Leasing in Pakistan

Analysis of Leasing Companies in Pakistan

INTRODUCTION & HISTORY OF LEASING

LEASING

First of all we have to define that what is mean by leasing?

Leasing is “The process by which a firm can obtain the use of certain fixed assets for which it must make a series of
contractual, periodic, tax-deductible payments”

Here we use two terms one is Lease & other is lesser.

Lessee means “the receiver of services of the assets under a lease contract.
Lesser means “the owner of the assets that are being used”

BASIC TYPES OF LEASES

We use two types of leases in business.

OPERATING LEASE
“A contractual arrangement by which the lessee agrees to make a periodic payments to the lesser, often for 5 years,
to obtain an assets services generally, the total payment over the term of lease are less than the lessor initial cost of
lease asset”.

FINANCIAL LEASE
“A long term lease than an operating lease that is obligates the lessee to make payments for the use of an asset over
a predefined period of time, the total payments over the term of lease are greater then the Lessor initial cost of the
leased asset.”
Reference “Financial Management”

BACKGROUND TO LEASING
The modern leasing concepts originated from England. Where the leasing company was established in 1855 as a
BRIMINGHAM WAGON COMPANY. But the leasing is modern form in the United State of America.
Where the first leasing company was established in 1952 as United States Leasing International (San Francisco). In
Pakistan, leasing starts financing i9n 1985 just after the Islamization of conducting business

LEASING IN PAKISTAN
In Pakistan leasing was introduced as an alternative debt financing which was being interest based is prohibited in
Islam. As such leasing has been approved by the religious Board as one of the Islamic modes of financing. The first
leasing company was established in 1985 in public sector National Development Leasing Corporation (NDLC).
Since then leasing sector has been progressing at a very high pace both in terms of increase in number of leasing
companies. Presently there are 32 companies were listed on Karachi stock exchange. All the 32 companies are listed
paid-up capital of 32 leasing companies almost RS 4.3bn. usually the leasing companies are the secondary lenders
as they borrow to land. That is why they are in expensive business.
According to the page (Pakistan & gulf economist) is estimated that leases accounting to RS 25000 billions have
been disbursed to date 01-01-1996.

MAJOR LEASING COMPANIES IN PAKISTAN

Askari Leasing English Leasing Dawood Leasing
Trust Leasing National Asset First Leasing
NDLC Union Leasing Universal Leasing
Pacific Leasing ORIX Leasing Lease Pak. Ltd.

DEFINATION OF LEASING BY LAW

According to the section 105 of the property act 1982. still in force in the country.
“Leasing is a transfer of a right to enjoy such property for a certain time , express or limited, or in the perpetuity, in
consideration of a price paid or promised, or of money, share of crops, services of any thing value, to be rendered
periodically or on specified occasion to the transfer, by the transfer who accept the transfer on such terms”.
Reference “Accounting ICMAP”

LEASING IN EASY TERMS

“Lease in an agreement where by the lessor conveys to the lessee, in return for rent to use an asset for an agreed of
time”.
Under a lese agreement assets are rented or lease to credit worthy clients while ownership of asset remain with
lessor. Actually lessee can obtain possession of the leased asset in accordance with the contract concluded between
lessor and lessee.

LEASING GAINING POPULARITY

Leasing is gaining popularity in the last six years due to many reasons.
(1) One of the reason is under developed state of capital market to raise long term funds.
(2) Bonds & Debenture markets are non-exist.
(3) Musharika & Modaraba as an Islamic mode of financing in not still fully developed.
In these circumstances leasing is one of the modern concepts which is practical and becoming popular.

IMPORTANCE OF LEASING
Leasing is become more and more important due to many causes which are given below.
(1) Timing and efficiency.
(2) Totally private sector.
(3) A hedge against inflation and political instability.
(4) Leasing provide a tax shield.
(5) Leasing is self-liquidating.
(6) Leasing preserves existing credit lines.

LEASING IN auto mobile

In Pakistan leasing is popular in auto mobile business. Many companies are involve in this business such as
Alfalah bank
Askari leasing
orix

PROBLEM BACKGROUND
Today we know that in all over the world people take the automobile on lease. But in Pakistan we want to know that
what is the scope of leasing business in automobile and also in other leasing things. The basic purpose is to measure
the consumer satisfaction.

RESERCH OBJECTIVES / PROBLEM DEFINITION

We have to find out that
ü Is the leasing automobile is feasible for the customer or not?
ü Find out the scope of leasing automobile business and industry analysis.
ü What is the computer behavior towards the leasing automobile?
ü Develop the demographic, socio graphic and psycho graphic profile of the lessee.
ü What companies are participating in the leasing business?
ü What type of tools they are using?
ü What is the contribution of Government towards the leasing business?
ü What is the role of leasing business in the economy of Pakistan?
ü What are the factors that influence the financial institutions to start the leasing business?

PROBLEM DEFINATION
Statement of Problem
Factors contributing towards consumer’s satisfaction.
Back ground of problem.
Approach to Problem
Before conducting the research, we should also study the entire situation and positions, which can affect research,
and we should also consider the variables, which can effect the situation.
The main topic of our research is to measure the satisfaction level of the consumer of different auto leasing
companies.

Research Methodology
Objective of study.
To identify the factors, influencing the consumer’s satisfaction level.
To identify the relationship between different variables like insurance rate, down payment terms and conditions etc.

Research Design

Research design is the arrangement of conditions and analysis of data in a manner that aims to combine the -----
purpose with economy in procedure. In conducting this research first of all a pilot survey was conducted to get
awareness about the consumer satisfaction with the automobiles companies. After developing a questioner a pretest
was done through survey of 15 respondents. After that the final questioner was developing.

Descriptive Research Design

Descriptive research design was selected to analyze and examine the effect of different factors affecting the
satisfaction level of consumers.

Data Collection Methods

This report is based upon mostly primary data e.g. information are taken directly from consumers and with some
extend on secondary data e.g. journal newspapers etc.
We used following data collection techniques.
Personal Interviews
We adopted personal interviews. The difference in roles between interviews and respond are pronounced. These
participants are typically stranger and interviewer dictates patterns of discussion.
Advantages of conducting interviews
Depth and detailed information.
Quality of information.
More control over responds.
Respondent motivation.

Questionnaires
Structured questioner is developed to collect information from people who have based automobile.
Internet
Some information’s are also collected from Internet and computer handouts.
Questionnaire Design
Questioner is measuring instrument used in business research. If they are to produce useful measurement they must
be both valid and reliable. The questioner design can affect the response rate both to overall instrument and specific
item of questionnaire. So questioner construction is of critical importance. Due to above importance we have subbed
divided our questioner into the following parts.
To know the satisfaction level.
To know the company perception against their consumer.
To know the recommendation from consumer.
Sampling procedure
Population
Category of population often provides research is auto-leasing consumers of Askari leasing, Bank alflah.

Target Population
All auto-leasing consumers of Askari leasing, Bank alflah.
Sampling
The basic idea in sampling is that the analysis of some of element in a population procedures useful information on
entire population. An element is the unit of study. Population is total collection of all elements.
Sampling Technique
To study the effect of various factors on the attitudes of consumers. We used non-probability technique. Sampling
technique and selected convenience method for selecting the sample of population. The sample was arranged by
using sampling technique without replacement. As the complete sampling frame is not available that is why we
selected the non-probability sampling.
Sampling Units
The data was collected from 45 respondents, 15 from each companies interviews are conducted from ten consumers
of different auto leasing companies. Environmental analysis also been done finally this data is analyzed and conclude
it.
Measurement and Selecting Techniques
To measure the effect of elements presented in question or attitude of consumer, the following scales are used.
Nominal
Likert scale
Sample Size
In Multan there are general leasing companies but we are measuring the satisfaction level of consumer of Askari
leasing, ORIX leasing and Bank alflah. In order to measure the satisfaction level of consumer we have chosen a
sample size of 45 respond including 05 respondents from each.

Analytical techniques.

We used different statistical tools as %age and mode.

For this purpose we used pie charts for graphical representation.
We can also use some other graphical techniques for showing our findings.

Time and cost requirements

Time and cost requirement include the time need to accomplish the research and the cost we have to incur in order to
complete our research.
Time and cost can be explained with the help of pert chart.
The time period of our research is was very limited and we have also faced the financial problem to accomplish the
research.
Technical Appendixes
it include any statistical or detailed information in which only one or few potential researchers may be interested.
it may include different statistical formulas for calculating mean, mode and median etc. it also include the statistical tables for calculating different measurements.

Results and analysis

Frequency analyzing.
Q#3;_ If you have automobile then you decided to take it on lease due to?

Options Frequency %Age

Purchasing power 6 33.3
Easy term and condition 13 28.89
Tax exemption 24 53.33
Investment point of view 2 4.44
Total 45 100%
Most of people take the automobile on lease due to tax exemption factor, which has more weight age of 53.3%.

Q#4: - from where have you got information about lease at that time?

Options F P
Friends and relatives 14 31.11%
Media 25 55.56%
Sales person 6 13.33%
Total 45 100%
The people have got the information from media which is 55.56%.

Q#6:- Did you evaluate all these companies for this decisions?

Options F P
Yes 20 44.44%
No 25 55.56%
Total 45 100%
Most of the people don’t evaluate the companies before taking the automobile on lease basis.

Q#7:- what was the speed of your application process?

Askari Orix Bank alfalah

Options F P F P F P
Fast 10 66.67% 1 6.67%
Average 5 33.33% 9 60%
Slow 15 100% 5 33.33%
Total 15 100% 15 100% 15 100%
Speed of application process is more high in askari, that is 66.67%.

Q#8:- Are you satisfied with this application process speed?

Askari Orix Bank alfalah

Options F P F P F P
Strongly satisfied 7 46.67% 1 6.67%
Satisfied 6 40% 5 33.33% 8 53.33%
Neither satisfied nor 1 6.67% 10 66.67% 6 40%
dissatisfied
Dissatisfied 1 6.67%
Strongly dissatisfied
Total 15 100% 15 100% 15 100%
About application process consumers of Askari leasing are more satisfied because the % age of their satisfaction is
more.

Q#9:- what was the installment period?

Askari orix alfalah

Options F P F P F P
2 years 3 20%
5 years 11 73.33% 15 100% 15 100%
7 years 1 6.67%
Total 15 100% 15 100% 15 100%

Q#10:- Are satisfied the installment period?

Askari Orix Bank alfalah

Options F P F P F P
Strongly satisfied 3 20%
Satisfied 9 60% 4 26.67% 6 40%
Neither satisfied nor 3 20% 11 73.33% 9 60%
dissatisfied
Dissatisfied
Strongly dissatisfied
Total 15 100% 15 100% 15 100%
Q#12: -Are you satisfied with the insurance process?

Askari Orix Bank alfalah

Options F P F P F P
Strongly satisfied
Satisfied 3 20% 4 26.67% 5 33.33%
Neither satisfied nor 6 40% 11 73.33% 10 66.67%
dissatisfied
Dissatisfied 6 40%
Strongly dissatisfied
Total 15 100% 15 100% 15 100%

Q#13:- have you faced any problem during lease payments?

Askari orix bank alfalah

Options F P F P F P
Yes 10 66.67% 10 66.67% 10 66.67%
No 5 33.33% 5 33.33% 5 33.33%
Total 15 100% 15 100% 15 100%
Q#14:- If yes, then what was behavior of the company with you?
Askari orix bank alfalah

Options F P F P F P
Cooprative 9 100% 6 60% 5 50%
Non Cooperative 4 40% 5 50%
Total 9 100% 10 100% 10 100%
Q#15: If cooperative then are you satisfied with?
Askari Orix Bank alfalah

Options F P F P F P
Strongly satisfied 4 50%
Satisfied 4 50% 4 100% 4 100%
Neither satisfied nor
dissatisfied
Dissatisfied %
Strongly dissatisfied
Total 8 100% 4 100% 4 100%

Q#16:- have you faced any road accident of your automobile?

Askari orix bank alfalah

Options F P F P F P
Yes 4 26.67% 11 77.33% 10 66.67%
No 11 73.33% 4 26.67% 5 33.33%
Total 15 100% 15 100% 15 100%
Q#17:- if yes, then what was the behavior of the company?
Askari orix bank alfalah

Options F P F P F P
Cooprative 5 100% 6 54.55% 3 30%
Non Cooperative 5 45.45% 7 70%
Total 5 100% 11 100% 10 100%

Q#18:- if cooperative then are you satisfied with it?

Askari Orix Bank alfalah

Options F P F P F P
Strongly satisfied 3 60% 1 16.67% 1 33.33%
Satisfied 1 20% 4 66.67% 2 66.67%
Neither satisfied nor 1 20% 1 16.67%
dissatisfied
Dissatisfied
Strongly dissatisfied
Total 5 100% 6 100% 3 100%

Q#19:- do you face any repossession problem?

Askari orix bank alfalah

Options F P F P F P
Yes 9 60% 11 77.33% 10 66.67%
No 6 40% 4 26.67% 5 33.33%
Total 15 100% 15 100% 15 100%
Q#20:- If yes, what sort cooperation you received?
Askari orix bank alfalah

Options F P F P F P
Cooprative 9 100% 5 45.45% 4 36.36%
Non Cooperative 6 54.55% 7 63.63%
Total 9 100% 11 100% 11 100%

Q#21:- If cooperative then are you satisfied with the cooperation?

Askari Orix Bank alfalah

Options F P F P F P
Strongly satisfied 3 33.33% 3 75%
Satisfied 4 44.44% 3 60% 1 25%
Neither satisfied nor 2 22.22% 2 40%
dissatisfied
Dissatisfied
Strongly dissatisfied
Total 9 100% 5 100% 4 100%

Conclusion:
From the above analysis we have concluded that the respondents we have selected are aware of the leasing and
knowledgeable of how it can work out for them. Most of them are satisfied with it. The basic motive behind leasing is
the purchasing power of the customer and the tax exemption. According to the business point of view the leasing is
best for tax rebates and relief. Untill now we have concluded that askari leasing customers are more satisfied as
compared to orix leasing and bank alfalah.Moreover they need to tell the customer that the concept of leasing is
according to Islamic mode of financing .Well all these objectives can be achieved by advertisements ,and providing
easy terms and conditions to customers.
Now if we look at industry, Askari Leasing co. askari leasing corporation consumers are more satisfied as compare to
orix and alfalah. Orix is at the second position. If askari leasing satisfy their consumers then no leasing company can
compete them.

Recommendations and suggestions

Following are the recommendations that are suggested for leasing companies that are providing automobiles on
leased basis.
Ø The leasing companies should reduce the eligibility criteria. So that every person can get an automobile on lease
basis who can afford it.
Ø They should reduce the down payments because it is creating a negative impact on consumer mind.
Ø The major thing that is creating dissatisfaction in the consumer mind is the insurance. The company is should
provide the facility of self insurance, so that they can arrange the insurance of an automobile on their own.
Ø They should also provide easy terms and conditions to their consumers. This thing will help the companies to
increase their market share.