'Operating Lease' needed for small firms to grow

Sudhir P. Amembal

Introduction of a new lease-financing product called 'Operating Lease' can be an effective way for small firms to operate businesses, says Sudhir P. Amembal, an expert.
The main feature of the new lease product lies in its less collateral obligation and will cost less than other available lease financing products.
'Operating Lease' allows the use of an asset, but does not convey rights similar to ownership of the asset.
'Operating Lease' finance, in particular, will provide Bangladesh's airline, textile, transport and heavy industries with an opportunity to get aircraft, automobile, textile and dying equipment, and generator with less collateral obligation and cost.
"The new financial product is suitable for Bangladeshi emerging sectors such as civil aviation, transport, textile and RMG since all these sectors need heavy equipment," Amembal, chairman and CEO of Amembal and Associates, a training and consulting firm, told a group of journalist in Dhaka Wednesday.
Amembal said the 'operating lease product' t has gained popularity in most emerging markets in Latin America, Asia, and Africa over the last three to four years.
"Operating lease is a wonderful means to finance those SMEs who often are afraid to go to a bank for seeking a loan or lack in financial strength to draw attention of the bankers," Amembal said
International leasing in 2007 accounts for approximately US $800 billion. This year about 20 percent of all form of capital formation, amounting to $800 billion, came in the way of new leasing finances.
But in Bangladesh the leasing contribution in terms of all capital formation is six to seven percent. It shows that there is room for improvement in this regard, Amembal said.
"If the operating lease is introduced in Bangladesh it can improve the lease financing from seven percent to double digit within a few years," he hoped.
The leasing sector expert said in Bangladesh all the legal, regulatory, taxation and accounting requirements, which are mandatory for leasing, is in place.
IFC-SEDF in collaboration with Bangladesh Leasing and Finance Companies Association (BLFCA) has recruited the services of Amembal to introduce 'operating leasing' in Bangladesh.
Amembal during his 11 days stay in Bangladesh will assess the conduciveness of the present environment for the finance companies to introduce operating leasing as a product.