Leasing Final
Leasing Final
Leasing Final
What is Leasing
A
lease
represents
a
contractual
arrangement
under which the owner of the
asset ( lessor ) grants to
another party ( the lessee ),
the exclusive right to use the
asset for a specified period of
time , in return for the
payment of rentals.
Types of Leases
(b) Real estate leasing : Under this system the lessors are
actually the manufacturer who lease their products to the
users. Leasing company provide lease finance for buying
building or apartment for private use, industrial land and
factory building for industrial enterprise.
Another form of leasing;
Leveraged Lease .
In leveraged lease there are three parties to the lease
transaction lessee , lessor and the lender. The lender
enters a leveraged lease transaction because the lessor
finances the investment in the lease partly by the equity
and partly by the debt
Domestic lease:
A lease transaction is classified as domestic if all
parties to the agreement, namely, equipment
supplier, lessor and the lessee are domicile in the
same country.
Disadvantages;
Consequence of default
Inadequate protection against loss
Loss of terminal value
High interest cost
Leasing in Bangladesh
Leasing in Bangladesh, like in many of its peer countries, owes
its origin to the efforts of the International Finance Corporation
( IFC), Washington. At the instance of IFC, the first leasing
company in Bangladesh, Industrial Development Leasing
Company of Bangladesh Ltd. (IDLC) was set up in 1984 and
commenced its operations in 1986, with a 20% shareholding
from Korea Development Leasing Corporation.
For several years, IDLC remained the sole leasing company in
Bangladesh. However, the real momentum began in the
1990s. The country's central bank, Bangladesh Bank, put in
place a regulatory mechanism under the Financial Institutions
Act 1993 and the Financial Institutions Regulations 1994.
In 1997, there were 15 leasing companies in the country.
Besides, some of the banks and financial institutions also
added leasing divisions to their existing operations.
Minimum capital,
branching, etc:
3. The Act empowers the Bank to fix
minimum capital for leasing
companies. Opening of offices and
branches is also regulated.
Restrictions on
declaration of dividend
4. Sec. 10 prohibits a financial
institution from declaring any
dividends without fully writing off all
Exposure restrictions
5. Very important restrictions are contained in sec. 14 on
exposure by leasing companies. These restrictions are:
Not accept any deposit which is withdrawable by
cheque, draft or order of the depositor; in other words,
not to accept any call deposits;
Not deal in gold or any foreign exchange;
Not to expose more than 30% of its capital in a single
individual, firm, body corporate or companies
controlled by such individual;
Not to provide any unsecured loan facility exceeding
Tk 5 lacs to any person; it may be noted that in the
language of the Act, a lease transaction will be treated
as a secured financing since the lessor retains title
over the asset, etc.
Not to acquire immovable properties exceeding 25% of
its paid-up capital and reserves.
Maintenance of liquid
reserves
6. Companies accepting deposits
from individuals shall maintain 10%
of their aggregate liabilities invested
in prescribed securities.
Maintenance of
reserve fund
7. Each company every year shall
transfer at least 20% of its divisible
profits to a reserve fund, unless the