Younger generations largely pushing growth in lease sector
Fears grow over shakey economy in Pakistan
THE leasing sector is seeing explosive growth in Cambodia with the emergence of new services that allow consumers to purchase motorbikes, cars, and other household appliances.
According to the annual supervisory report released by the National Bank of Cambodia (NBC) last week, revenue from leasing last year accounted for $129 million.
This is a huge jump from the $4 million recorded in 2013, when leasing was first introduced in the Kingdom.
Ngeth Chou, the senior consultant at Emerging Markets Consulting (EMC), said on Tuesday that even though the leasing sector is fairly new in the market, it has made significant progress and is giving vast opportunities to financial operators and consumers.
However, he urged caution as he said that financial literacy among Cambodians is still low, and that the public were leasing consumption assets rather than productive ones.
“Many young Cambodians use leasing services to purchase consumer goods that fit their modern lifestyles. If the largest share of leasing is for consumer goods, then it is not a good sign.
“Business owners are constrained by a lack of capital to buy more equipment, so if leasing services offer machinery and equipment for business and production, then it will be of greater benefit to the economy,” he said.
According to the NBC’s figure, there were 11 leasing companies at the end of last year. Assets they held totalled $174 million.
Leasing companies buy equipment from vendors, and then lease them to customers at monthly installments. And they are often given a “rent to buy” option too.
NBC Director-General Chea Serey said the growing number of companies providing leasing services allowed those running small- and mediumsized enterprises to purchase assets such as mechanical and electronic equipment even when they don’t have all the money up front.
She said leasing companies are unlikely to stock useless products as their customers will not want to purchase them at the end of the term. If that happens, the leasing companies will be stuck with useless assets they can’t sell.
Sok Sothearoth, the director of the administrative department at I-Finance Plc, said her company’s services are popular among Cambo- dian’s aged between 20 and 30 years.
She said I-Finance signedup nearly 400 new customers each month, and that most of its leasing plans were for mobile phones or motorbikes.
“Even if leasing customers are charged higher interest rates compared to bank loans, the service is easier to avail of and provides those with little money to purchase the things they want,” she said. FEARS mounted over Pakistan’s economic stability before elections this summer as the caretaker government pledged on Tuesday to stem the account deficit by using rapidly dwindling foreign currency reserves.
There is growing speculation the country will have to seek a loan package from the International Monetary Fund following the elections, for the second time since 2013, amid fears of a balance of payments crisis.
“We have to finance this gap of the trade deficit of $25 billion by depleting our reserves. There is no other option,” caretaker Finance Minister Shamshad Akhtar told a press conference.
“This is a major worry which our government is facing.”
The announcement came hours after the central bank devalued the rupee by 3.7 percent, the third devaluation since December.
A caretaker government was installed last week as the country prepares to head to the polls in late July, in what would be only the second democratic transfer of power in Pakistan’s 70-year history.
The country relies heavily on imports and has struggled for decades to increase exports, with chronic power shortages and creaky infrastructure.
The economy grew by 5.8 percent during 2017-18, missing a government target by two percent, according to Finance Ministry documents.
Rent-to-own motorbikes sit out in front of a capital shop on Tuesday.