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Kingdom allows first leasing firm
Riyadh, 18th Apr 2001

    The Kingdom has allowed the first leasing firm, Saudi Orix Leasing Company, to operate within the regulatory frameworks of the Ministry of Finance & National Economy and the Saudi Arabian Monetary Agency (SAMA). This paves the way for interested companies to seek licenses from Saudi government and to enter into the SR5 billion lucrative Saudi leasing market.

The Finance Ministry is currently working on a charter to define the jurisdiction of the leasing companies, said Saleh A. Al-Omair, chairman of Saudi Orix Leasing Company, here today. Until now, the leasing business in Saudi Arabia has been restricted to car rental firms, which have been leasing vehicles to the customers. Saudi Orix will be the first institutional leasing entity to operate in the Kingdom and to be monitored by the government agencies.

Al-Omair said that a study conducted by the International Finance Corporation (IFC), an affiliate of the World Bank, in cooperation with Saudi Investment and Trading Group  encouraged investors to pull their resources to launch this leasing firm. “But, now we have to educate small and medium size companies as how they can cut their operational costs by taking factory buildings, machinery, equipment, vehicles and warehouses on lease”, he said.

“The leasing, in fact, diversifies funding sources and offers cash flow benefits besides being tax efficient”, said the Saudi Orix chief, adding that at the expiry of a lease, several options are normally available to the lessee depending on the nature of lease agreement. On expiry, the lessee can return the leased asset to the leasing company or can renew the lease at a reduced price or purchase the leased asset at a predetermined price.

Asked about the shareholders of Saudi Orix, Al-Omair said that the business plan to operate this leasing firm is based on an initial capital of SR140 million including SR60 million currently in hands. “We will be borrowing SR80 million from the money market”, he said. Sixty percent of Orix’s equity is owned by Saudi investors. The shareholders are Saudi Investment Bank (28 percent), Orix Corporation of Japan and Pakistan (30 percent), the Washington-based IFC (10 percent) and Saudi investors (32 percent).

He said that “the Saudi Orix is the first lease financing firm of its kind incorporated as a joint stock company with the primary objective to provide lease financing for all types of moveable and immovable assets and thereby assisting in extending and expanding financial intermediation and credit delivery mechanism in the Kingdom”. SAMA will monitor the operations of this leasing company.

Referring to the services to be provided by Saudi Orix, he said that “this leasing firm prides itself on customer focus and speed of response”. The time required to successfully consummate a lease transaction, he said, could range from a few days to a few weeks depending on the complexity and size of the transaction. The lease terms and conditions are negotiated before issuing a lease offer.

In order to seek leasing facility, local companies/industries or hotels will have to make an application to Saudi Orix for lease facility giving details of the business, its nature, range of products, legal status and ownership profile. These business houses applying for lease will have to submit some documents including financial statement, bank statement and commercial registration paper.

Source: Arab News©

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18 April 2001 05:08:54 PM

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