Financial leasing: Solving difficulties in accessing medium and long-term capital for businesses

Financial leasing: Solving difficulties in accessing medium and long-term capital for businesses

28/04/2020
In the context of access to medium and long-term capital, it will be more difficult when the State Bank implements the road map to gradually reduce the rate of using short-term capital for medium and long-term loans, financial leasing will be one of the important solutions to help businesses overcome barriers to access capital.

This is shared by Mr. Can Van Luc - senior advisor to the Chairman of BIDV, cum Director of BIDV Training School, with a reporter from Vietnam Financial News Agency

* Reporter: Sir, how do you assess the financial leasing market in Vietnam today?

- Mr. Can Van Luc: Financial leasing is not a new field in Vietnam. It has been formed and developed since the early 2000. However, recently, this field has not really developed as fast and strong as expected.

Up to now, there are 11 financial leasing companies in Vietnam, including 7 Vietnamese companies, 1 joint venture company and 3 companies with 100% foreign invested. Regarding the scale of operation of the financial leasing companies is quite limited. Currently, total outstanding loans of financial leasing  is about VND 90,000 billion - a relatively small scale compared to the size of the system of credit institutions.

Because the size of the financial leasing market in Vietnam is still quite small, this is also the potential and huge potential for development of the financial leasing market in the next time.

* Reporter: which reason the fact that the development of the financial leasing market is limited, sir?

- Mr. Can Van Luc: The development of financial leasing market in Vietnam is still limited due to many reasons, including the main reasons as follow:

Objectively, the institution, the legal environment for the field of financial leasing have not been really completed, should not promote the strong development of this type. Specifically, in terms of capital, according to the provisions of the Law on Credit Institutions, financial leasing companies are only allowed to receive deposits from organizations to supplement their capital, while the issuance of deposit certificates, treasury bills, bonds to raising capital from organizations is not yet implemented. Therefore, the main source capital of financial leasing companies rely on their parent bank or inter-bank capital market. This is a problem that financial leasing companies have not had feasible remedies.   

Secondly, the operating costs, financial leasing activities are medium and long term credit. The procedures for leasing are similar to loans in commercial banks, while commercial banks are allowed to charge fees related to lending activities, but financial leasing only charge the arrangement fee for syndicated loans, no charges any other fees. This is also a problem that limits financial operations.  

Thirdly, the incentive policies, financial leasing is also a form of credit such as medium and long-term credits of banks, but in recent years, the State's preferential policies have only been applied to enterprises using sources medium and long-term credit capital of commercial banks to invest in equipment for business; if they implement through the form of financial leasing, the preferential policies, support businesses are not applied. This has created an unfair "playing field" and reduced the competitive advantage of financial leasing services in the market.

In addition, most of the legal document system only focuses on regulating the operation of banks, the law provisions in the recovery and disposal of financial leasing assets are not tight enough, so it is not enough to deter and lead to psychology the lessee "lags", does not perform debt repayment obligations to financial leasing company or shows signs of appropriating financial leasing assets ... affecting the operational safety of the financial leasing companies ...

Subjectively, Financial leasing companies are still limited in marketing and promotion activities, so the knowledge of enterprises about financial leasing products is low ...

 

* Reporter: Compared with bank loans, what does the advantages in accessing credit through financial leasing, sir?

- Mr. Can Van Luc: Some basic advantages of financial leasing can be mentioned, first of all, there is no need collateral. In most cases of financial leasing transactions, the lessee is not required to have collateral asset. In the course of business activities, when businesses need modern machinery and equipment (great value), they must immediately invest a large amount of medium and long-term capital to purchase. That may be a problem for many businesses, especially small and medium enterprises, but if they borrow from credit institutions, businesses will face many difficulties in collaterals, which is followed by sufficient complex conditions and increase their production and business costs. As for financial leasing transactions, businesses do not need to spend a large amount of money at the same time, they only need to pay rent with small items for each agreement period. 

Besides, financial leasing is a financing method that meets the capital ratio higher than any other credit methods. Normally, with medium and long-term loans of credit institutions, they only financed 60-70% of the total value of equipment, businesses often have to have 30-40% of equity capital to participate in the project. Whereas with a financial leasing, enterprises can be financed up to 100% of the loan without mortgage or requiring equity capital in the total value of the project.

In addition, financial leasing is a flexible method. Businesses have the maximum ability in choosing to renovate equipment, or hire / return property assets at the end of the contract ...

* Reporter: With the above benefits, according to you, what solutions are needed to promote the development of Vietnam's financial leasing market, turning this type into an effective medium, long-term capital channel for businesses?

- Mr. Can Van Luc: First of all, on the side of the Goverment, it is necessary to continue to improve the legal provisions related to financial leasing operation activities to ensure the sustainable development of financial leasing companies. For example, consider expanding the scope of capital mobilization of financial leasing companies, giving conditions for financial leasing companies to mobilize sufficient capital to meet development needs. Or expand financial leasing assets object, in addition to current regulations only limited to the scope of the property is movables, it can be expanded to other objects such as real estate ...

On the side of financial leasing companies, it is necessary to improve the quality of products and services, improve the procedures, design product to suit each customer ... At the same time, these companies need to promote promotion, introduce products to many businesses  to know about  financial leasing. In addition, it is necessary to cooperate with suppliers of machinery, equipment and assets domestically  and internationally to build a closed sales chain from the seller, the buyer (the lessee) and the lessor (financial leasing company) ...

For businesses, because financial leasing does not require collaterals, businesses must increase the transparency of information to be considered for leasing by financial institutions, as well as may enjoy interest rates at lower ...

 * Reporter: Thank you! 

(From_Thời báo Tài chính Việt Nam)

Source: http://thoibaotaichinhvietnam.vn/pages/tien-te-bao-hiem/2020-02-18/thue-tai-chinh-go-kho-tiep-can-von-trung-dai-han-cho-doanh-nghiep-82699.aspx