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Kenyan banks sign deal to offer leasing services

 Ten Kenyan commercial banks have signed up to a deal to offer leasing services to their customers, though analysts feared that such an agreement could be illegal in Kenya, PANA reported from here Monday.

The 10 commercial banks, including the Imperial Bank, NIC and Bank of Africa, some of the country’s medium-sized banks, have entered into an agreement with a private firm to provide leasing services.

“The Kenyan banking law may restrict financial institutions from engaging in trading, but the zeal of banks to make a kill from the fast growing leasing sector is causing a stir in the local assets market,” a statement sent by a publicity firm, Wheels Media, said Monday.

The banks are partnering with leasing companies to offer popular leasing products in their banking halls, a move, according to leasing experts, reminiscent of the advanced European and North American finance and assets trends.

Leading leasing company Vehicle and Equipment Leasing Limited (VAELL), which signed the agreement with the various banks, confirmed that at least 10 local banks had signed up for partnerships that would enable banks provide leasing products.

Jonathan Ngunjiri, the Credit Manager at the company, said at least six banks had already offered leasing products, while four more would have finalized plans to launch similar products by end of May.

The banks include Bank of Africa, NIC Bank, Imperial Bank, Prime Bank, Consolidated Bank and the recently merged Equatorial Commercial Bank/Southern Credit Bank.

VAELL is part of a group of companies that have over a decade of experience in asset-leasing.

The company lists over 50 large organizations spread across the manufacturing, horticulture, mining, technology and international and donor organizations as clients.

The arrangement effectively allows the bank to lease out to its clients any number or type of assets. These assets are handed to the company but placed in VAELL’s custody for management and maintenance.

They are also reflected in VAELL’s balance sheet, in compliance with local banking laws.

In Kenya, banks have traditionally offered their clients the asset finance option – which essentially is an interest earning loan.

However, trends in asset acquisition show the corporate market moving towards leasing.

“The ‘pay for use’ models in it ensure that companies enjoy zero debt and depreciation obligations if they lease rather than get financing,” Ngunjiri noted.

Catherine Wainaina, the relationship manager at Bank of Africa, said leasing in Kenya had grown to an industry that banks could no longer afford to ignore.

Large businesses accept leasing in their acquisition of expensive movable assets of the market for asset finance is thinning, leaving the small and middle sized companies the core target for banks in the product.

Literally, banks outsource the trading portion of the lease and it is also up to the lessor to raise tax and fee invoices to the client monthly or quarterly and administrating over other aspects of the lease, like insurance, inspection and asset maintenance.

Commercial banks have similarly cultivated relationship with high growth sectors like insurance (banc-assurance) and stock brokerage.

VAELL has a leasing portfolio in excess of Ksh 500 million.

Some of its clients have signed memoranda with the company for the supply on lease of all the vehicles and equipment required in future projects and expansion. 

 

   

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