leasing Company Ltd. said after banks were allowed to operate in traditional markets of lease financing leasing industry sustained unbearable exposure of stiff competition. Of course, transparency and fair trade practices were emerged from competition, but level playing field must have been ensured, he clarified. Previously, only leasing companies could engage in financial service provision to auto, SMEs, and housing sectors. "And we are well savvy of the market because of years of expertise and experience. It is difficult to keep vigilance on lending amount. Banks can not monitor small customers while leasing companies have threadbare studies of the market." It is obvious that merely specialized institution is able to attain optimal productivity. Referring to success story in micro financing of Gramin bank, Bangladesh, he said, the outcome was commendable because of monopolistic operation of the bank. Similarly in Far East countries there is a distinction in areas of operation of commercial banks and leasing companies. "Cluster marketing has never been effective instead it leads to confusion." Unless single purpose license is ensured by SECP, leasing industry can not get its due market share. He said indeed we were the people who carved out market for asset based financing in Pakistan. Leasing industries financed CNG stations, manufacturing operations and so on and so forth. Following his graduation from IBA, Karachi in 1983, Farukh Ansari joined a development financial institution. In fact, since his career start he has been a banker. Later in his career journey, he worked with a French bank and in Overseas Bank of South Africa. In 1994, Farukh Ansari was appointed as Group Director Finance, Deewan Mushtaq Group, where he served for a longest time period that ended in 2003. Finally, he held the sway of chief executive officer in Saudi Pak Leasing in 2003. Along with, he holds the directorship in board of directors of Saudi Pak Commercial Bank Ltd. and Saudi Pak Insurance Co. Ltd. He has been the chairman of Leasing Association of Pakistan in 2007 and its vice chairman in 2006. Farukh Ansari has played vital roles in project financing, merchant banking, and leasing industries.

KIBOR: Leasing companies are specialized in asset-based financing; therefore, in past we had minimal record of non performing loans." To add insult to injury, in end of 2004, borrowing made by leasing companies was linked to KIBOR. KIBOR mechanism is all right if applied to all credit propositions. While commercial banks generate approximately 30 percent of its funds [via current accounts] at negligible cost, leasing companies are charged with variable percentage on credit that increases their cost of funding. Apart from intermediation cost, which we incur in lieu of miscellanea, an addition is tantamount to attaching "high price" tag on our credit product to customers. While talking about other source of borrowings, he said, pension and provident funds may be beneficial for us but corporations find other financial institutions more competitive in terms of interest rate. When asked: can leasing companies take deposits directly from individual? H replied leasing companies do not have required infrastructure to take deposits from individual account holders. Banks can provide services to customer at their door steps while leasing companies do not possess such resources. Furthermore commercial banks provide many other ancillary services to depositors besides money holding which we can not.

CREDIT PRICE DIFFERENTIAL: Dismaying the poor state of the industry, he opined banks are churning out recorded profits to disclose profitability indications in their balance sheets. This might be attracting investments to give a way to privatization. Government banks register never-happened-before growth. "Even National Bank of Pakistan starts disclosing incredible fiscal year profits." The biggest challenge of leasing companies is to explore suitable capital avenues. Otherwise, they could not remove price differentials of product. Market expansion would never be possible until government moves forward to pull up barriers in leasing industry's growth. The present structure of financial market inclines towards one group of participants while another deprived group bears unjustifiable costs.

Leasing companies meet the credit demand of sectors which are entangled in intricacies of banks' pre-loan documentation. In spite of apparent credit risk involved in lending, we go for an agreement with them. Asked how do they analyze insolvency danger? He responded we have information and track records of competency. This type of customer seeks after leasing companies and accepts to comparatively high interest rate.