Pavlo Olegovych Mukhin, General Director of TEKOM-Lease, told us about the leasing market development.
Pavlo Olegovych, what is a status of leasing in Ukraine today?
– Leasing becomes more and more interesting as for consumers as for financial organisations (Banks, Leasing Companies), as the community becomes more financially literate, aware every day on the one hand, but financial institutions of Ukraine seek for an opportunity to attract new clients by using new mechanisms, inc. leases, on the other hand. It should be pointed out that leasing as alternative to bank loans is used by consumers almost always when financing is needed.
Tell us please about critical distinctions of car loans from leases!
— They are apples and oranges – two completely different financial instruments. Car loan is a complex service: a lease agreement is signed; a client makes lease payments under this agreement according to a schedule suitable for him. That is all. It is his single obligation. No other collateral agreements are needed. Everything else is settled by the leasing company – up to leasing out vehicles in the period, when an insurance case arises, and the car may not be operated. Moreover, the Leasing Company like nobody else is interested in the car good working order, as it is its property. This is a critical organisational distinction. Loan is just funds for buying a car. There is another third option – to hire it, i.e. rent, when you use a car and then return it. People prefer leases or car loans more in Ukraine. Nevertheless, car lease is the most popular leasing service, maybe because cars are the most popular facilities, which loans are taken for (funds raising).
What are the main and additional services offered by the leasing company for the client`s comfort?
— Facility insurance, supporting technical maintenance, settlement of insurance cases by the leasing company without involving its clients. When agreed with the manufacturer, it is possible to provide the client with a discount for the leased facility. Our company is specialised in supplies of appliances of any complexity, machines for seaports, agricultural equipment – to bring, clear entry customs, service and deliver for their running.
Main risks of leasing companies: what are they and what protection is afforded?
— The main is a risk of non-payments, sure why. The second is a risk of liquidity, i.e. depreciation of facilities. The third is a risk of loss of facilities. The last of the listed risks is secured by the insurance company. For the second risk, there are 2 protection methods: to increase a lessee`s down payment and to draw up a buyback contract with a supplier of facilities. Coming back to the main risk of non-payments, it is levelled out through a deep analysis of the client`s financial state, credit history.
Tell us about new products as express lease programs!
— The express analysis works only in the microcredit area and sometimes in the process of financing of small and medium-sized business. If speaking of express leases, it is about a quick decision-making, accelerated analysis of clients` solvency. It mainly works with facilities, the risk to lose the liquidity of which is the lowest. For instance, cars, real estate, agricultural machinery of famous brands. Earlier, almost 90% of the company portfolio was for projects on financing of difficult production projects, infrastructure facilities – their construction with the use of leases. For example, equipment is to be procured under the terms when 30% is to be paid by the client, 70% is to be paid by the leasing company. The project is assessed conjointly. As a result, contributing 30%, the client gets a ready facility, profits off it, pays to the leasing company, and the company in turn has a good security in the form of this facility. Besides, here is an irrefutable advantage: levies may not be imposed on a leased property by third persons – it is a good protection for clients.
What development prospects are for the leasing market in Ukraine and for clients?
— Prospects are huge. It is highly rewarding that people in Ukraine become more literate, interested in new opportunities, start managing their funds in a right way as well as saving money where possible. Our company always advises everyone who turns to us, even if we understand that it is not our Client today. I always ask my colleagues to remember that they too did not have that necessary knowledge a while ago. Therefore, everyone coming to us is those people, who have become more financially literate; and it means, they are our future potential clients. There are niches today where leasing companies can make real progress. For example, real estate leases, equipment for start-ups, financing of business entities. I think who will be the first in this, that one will get a great future.
The conversation was with the participation of Larysa Semaka for the Magazine “Financial Services”.