LEASING AND MICRO FINANCE

Curriculum Contents:

1. Introduction to the Leasing Industry in Pakistan

· Leasing Fundamentals

1.      Leasing defined

2.      Types of leases: operating and financial

3.      Leasing vs. conventional financing

· Macro Analysis

1.      Rationales, practices, challenges and product-life-cycle of leasing industry

2.      Market environment

3.      Introduction to regulatory regimes

4.      Players, competition and trends

5.      Analysis of global status and performance

· Sector wise Lease Portfolio Analysis

1.      Corporate leasing

2.      Commercial leasing

3.      Consumer leasing

4.      Agricultural leasing

5.      SME and Micro leasing

· Legal and Regulatory Environment

1.      Primary legal environment: lessor-lesses relationship relevant chapters

2.      Non Banking Companies Ordinance 2003

3.      Prudential regulations for Leasing Cos.

4.      Recovery laws relating to lease financing

5.      Tax law: covenants and practices

2. Managing Lease Operations

· Lease Agreements

1.      Operating lease agreements

2.      Financial lease agreements

· Lease Operations’ Profit Function

1.      Typical asset lease cycle

2.      Risks in leases: systemic, non systemic

3.      Lease pricing: rationales, conventions, and methods

4.      Lease product profitability analysis

· Marketing of Lease Products

1.      Competitive advantages of leasing products viz. bank lending/financing

2.      Customer segmentation and prospecting

3.      Customer needs and expectations analysis  

· Enterprise (Customer) Potentials and  Risk Assessment

1.      Business assessment: Industry SWOT  Com- petition analysis, Suppliers and customer checks, and competitors feedback

2.      Financial assessment: Historic financial data analysis; Assets conversion cycle analysis, Free cash flows and debt servicing projections; and, Liquidation analysis

3.      Lease asset: Evaluation of forced sales value, rate of obsolescence, & productivity 

4.      Significance of external agency credit rating / reputation evaluation

· Lease Structuring Proposal Development, and Sanctioning

1.      Lease structuring: Determining safe lease exposure, duration and type of agreement – financial, operating, sale and lease back.

2.      Quantifying the risks factors and calculating the lease transaction price

3.      Determining down payment, principal and gross recovery periods

4.      Rental projections: Matching cash flows

5.      IRR and amortization calculations

6.      Recommending possible risk mitigates and documentation (agreement) requirements

7.      Writing summary recommendations

8.      Considerations in sanctioning of lease

· Lease Disbursement, Accounting and Relationship Management

1.      Lessor and Lessee reciprocal rights and responsibilities under the law and practices

2.      Legal agreements and documentation: scope, requirements, critical covenants, and protective clauses

3.      Procedure for the execution of valid lease agreements and other legal documents being part of the basic agreements

4.      Common legal discrepancies in basic agreements and related documents

5.      Accounting treatment of lease assets under the IAS and local regulations

6.      Accounting for lease asset depreciation and recovery of rentals under the IAS and local regulations

7.      Account Monitoring and Classification: Physical inspection of the leased asset, enterprise business, performance and potentials, recovery of rentals

3. Lease Administration

· Capital (Equity) Management

1.      Role and significance of capital (equity) in managing the balance sheet

2.      Adequacy requirements for capital

3.      Sources of mobilizing equity funds

4.      Managing cost of equity funds

· Liability Management

1.      Liability instruments and categories

2.      Funds through various liability instruments

3.      Managing leverage and cost of the liabilities

4.      Implications of the matching principle

· Lease Portfolio Management

1.      Lease portfolio strategies and models

2.      Portfolio duration and risk management

3.      Internal vs. External hedging strategies

· Balance Sheet Performance Management Monitoring

1.      Financial plans and operating budgets

2.      Critical performance indicators, under Non Banking Finance Companies Rules

3.      SBP stress testing and rating framework for financial institutions

4. Micro Enterprise Development

· Definition of Micro Enterprise

1.      Who are the micro entrepreneurs

2.      Business dynamics of a micro enterprise

3.      Prospects and challenges for micro enterprises in Pakistani context

· Role of Micro Enterprise in the Socioeconomic Context

1.      Micro enterprise: A strategy for poverty reduction, socioeconomic empowerment, and gender equality

2.      Scope of micro enterprises in building sustainable industrial and corporate sectors

3.      A review of micro enterprise sector performance and impact on Pakistan’s GDP, Exports, and Employment

4.      Comparative analysis of the micro enterprise models and performance in Pakistan viz. International experiences, such as Japan, Singapore, India, Bangladesh, etc.

5. Micro Enterprise Financing

· Micro Enterprise Financing Scenario in Pakistan

1.      Role of financing in sustainable micro enterprise development

2.      Sources of financing for micro enterprise development: informal money lenders vs. formal sector institutions

3.      Prospects and limitations in accessing financing from the formal sector

4.      SBP micro finance institutions regulations

5.      International micro enterprise financing institutions: performance and impact

· Micro Enterprise Financing Programs and Products

1.      A review and analysis of formalized micro enterprise financing programs in Pakistan

2.      Micro enterprise financing by banks and specialized MFIs: manifestations, achievements, and challenges

3.      Micro Enterprise Leasing as an Alternate: manifestations, achievements, challenges

4.      Recovery of micro loans: Strategies, prospects, impediments and performance of the formal sector in Pakistan

· Micro Enterprise Financing Administration

1.      Challenges in attaining sustainability in micro enterprise financing operations

2.      Managing operational cost of micro enterprise financing operations: volume verses pricing strategies

3.      Role of international agencies in the micro enterprise financing and leasing initiatives in Pakistan: Institutional capacity building and Funding financing/leasing operations

4.      Scope of monitoring micro enterprise 

· International Micro Enterprise Financing Institutions

1.      Analysis of the performance, models and programs of international banks and financial institutions engaged in micro enterprise financing

2.      International best practices in micro enterprise financing

Reading material recommended

1.         Pakistan, Institute of Bankers                Management of Lease Operations

2.         Pakistan, Institute of Bankers                Role of Micro Credit in Economic Revival and

Poverty Alleviation

Supplementary Readings

1.         Pakistan, Leasing Association of           Leasing Handbook (Latest)

2.         Pakistan, State Bank of                         Annual Report 

3.         Dr. Muhammad Younus                        Micro Enterprise Financing

            Grameen Bank, Bangladesh     

-.-.-.-.-