LMDtv 4
Leasing plays a pivotal role in enabling inclusivity in the country. Though Sri Lanka’s leasing sector has been described as fragile due to issues such as high default rates, rising interest rates and increased scrutiny on lending practices in recent times, the CEO and General Manager of People’s Leasing & Finance (PLC) Sanjeewa Bandaranayake sees potential for growth and positive sector performance.
During a recent interview aired on LMDtv, he shed light on the sector and explained how it tends to be misunderstood.
Bandaranayake stated that “the leasing sector is booming – sales have risen, disposable incomes have increased and interest rates have stabilised,” adding that with Sri Lanka’s credit milieu improving, most players are seeing improvements in collections.
He added: “However, the leasing sector has been misunderstood as a whole. I think this has happened because even though leasing is mainly offered by banks, it’s the non-bank financial institutions that are mainly engaged in it. We cater to small and medium-sized enterprises, and the informal sector of the country – which may not have access to the formal sector of the economy.”
Bandaranayake continued: “Sector players are experts when it comes to lending. For example, if someone wants to buy a vehicle, we take it as security so that customers don’t need to provide additional securities.”
“There is negativity around the sector because sometimes you hear of asset repossession, which is the ultimate action and final tool that we use when lessees default on their payments. So even if 97 percent of cases are successful, it is those two or three repossessions that reach the ears of the public,” he charged.
In his opinion, “customers who make their leasing payments and take possession of their assets don’t talk about the good service they receive; but those who default and have their assets repossessed are the ones who share their stories. Though it’s a very small fragment of clients that face this issue, their noise is quite loud and regrettably, the service that the sector provides is drowned out.”
“Perhaps the lessors must also take a portion of the blame because they don’t come forward and talk about their services. If we don’t talk about ourselves, it’s very unlikely that others will,” he lamented.
Sri Lanka’s leasing sector is regulated and supervised by the Central Bank of Sri Lanka under the Finance Leasing Act of 2000 through the registration of Registered Leasing Establishments.
Bandaranayake added that “the leasing sector, which has been in existence since the late 1980s, has evolved over the decades. While the shortcomings have been addressed, there’s always room for improvement. Meanwhile, this sector has also seen much progress in terms of regulatory frameworks.”
According to him, the main issue is the lack of awareness: “Customers, businesses and the general public may not be aware of what’s happening in terms of Sri Lanka’s leasing sector, and the fact that we cater to a segment of the country that’s not served by others.”
“We also finance income generating assets that fall – to a great extent – into the category of commercial assets… such as a bus, a lorry, a tipper or a three wheeler. In that sense, we help the economy because we’re helping people make a livelihood,” he emphasised.
Bandaranayake continued: “Right now, we see a big improvement because there’s increased economic activity in the country. For instance, a person who’s running a small shop might need a vehicle to transport goods, which means that he or she is using it to generate income. Or if someone wants to buy a three wheeler, it’s invariably used to earn an income.”
“The leasing sector plays an important role in financial inclusivity because it aims to bring unregulated people from the informal sector to the formal sector. And that’s a great service because they can then enter the formal economy,” he summed up.
