Younger gen­er­a­tions largely push­ing growth in lease sec­tor

Fears grow over shakey econ­omy in Pak­istan

The Phnom Penh Post - - BUSINESS - Hor Kim­say and Hin Pi­sei

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.

Young cus­tomers

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.

HENG CHIVOAN

Rent-to-own mo­tor­bikes sit out in front of a cap­i­tal shop on Tues­day.

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