Corporate

Nation Lanka Finance PLC expands leasing and pawning

The vehicle leasing, jewellery pawning and credit business of Nation Lanka Finance PLC has risen significantly following the reduction of interest rates in the market.

The move was in line with the Central Bank's initiative to lower lending rates in the country, and has already paid dividends.

The rates now offered by the company are quite appealing. Therefore, the company offers several types of solutions including leasing and hire purchase on used vehicles.

The company procedures are streamlined and tailor-made to the individual requirements of customers, and provide the quickest possible solution with minimal documentation and a doorstep service.

The leasing industry has created many opportunities in rural areas of the country despite the current economic crisis in the world.

The Nation Lanka Finance PLC concentrates mainly on leases for commercial vehicles. During the past few years there was a significant drop in demand for imported vehicles due to the higher taxes.

The higher taxes and the current economic crisis in the world had adversely affected the leasing industry.

Even though, the current economic situation is affecting the industry adversely, many opportunities have surfaced.

Since there is a higher tax on imported and reconditioned vehicles, there is an increase in demand for second-hand vehicles in the country.

Nation Lanka Finance has grabbed the market potential in second-hand vehicles to sustain in this crisis situation" said the Director Credit Jayasankha Alahendra.

From the total portfolio of the industry only 10-12 per cent have been leased for private cars and the rest is for income generating commercial vehicles such as trucks, three wheelers, tractors and other commercial vehicles for self-employed individuals.

There is a higher demand especially for agricultural machinery, three wheelers, motorcycles, tractors and solar panels in these areas. Therefore, the company explores these new market segments and it has already expanded their services to meet the rural community's transportation needs, "with the dawn of peace, many development projects have already been implemented in the Northern and the Eastern provinces.

It has also created many market opportunities for leasing organisations to expand their business. "Unlike earlier, the industry is quite competitive today and we have to find innovative ways to reach customers."

"Therefore, being customer-oriented is essential to sustain in the business" he said.

Our strategy employed in the leasing industry is more focused on recoveries. It is essential to keep a close rapport with clients and take timely action," said Alahendra.

Nation Lanka Finance PLC has always laid much emphasis on a personalised customer service.

The use of advanced computer technology enhances their efficiency in day-to-day operations.

With the establishment of political stability Nation Lanka Finance is optimistic on macro economic conditions which accelerate its leasing and gold jewellery pawning business.

Nation Lanka Finance plans to set up three more pawning centers in the island shortly.

There are opportunities in the market for products that truly cater to the needs of the rural segment.

One needs to identify that not only does this segment require convenience and attractive rates, it also requires financing solutions that allow greater flexibility in selecting the vehicle of choice," he said.

Some of the features of this product are the ability for customers to borrow a greater percentage of the value of the vehicle.

These schemes will ideally suit people who are engaged in small and medium businesses, such as transportation of agricultural products and fish.

The new capital infused by way of the rights issue has been used for improving both the leasing and lending portfolios. The company plans to achieve an exponential growth in business as well as profitability while fulfilling the aspirations of the customers.

The lending portfolio of Nation Lanka Finance consists of a number of value additions to the traditional lease and vehicle hire purchase products.

The company is focusing to become the most trusted finance company in Sri Lanka, capitalising on its management strength.

Strong reiteration for non-interest based investment vehicles

Amana Takaful recently released its financial for the year ending December 31, 2009 with mixed feelings and the company's Chairman. Tyeab Akbarally made a strong reiteration for non-interest based investment vehicles to level the current playing field.

In his statement the Chairman also stressed that it was a continuing challenge to find avenues for similar investment returns that are open to conventional insurance companies.

Investment of company funds continues to be an issue and has a big impact on the company's profitability. We have had several rounds of discussions with banks and financial institutions with a view to develop non-interest based investment vehicles. The company has appointed a top banking specialist as an advisor to speed up this process, said Akbarally. One of the unique features of the company's product repertoire is the fact that it refrains from investing and gaining returns from interest bearing instruments. In keeping with the principles of Takaful, funds have to be invested on a basis of profit sharing as standard instruments or structured debt.

Presently these are being developed with local banks, but commercialisation is taking longer than originally planned. There is a vast lacuna in the market for such instruments, though little research on the market size is available. The opportunity will definitely be sizeable and more importantly highly profitable.

Some developed countries offer Government securities as well on profit sharing basis which have excellent take up rates.

The company is also looking forward to developing investments into bullion upon obtaining the necessary approvals from the regulator and also benefiting from the growth in the CSE according to the Chairman.

A significant part of the company's performance was its underwriting profit for the year 2009, which was the highest in the industry reaching 21% of the Gross Premium Income.

This was attributed to stringent underwriting principles and also an efficient claims process.

The company's revenue increased from Rs. 1.02 billion to Rs. 1.16 billion recording a growth of 13.4%. The General Takaful division grew by Rs. 119 million recording a growth of 14.2% while the Life Takaful business grew by Rs. 18 million witnessing a growth rate of 9.8%. Consolidated loss for the year was Rs. 52 million compared to Rs. 49.2 million in the previous year while the company made a loss of Rs. 50.8 million compared to the loss of Rs. 52.5 million in 2008 as result of additional provisions of Rs. 46.8 million as Unexpired Risk Reserve and IBNR (Incurred But Not Reported) reserve recommended by its Malaysian based actuaries as a prudent measure.

Meanwhile, the Maldives operation of the company managed to grow by 55.2% during the year and also secured a licence to operate as a company in the Maldives, changing from its current status of operating through an agency. Significant improvements were visible in the operations where Rs. 54.1 million was saved compared to the expenses incurred the previous year.