Comparative study of the leasing industry of Sri-Lanka; in the context of, the impact of banks on specialised leasing companies.

Require Questionnaires and any other primary data research formats, in order
that I could obtain this information for you, thereby allowing you to incorporate primary data findings also into the study.

Any other statistics required in the market which is required should be conveyed to me , in order that this information can be furnished to you.

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The proposal has been submitted to the Board and has been approved by my instructer, It is as follows
Research Title

A comparative study of the leasing industry of Sri-Lanka; in the context of, the impact of banks on specialised leasing companies.

Introduction
Leasing in SriLanka has become an extremely competitive industry, taking into consideration the size of the country and the age of the leasing industry.
Sri Lanka ventured into leasing 21 years ago. Its pioneering leasing company was Lanka Orient Leasing Company now known as LOLC, which was set up in 1980 with IFCs equity participation, technical partnership from the Orient Leasing Co of Japan and domestic equity from the Bank of Ceylon. The company got going in January 1981. This is almost the time when leasing was taking roots in other developing Asian markets, and is now an industry of over 45 companies actively involved in leasing. Specialised leasing companies, finance houses, major commercial banks, merchant banks and development banks, are all engaged in leasing today.
The success of the first comer soon attracted fresh entry. Mercantile Lloyds Leasing Ltd entered the scene in 1983, when development financial institutions set up by the State namely NDB and DFCC, also undertook leasing and project financing.
In 1997, there were 19 leasing companies (members of the Equipment Leasing Association) in the country. In addition some of the banks and financial institutions also added leasing divisions to their existing lending operations.
As at 2005, over 45 companies are actively involved in leasing. Specialised leasing companies, finance houses, major commercial banks, merchant banks and development banks, are all engaged in leasing today.










Research objectives
1) To study and evaluate the banking industry, in order to determine any possible weaknesses/ loop holes, that can be exploited
2) To critically analyse, finance and operating leases, in the context of banks and specialised leasing companies, in order to determine a competitive edge that could be utilised.
3) To determine the degree to which leasing is price sensitive, and to what extent a customer would give preference to quality service over price.
4) To evaluate the possible means of raising low cost funds, in order that these companies could be price competitive.
Rationale and Significance
As mentioned earlier, good customers are the key elements, in the finance industry. The significance of this study is to determine a fair playing ground thereby enabling specialised leasing companies also to attract these clients.












Diagram 1


Source : Website of Vinod Kothari on the leasing industry of Sri Lanka
The growth of leasing in Sri Lanka is visible in the Diagram 1 note that the minor reduction in volumes in 1996-7 is reportedly due to drought and bad economic conditions, but later in 1997 and 1998, leasing has grown at remarkable rates.







Diagram 2

Diagram 3

Source : Leasing association of Sri-Lanka


Diagram 4

Source : Leasing association of Sri-Lanka
The pie charts depicts, that for all three years 2003/2005 main sector concerned is the trading sector. In 2003 and 2004 the second largest sector , which was the transport sector was replaced in 2005 by the service sector.
The registered institutions which are actively involved in leasing are as follows;
Alliance Finance Co Ltd.
Arpico Finance Co Ltd.
Asian Finance Ltd.
Asia Commerce LtdBank of Ceylon
Central Finance Co Ltd.
Ceylease Financial Services Ltd.
Ceylinco Development Bank
Ceylinco Leasing Corporation Ltd.
Ceylinco Securities & Financial Services Ltd
Citibank NA
Commercial Bank of Ceylon Ltd.
Commercial Leasing Co Ltd.
Co-operative Leasing Co.Ltd.
DFCC Bank
Finance & Land Sales Ltd.
Hatton National Bank Ltd.
Industrial Finance Ltd.Koshiba Leasing Ltd
Lanka ORIX Leasing Co Ltd.
LOLC Finance Co.Ltd.
L B Finance Ltd
Mercantile Investment Ltd
Mercantile Leasing Ltd.
Merchant Bank of Sri Lanka Ltd.
Merchant Credit of Sri Lanka Ltd.
Muslim Commercial Bank Ltd
National Development Bank
Pan Asia Bank
Peoples Bank
Peoples Leasing Co Ltd.
Peoples Merchant Bank Ltd.
Sterling Merchant Investments Ltd.
Sampath Bank Ltd.
Seylan Bank Ltd.
Seylan Merchant Bank Ltd.
Seylan Merchant Leasing Ltd
Sinhaputhra Finance Ltd.
The Finance Co Ltd.
Vanik Leasing Ltd.
Source: Leasing association of Sri-Lanka
The Sri Lankan market is predominantly a finance lease, unlike in mature markets as in the USA, where Operating leases are more popular. Only two institutions that are carrying out operating leases, namely Central finance and LOLC. The former is extremely successful, whereas the latter is planning on discontinuing this line of business. All other institutions provide finance leasing with varying degree of customization. Step up, step down, and residual leases are utilised.
The market leader in finance leasing is Peoples leasing company limited, whereas in operating leases Central finance is the dominant player.






Regulatory framework for leases before 2000 was based on the Finance Companies Act, 1988 as amended in 1991. The Act requires registration of an entity carrying on Finance business”. Finance businessis defined in sec. 46 of the 1988 Act as The business of acceptance of money by way of deposit, the payment of interest thereon and the lending of money on interest, or investment in whatever manner otherwise, etc. Loanincludes a hire-purchase agreement as well as a lease agreement, in the loosely defined meaning of the term in sec. 46 of the Act.
Therefore, though both hire-purchase and lease have been included in the business of lending, they are not Finance businessunless the entity also accepts deposit of money, with interest payable thereon.
Source: Finance companies act of 1988
Clearly therefore, it is only the depository finance companies that are covered by the Act for regulation. A non-depository company, whether engaged in hire purchase or lease activity, is apparently not covered by the Finance Companies Act
Similarly, unincorporated bodies, are not covered by the Finance Companies Act, but there is a prohibition in sec. 2 (1) of the Act against any such unincorporated body engaging itself in Finance business”. Again, this restraint is applicable only if there is a deposit-taking activity linked to such business: that is, an unincorporated body may well get into leasing business, but cannot source deposits from public.
Source: Finance companies act of 1988
Sri Lanka recently enacted a comprehensive enactment to regulate lease transactions in the country. Leasing is growing fast in Sri Lanka and the enactment was being considered for quite some time.
Called the  Finance Leasing Act of 2000 , the law applies to all finance lease transactions which are defined as such leases which amortise the whole or substantially the whole of the cost of the asset.
The Act requires registration as a must for carrying on finance leasing business in the Island. Existing leasing companies have been given one years time for registration.






One of the requirements of registration is that the applicant will furnish an operating manual for the leasing business, from which deviations will not be permitted without the approval of the authorities.
 This, in opinion, is