A Case Study on United Leasing Company
Executive Summary
The financial sector in Bangladesh comprises the money and capital markets, insurance and pensions, and microfinance. As the development process in financial sector proceeds, Non-Bank Financial Institutions (NBFIs) became prominent alongside the banking. The major business of most NBFIs in Bangladesh is leasing. Leasing in Bangladesh, like in many of the peer countries plays vital role in economic development. At present there are twenty nine leasing companies are in operation of leasing business in Bangladesh.
In order to analysis the overall leasing sector in Bangladesh we have chosen United Leasing Company Limited one of the oldest leasing companies of Bangladesh with wide range of lease financing related product and services.
In this study we have tried to analyze the overall leasing sector of Bangladesh by using our selected company as a sample of the overall leasing sector. Here we have focused on certain issues regarding leasing business in Bangladesh which includes: Overview of the overall sector, company background, product & services offered by this company, performance analysis, cost of fund, sources of fund, corporate governance structure, major problem identification & ways to solve this problem. Finally we have recommended some measures to extend lease financing & thereby improve performance & profitability.
To conduct this study we have collected required information from company’s annual report, website and finally meeting with company personnel. From our study we have found that ULC collects necessary funds from sources like bank borrowing, public deposit, brac bank ltd, redeemable cumulative preference shares foreign funding, refinancing from Bangladesh bank, zero coupon bond and asset backed security. The cost of equity of ULC is 19.63430795, and the cost of debt is 13.7 %( after tax).
From this analysis we find that cost of capital is higher this is because the structure of cost of fund for leasing companies does not follow any unique trend. Weighted average cost of fund for the leasing companies is always positioned much higher than that of banks. Moreover according to the central bank regulation, leasing companies has the restriction to collect public deposits for less than one year, which creates uneven competition with banks.
The major problem for this company in extending leasing business like any other leasing business includes: sources of funds Problem, high Cost of fund, and low profit margin compared to banking sector, asset-liability mismatch, investment in high risk portfolio, lack in product diversification, competition with banks, lack of human resource, weak legal system, and lack of a secondary market. Moreover it also has to face the problem of time to time regulatory reforms. Analyzing the problem associated with providing lease financing here we have suggested some recommendation which includes: Exploring Alternative Sources of Funds, Competition and Product Diversification, Enhancing Capital Market Activities, Issues of Taxation and Market Segmentation.
OBJECTIVES OF THE REPORT
We have prepared the report for some definite purposes. Those purposes are photographed beneath as,
÷ To find out the leasing policies of United Leasing Company (ULC),
÷ To evaluate the performance of United Leasing Company (ULC),
÷ To give focus of their current cost of fund and focus on reduction of cost of fund
÷ To develop any alternate source of funding
÷ To recommend specific measures in order to improve leasing strategies of ULC by analyzing the Strength, Weakness, Opportunities and Threats (SWOT)
÷ To highlight on the products that can take them on the driving seat in the competition with banks and other financial institutions
METHODOLOGY
÷ Tabulation system – to describe corporate information, different products and features of the company
÷ Ordinal level of measurement
÷ Graphs- to show the company’s ratio analysis
LIMITATIONS
÷ Lack of information due to the policy of the company of keeping all the information confidential,
÷ Inadequate knowledge on contemporary leasing terms of the company’s business representatives.
÷ Insufficient time due to the congested corporate schedule and exam schedule,
÷ Lack of knowledge about the real life leasing business,
÷ Insufficient published information and reluctance about providing those by the company.
SCOPE
We have limited knowledge on Leasing Business. So, we applied all kind of work to know about Leasing Business in Bangladesh. For this, we read different types of article from different books. We discussed this with our senior brothers and sisters who know it very well. They helped us with the information what they actually know about it. To know information about Leasing Business we must know about what the Leasing Business is and what is the historical background of Leasing Business in Bangladesh.
LEASE FINANCING
Lease is a contract between the owner and the user of assets for a certain time period during which the second party uses an asset in exchange of making periodic rental payments to the first party without purchasing it. Under lease financing, the lessee regularly pays the fixed lease rent over a period of time at the beginning or at the end of a month, 3 months, 6 months or a year. At the end of the lease contract the asset reverts to the real owner.
However, in case of long-term lease contracts, the lessee is generally given the option to buy the leased asset or renew the lease contract. The three major types of leases are
÷ Operating lease,
÷ Financial/capital lease
÷ Direct financing lease.
The operating lease is a short-term lease contract where the lessor bears all operating and repairing costs of the asset and the lessee pays periodic rental payments to the lessor, and where the lease is cancelable, and there is no bargain purchase option.
Financial/capital lease is a long-term lease contract where the lessee bears all operating, repairing and maintenance costs, and makes periodic rental payments to the lessor. The lease is not cancelable and the lessee has the option for bargain purchase or renewal of lease contract at the end of the original lease period.
In a direct financing lease, the lessor leases the asset by manufacturing or by purchasing from the manufacturer to the lessee directly and the lessee makes regular rental payments to the lessor. The lessor holds the ownership of the asset until the end of the lease period and the lessee holds the possession of the asset. In addition to these major types, there are some other types of lease such as sale and lease and leveraged lease.
Legally, a leasing company is defined as one having the business of hiring plants or equipment or of financing their hire by others. The International Finance Corporation promotes leasing as a method of financing industrial development in the developing countries as a part of its capital market development strategies.
HISTORY LEASE FINANCING
Lease financing was first introduced in Bangladesh in the early 1980s. Industrial Development Leasing Company of Bangladesh Ltd. (IDLC),
the first leasing company of the country, was established in 1986 under the regulatory framework of Bangladesh Bank. It was a joint venture of the Industrial Promotion and Development Company of Bangladesh Ltd. (IPDC),
International Finance Corporation, and Korea Development Leasing Corporation. Another leasing firm, the United Leasing Company Ltd. (ULC) started its operations in 1989.
The number of leasing companies grew quickly after 1994 and by the year 2000, rose to 16. The leasing business became competitive with the increase in the number of companies and wider distribution of their market share. There are, however, 6 other companies conducting leasing business in the country, although they do not use the word leasing in their names. In terms of money value, the leasing business in Bangladesh increased from Tk 41.44 million in 1988 to Tk 3.16 billion in 2000.
The leasing companies now operating in the country are Industrial Development Leasing Company of Bangladesh, United Leasing Company, GSP Finance Company (Bangladesh), Uttara Finance and Investments, Bay Leasing and Investment, Phoenix Leasing Company, Prime Finance and Investment, International Leasing and Financial Services, Union Capital, Vanik Bangladesh, Peoples Leasing and Financial Services, Bangladesh Industrial Finance Company, UAE-Bangladesh Investment Company, Bangladesh Finance and Investment Company, and First Lease International.
INDUSTRY OVERVIEW
The financial sector in Bangladesh comprises the money and capital markets, insurance and pensions, and microfinance. In addition to the Bangladesh Bank—the central bank of Bangladesh—there are 4 state-owned commercial banks (SCBs), 5 state-owned specialized banks, 30 domestic private commercial banks (PCBs), 9 foreign commercial banks, and 29 nonbank financial institutions (NBFIs) as of 2008.
As leasing business is the major business of NBFIs and most of the NBFIs are multi product financial intermediaries, our industry analysis focusing on the performance of NBFIs of Bangladesh and through NBFIs we highlights leasing business of Bangladesh. The operations of NBFIs in Bangladesh are regulated by the Bangladesh bank. Nonbank financial institutions (NBFIs) are licensed and controlled by the Financial Institutions Act of 1993. These institutions
give loans and advances for industry, commerce, agriculture, or housing;
carry on the business of underwriting or acquisition of, or the investment or reinvestment in, shares, stocks, bonds, debentures, or securities issued by the government or any local authority;
engage in hire-purchase transactions, including leasing of machinery or equipment;
finance venture capital;
provide loans for house building and property purchases; and
use their capital to invest in companies.
There were 29 NBFIs operating in Bangladesh as of 2008. Of these institutions, 1 is government owned, 15 are local (private), and the other 13 are established under joint-venture arrangements with foreign institutions. The minimum capital requirement of NBFIs is Tk250 million. The major business of most NBFIs is leasing, although some are also engaged in merchant banking and housing finance.
| Investment Portfolio Mix of Nonbank Financial Institutions, 2002–2006
(10 million taka) |
|||||||||||
| Investment Portfolio | 2002 | % | 2003 | % | 2004 | % | 2005 | % | 2006 | %5 | |
| End-Dec | End-Dec | End-Dec | End-Dec | End-June | |||||||
| Lease | 1,646.89 | 56.7 | 2,127.24 | 58.4 | 2,537.46 | 47.7 | 3,115.73 | 45.9 | 3,356.59 | 45.9 | |
| Term Loans | 561.71 | 19.4 | 820.33 | 22.5 | 1,713.52 | 32.3 | 2,310.02 | 34 | 2,457.80 | 33.6 | |
| Housing Loans | 414.33 | 14.3 | 513.74 | 14.1 | 666.85 | 12.5 | 894.15 | 13.2 | 1,026.23 | 14 | |
| Other Assets | 170.7 | 5.9 | 182.81 | 5 | 240.42 | 4.5 | 106.46 | 1.6 | 120.76 | 1.7 | |
| Investment | 108.42 | 3.7 | 0 | 0 | 160.06 | 3 | 362.5 | 5.3 | 353.12 | 4.8 | |
| (Shares and Equities) | |||||||||||
| Total Outstanding | 2,902.05 | 100 | 3,644.12 | 100 | 5,318.31 | 100 | 6,788.86 | 100 | 7,314.50 | 100 | |
In a market with considerable competitive pressures from banks and other financial institutions, the leasing industry has shown significant resilience. Its total assets grew at an annual average rate of 34% during 2002–2006. Lease financing constitutes 54.5% of the total long-term assets in the country’s financial sector, with the rest consisting mainly of term financing. Leasing companies offer their services to industries such as textiles, chemicals, services, pharmaceuticals, transport, food and beverage, leather products, and construction and engineering. Some leasing companies are also diversifying into other lines of business, such as merchant banking, equity financing, term lending, and house financing. Total number of NBFIs and their year of commencement are given below.
The listing of NBFIs
| Name of Non-Bank Financial Institution | Year of Commencement | |
| 1 | Industrial Promotion and Development Company of Bangladesh Ltd (IPDC) | 1981 |
| 2 | Saudi-Bangladesh Industrial and Agricultural Investment Company Ltd (SABINCO) | 1984 |
| 3 | Industrial Development leasing Company of Bangladesh Ltd (IDLC) | 1985 |
| 4 | The UAE Bangladesh Investment Company Ltd | 1989 |
| 5 | United Leasing Company Ltd (ULCL) | 1989 |
| 6 | Phoenix Leasing Company Ltd | 1995 |
| 7 | Uttara Finance and Investment Ltd | 1995 |
| 8 | International Leasing and Financial Services Ltd (ILFSL) | 1996 |
| 9 | GSP Finance Company (Bangladesh) Ltd. | 1996 |
| 10 | Prime Finance and Investment Ltd. | 1996 |
| 11 | Oman Bangladesh Leasing and Investment Company Ltd | 1996 |
| 12 | Bay Leasing and Investment Ltd | 1996 |
| 13 | Peoples Leasing and Financial Services Ltd. | 1996 |
| 14 | First Lease International Ltd | 1996 |
| 15 | Delta BRAC Housing Finance Corporation Ltd (DBH) | 1996 |
| 16 | LankaBangla Finance Ltd. | 1997 |
| 17 | Infrastructure Development Company Ltd (IDCOL) | 1997 |
| 18 | Bangladesh Industrial Finance Company Ltd (BIFC) | 1998 |
| 19 | Union Capital Ltd (UCL) | 1998 |
| 20 | National Housing Finance and Investments Ltd | 1998 |
| 21 | Midas Financing Ltd (MFL) | 2000 |
| 22 | Bangladesh Finance and Industrial Company Ltd (BFIC) | 2000 |
| 23 | Industrial and Infrastructure Development Finance Company Ltd (IIDFCL) | 2001 |
| 24 | Islamic Finance and Investment Ltd (IFIL) | 2001 |
| 25 | Fidelity Assets and Securities Company Ltd | 2001 |
| 26 | Fareast Finance and Investment Ltd | 2001 |
| 27 | Premier Leasing International Ltd | 2002 |
| 28 | Self Employment Finance Ltd | 2002 |
| 29 | Ahsania-Malaysia Hajj Investment and Finance Company Limited | 2006 |
INTRODUCTION OF ULC
United Leasing Company Limited a joint venture non-bank financial institution engaged mainly in lease finance business and bills discounting. It was incorporated on 27 April 1989 as a public limited company under the company’s act 1994 with an authorized capital of Tk 1,000 million. On 31 December 2000, its paid up capital was Tk 70 million, of which foreign and domestic sponsors held 40.29% and 33.57% respectively and the remaining 26.14% was held by institutional shareholders (19.46%) and the general public (6.68%). Foreign sponsors of the company are Asian Development Bank (ADB), Commonwealth Development Corporation and Lawrie Group Plc of the UK. Sponsors in Bangladesh are Duncan Brothers (Bangladesh) Ltd, Shaw Wallace Bangladesh Ltd, National Brokers Limited, Octavius Steel & Co. of Bangladesh Limited and the United Insurance Company Limited. The company is listed with the Dhaka Stock Exchange Ltd.
On 31 December 2000, the total assets of the company were valued at Tk 1,482.11 million, 76.98% of which accrued to leased assets. Liabilities of the company included capital and reserve funds Tk 434.22 million, long-term loans from local and foreign sources Tk 867.63 million, and lease deposits Tk 180.26 million. Sources of funds of the company are mainly commercial banks. The company is eligible to receive fund from the World Bank sponsored Financial Institutions Development Project (FIDP) at concessionary interest rates. Number of lease contracts made and executed upto 31 December 2000 was 373 with total monetary involvement of Tk 1,119 million. The company performed relatively well in terms of profitability and it paid dividend @ 30% in 2000.
MISSION
÷ Devote continuous effort to improve products and services for sustaining competitive edge.
÷ Ensure service excellence by leveraging motivated human resource and technology.
÷ Manage risks and costs to ensure sound financial performance and adequate return on all investments.
VISION
To be the leading high quality service provider in the markets we serve.
GOALS
Customers:
Ensure that our service quality exceeds customer expectation in terms of timely delivery, fairness in treatment and value addition.
Risk Management:
Proactively manage risks and adhere to international best practices.
Shareholders:
Maximize growth in earning per share.
Employees:
Provide a stimulating and challenging yet congenial work environment, invest in training to harness full potential and compensate on performance basis.
CORPORATE GOVERNANCE
| Our Management | |
| Syed Ehsan Quadir | Managing Director |
| M. A. Azim | Deputy Managing Director |
| M. Ataul Hoque | General Manager |
| Avijit Bhattacharjee | Head of Accounts |
| Jamal Mahmud Choudhury | Head of Collection & Special Asset Management |
| Eva Rahman | Head of Channel Financing |
| Mohiuddin Rasti Morshed | Head of Corporate & Syndicate Financing |
| Quazi Nizam Ahmed | Head of Small Enterprises |
| Shahidul Islam Mazumder | Head of Information & Communication Technology |
| Fahad Rahman | Head of Enterprise Financing |
| Sabrina Mehnaz | Head of Human Resource |
| Md. Abul Ahsan | Head of Credit |
| Sharmi Noor Nahar | Head of Board & Secretarial |
| Ashfaque Chowdhury | Head of Operation |
| A N Baset Osmany | Head of Investment Marketing |
| Mahmud Kaiser | Head of Treasury |
| Khandaker Tanbir Islam | Head of Credit Risk Administration |
| Soma Chowdhury | Head of Marketing Services |
| Mohammad Neazur Rahman | Head of Internal Compliance & Control |
PERFORMANCE ANALYSIS
Current ratio: It measures a company’s liquidity and short term debt paying ability. United leasing company also needs some liquidity position for operating the business.
| Year | 2008 | 2007 | 2006 | 2005 | 2004 |
| Current ratio | 1.09 | 1.08 | .9 | 1.39 | 1.33 |
The trend of the company shows that current ratio is always in a stable position. Firm always maintain required liquidity.
Debt to Equity Ratio: debt to equity ratio measures total debt financing from the creditors relatives to the equity of the firm.
| 2008 | 2007 | 2006 | 2005 | 2004 | |
| Debt-equity ratio | 6.0 | 6.2 | 5.7 | 5.3 | 5.9 |
Here we find that debt is relatively higher in last two years.
Return on Equity: Return on equity measures the profitability of the firm from common stock holder’s view. This ratio show how many taka of net income were earned for each dolled invested by the owner.
Return on equity is higher in the beginning of the year and it gradually reducing and in 2008 the ROE is 14%.
Expenses Per Taka Profit (profit after tax): Here the expenses for profit is increasing day by day. In year 2004 was only 2.2, but in the year 2008 it become 5.6.
Financial Expenses Coverage: Financial expenses coverage ratio shows how many times it needs to recover the financial expenses taken by the firm. Financial expenses coverage ratio is decreasing from 2004 to 2008. That means it takes lower time to cover financial expanses than previous. That is good for the company.
Net Asset Value Per Share: The increase of the value of the share shows the good condition of the firm. Increase in net asset value shows that the price of the share is increasing relative to the asset of the firm. The net asset value is increasing yearly which shows good condition of the firm.
Earning Per Share: It measures the net income earned on each share of common stock. It is computed by dividing net income by the number of weighted average common shares outstanding during the year. EPS in 2008 is 66 taka which is relatively high in comparison to2007 and 2006 but low in compression to 2005 and 2004.
Cash Dividend: Every year firm provide some cash dividend to its share holderd, which is relatively same over the last 5 years, this cash dividend is an important indicator of the good condition of the firm.
| 2008 | 2007 | 2006 | 2005 | 2004 | |
| Cash dividend | 20 | 20 | 20 | 21.3 | 20 |
Debt to Total Asset Ratio: it measures the percentage of the total assets provided by the creditors. We get it by dividing total debt by total assets. This ratio indicates the company’s degree of leverage.
| 2008 | 2007 | 2006 | 2005 | 2004 |
| 33.33% | 28.18% | 26.65% | 25.3% | 22.13% |
From this graph we see that the debt to asset ratio of the firm is increasing day by day. In every year the ratio is increasing with a significant percentage. so it become more leverage.
Financial performance overview
Taka in Million
| 2008 | 2007 | 2006 | 2005 | 2004 | |
| Debt-equity | 6.0 | 6.2 | 5.7 | 5.3 | 5.9 |
| Current ratio | 1.09: 1 | 1.08: 1 | 0.9: 1 | 1.39: 1 | 1.33: 1 |
| Return on equity(%) | 14.0 | 14.5 | 13.8 | 22.6 | 23.0 |
| Expenses per taka profit after tax (Taka) | 5.6 | 5.1 | 4.7 | 2.3 | 2.2 |
| Financial expenses coverage (times) | 1.3 | 1.4 | 1.4 | 1.9 | 2.2 |
| Net asset value per share | 496 | 484 | 445 | 408 | 345 |
| EPS (Taka) | 66 | 62 | 59 | 85 | 73 |
| Cash dividend (Taka per share) | 20 | 20 | 21.3 | 20 | |
| Stock dividend (Bonus share) | 10:1 | – | 2: 1 | 1: 1 | |
| Debt to asset ratio (%) | 33.33 | 28.18 | 26.65 | 25.3 | 22.13 |
PROGRESS AT A GLANCE
SOURCES OF FUND
- Bank Borrowing: The Company can borrow from the following banks its necessary funds.
i. Uttara Bank Limited.
ii. Pubali Bank Limited.
iii. Trust Bank Limited
iv. The City Bank Limited.
v. Commercial Bank of Ceylon Plc.
vi. Sonali Bank Limited.
vii. Standard Chartered Bank.
viii. Bank Alfalah Limited.
ix. City Bank N.A.
x. Basic Bank Limited.
xi. Mercantile Bank Limited
- Public Deposit: ULC Ltd. collects public funds as a means of Share Capital.
Composition of Shareholding is as Follow
| No. of Shares | Percentage | |
| 2008 | 2008 | |
| i. Sponsors – Foreign
– Domestic |
462,000
559,240 |
20.00
24.21 |
| ii. Financial Institutions and Companies – Foreign
– Domestic |
210,305
513.825 |
9.10
22.25 |
| 31.35 | ||
| iii. General Public – Domestic | 564,630 | 24.44 |
| Total | 2,310,000 | 100.00 |
A range distribution schedule of the above shares as at December 31, 2008 is given below as required by Regulation 37 of the listing Regulation of Dhaka Stock Exchange Limited:
| No. of Shares | No. of Shareholders | Total Number of Shares | Percentage of Total Shares |
| Less than 500 | 4,903 | 356,371 | 15.43 |
| 500 to 5,000 | 179 | 277,022 | 11.99 |
| 5,001 to 10,000 | 5 | 34,892 | 1.51 |
| 20,001 to 30,000 | 3 | 66,888 | 2.90 |
| 30,001 to 40,000 | – | – | – |
| 40,001 to 50,000 | 1 | 42,000 | 1.82 |
| 50,001 to 100,000 | |||
| 100,001 to 1,000,000 | 5 | 1,421,378 | 61.53 |
| Total | 5,104 | 2,310,000 | 100.00 |
Brac Bank Ltd.
The Company subscribed 500,000 redeemable cumulative preference shares @ Tk. 100 per share bearing 9% dividend issued by BRAC Bank Limited as per share subscription agreement made on January 31, 2006 between United Leasing Company Limited and BRAC Bank Limited.
Energypac Confidence Power Venture Ltd.
The company subscribed 500,000 redeemable cumulative preference shares @ Tk. 100 per share bearing 12.75% dividend issued by Energypac Confidence Power Venture Limited as per share subscription agreement made on May 29, 2008 between United Leasing Company Limited and Energypac Confidence Power Venture Limited.
- Foreign Funding: ULC Ltd. collects fund from foreign investors. Investors from abroad make crucial funding for the company and gives the chance to operate smoothly.
- Refinancing from Bangladesh Bank: The Company gets refinancing facility from Bangladesh Bank by investing in SME, Women Development Projects and Agricultural Sectors
- Zero Coupon Bond: Sometimes issue zero coupon bonds for raising necessary funds. As per Trust deed dated February 7, 2005 between United Leasing Company Limited (ULC) and Investment Corporation of Bangladesh (ICB) a Trust in the name of “ULC Securitization Trust 2005- A” was formed and ULC sold lease receivable of Tk. 400 million to the Trustee (ICB) to issue Asset Backed Zero-Coupon Bonds. Thereafter the Trustee issued 37 Class A and 3 Class B Bonds of Tk.10 million each of which ULC purchased 3 class B Bonds as credit enhancement to secure the interest of class A bond holders. Any loss due to non-collection of lease receivable in respect of class-A bonds held by the investors will be adjusted against the amount of class B bonds held by United Leasing Company Limited. All Class A Bonds have been redeemed by January 2009. The redemption of the Class B Bond starts from February 2009.
- Asset Backed Security: Formerly ULC Ltd. collected fund from asset backed securities but now it has stopped doing it.
COST OF FUND
WAYS TO REDUCE COST OF FUND
As ULC Ltd. has to maintain CRR of 2.5% with Bangladesh Bank on 100% borrowing and give commission to depository assistance of 13.75-13.85%, it is not easy to reduce cost of fund for the company. Reducing costs for United Leasing Company Limited. solely depends on the overall conditions of the market. If market runs well that is gives loan in low interest and other conditions of the markets favors only in that time ULC Ltd. can reduce its cost of fund. Except the condition of market the company can reduces costs by following ways –
- Arbitrage
By arbitraging the company can reduce cost of fund. By definition we know that arbitrage is a discrepancy in relative values that is taking of positions in two or more markets in order to exploit pricing aberration among them. The academic definition of arbitrage demands that the strategy not require any of the arbitrager’s own funds and that it be entirely risk less. And United Leasing Company makes temporal arbitrage for reducing cost of funds. By this the company involves buying an asset for immediate delivery and selling it for later delivery in order to exploit a price discrepancy between the cash price and the forward price.
- Long Term Deposit
By increasing the volume of Long Term deposit and reducing short term deposit volume, it can reduce cost. Because the company has to give more interest for short term deposits than long term.
- Refinance
Having increased volume of refinance from Bangladesh bank, the company can reduce cost of funds. Because when the company makes much financing in the SME, Women Development Projects and Agricultural Sectors, it can claim more money as refinance from Bangladesh Bank
- Long Term Product Development
ULC Ltd. can reduce cost by increasing the volume of long term product such as introducing MILLIONARIE SCHEME. They are going to offer another scheme called “Lakhopoty Scheme”. These long term products can reduce their cost.
Alternative Sources of Funding
United Leasing Company Ltd. may make funding from the following sources:
- Bond Issue: The company presently does not issue bond expect it has issued zero coupon bond. But it may raise it fund through issuing corporate, perpetual and discounted bond to the general investors of Bangladesh and get necessary fund to make smooth operation.
- Debenture Issue: The Company may issue debenture for raising fund. In a days debenture has become one of the easiest source of funding for many leasing companies and it is a non collateral long term mechanism to raise necessary fund. So ULC Ltd. may issue debentures to get funds.
Multi Products to Compete with Banks/ Financial Institutions
United Leasing Company Limited a joint venture non-bank financial institution engaged mainly in lease finance business and bills discounting. It was incorporated on 27 April 1989 as a public limited company under the companies act 1994 with an authorized capital of Tk 1,000 million. On 31 December 2000, its paid up capital was Tk 70 million, of which foreign and domestic sponsors held 40.29% and 33.57% respectively and the remaining 26.14% was held by institutional shareholders (19.46%) and the general public (6.68%). Foreign sponsors of the company are Asian Development Bank (ADB), Commonwealth Development Corporation and Lawrie Group Plc of the UK. Sponsors in Bangladesh are Duncan Brothers (Bangladesh) Ltd, Shaw Wallace Bangladesh Ltd, National Brokers Limited, Octavius Steel & Co. of Bangladesh Limited and the United Insurance Company Limited. The company is listed with the Dhaka Stock Exchange Ltd.
On 31 December 2000, the total assets of the company were valued at Tk 1,482.11 million, 76.98% of which accrued to leased assets. Liabilities of the company included capital and reserve funds Tk 434.22 million, long-term loans from local and foreign sources Tk 867.63 million, and lease deposits Tk 180.26 million. Sources of funds of the company are mainly commercial banks. The company is eligible to receive fund from the World Bank sponsored Financial Institutions Development Project (FIDP) at concessionary interest rates. Number of lease contracts made and executed upto 31 December 2000 was 373 with total monetary involvement of Tk 1,119 million. The company performed relatively well in terms of profitability and it paid dividend @ 30% in 2000.
The management of the company is vested in a 9-member board of directors including its chief executive, the managing director assisted by a team of 35 executives. It addition to the head office at Dhaka, the company has a branch in Chittagong.
products & services of ulc
Products provided by united leasing company
1. Lease Product
Under Lease finance United Leasing Company provides:
÷ Industrial machinery and motor vehicles at concessionary term.
÷ Machinery and Furniture for Hospital use.
÷ Truck or Bus for Transportation.
÷ Equipment or Furniture for Official use.
Benefits from the Lease product
Conserving Capital:
United Leasing Company provide 80%-100% lease financing for a period of 3-5 years. Thereby, customers can avoid capital investment and utilize fund elsewhere.
Payment Flexibility:
Customer’s lease rentals can be structured as monthly, quarterly, semi-annually or annually to match with the cash flow generation.
Customize Service:
Lease financing at ULC are customized into number of facilities like, lease local, sale & lease back and lease foreign. That allows customers to lease new or existing asset from local or foreign vendor.
Ownership Transfer:
As ULC is providing capital or financial lease, at the termination of contracts customer will have the opportunity to renew the lease or purchase the asset with a minimum transfer price.
Prepayment Facility:
Customers can prepay and adjust full or partial amount with receivable only after adjustment of first six installments.
Reducing Balance Method:
Construction of repayment schedule using this method allows customer to pay lower interest as principal payments are gradually adjusted with receivables.
Tax Benefits:
Lease rentals are treated as revenue expenditure and are entirely deductible for tax purposes. This provides a greater tax benefit for customers in comparison to borrowing.
2. Term Loan:
Term loan services of ULC offers you 3 (three) types of facility;
Long Term Loan; is suitable for customer, if cash flow resources are sufficient for longer tenure obligation, profitability and expansion plan.
Short Term Loan; enables customers to take advantage of transactions to be completed in short period.
Revolving Loan; enables customer to meet continuous working capital requirement.
Collateral Free Term Loan:
Typically small and medium-sized enterprises are unable to raise finance in the conventional way due to lack of security. To meet their requirement United Leasing Company further customizes their facility into collateral free long term loan. Facilities under this service are;
| Product Name | Nokshi | Mousumee |
| Focus Group | Woman Entrepreneurs | SME |
| Loan Amount (up to) | Tk 5.00 lacs | Tk 5.00 lacs |
| Repayment Term | 24 months | 18 months |
| Repayment Method | EMI | Can be Structured |
| Age Limit | 25-55 years | 30-55 years |
| Applicant’s Income (min) | Taka 3.50 lakh | Taka 2.50 lakh |
| Product Name | Agrani | Briddhi |
| Focus Group | SME | SME |
| Loan Amount (up to) | Tk 6.00 lacs | Tk 12.00 lacs |
| Repayment Term | 18-24 months | 18-24 months |
| Repayment Method | EMI | EMI |
| Age Limit | 30-55 years | 30-55 years |
| Applicant’s Income (min) | Taka 2.50 lakh | Taka 2.50 lakh |
3. Home Loan:
Home loan services of ULC helps customers in:
÷ Purchase/construction of house/apartments.
÷ Renovation/extension of existing house/apartments (for individual).
÷ Renovation/extension of existing office chamber/space (for professionals).
÷ Construction/purchase of commercial building.
÷ Construction of commercially viable project like school, hotel, hospital etc.
÷ Construction of industrial building like factory, godown, warehouse etc.
Loan Information
Loan Amount:
Maximum loan amount is Tk 50 lacs or 70% of the purchase price/cost, whichever is lower.
Repayment Term:
1. Individual loan:15 years for normal facility and 20 years in case of Bangladesh Bank refinancing scheme, but not beyond the 60th birthday of the applicant.
2. Commercial loan: Maximum term is 7 years.
Interest Rate:
United Leasing Company offer customers a competitive interest rate and low fees on the basis of their financial status, amount borrowed and repayment terms.
Repayment:
customers will repay the entire loan by Equated Monthly Installments (EMI) comprises of principal and interest calculated on the basis of monthly rests at the rate of interest applicable and is rounded off to the next taka.
Disbursement:
Loan will be disbursed to customers in one trench or in suitable installments to be decided by ULC with reference to the need or progress of construction/ renovation/ extension of the house.
Security:
Registered mortgage of the property financed will be the prime security. Other security may also be taken on the discretion of the Management.
Prepayment:
Customer loan can be prepaid partially or in full, at any time before its maturity date.
Insurance:
Customer will be vigilant and the property is duly insured against fire, earthquake and other hazards, ULC being the sole beneficiary under the policy, for a value as required by ULC. Premium will be paid by him with loan installment amount.
4. Deposit Scheme
Deposit scheme of ULC offers customers;
÷ Annual Term Deposit:
A fixed return investment allowing them to withdraw or reinvest profit or principal at maturity.
÷ Earn Ahead Term Deposit:
This scheme offers customer an opportunity to benefit from their investment at the time of opening account. Also allows them to reinvest withdrawal amount for further benefit.
÷ Monthly & Quarterly Earner Deposit:
This scheme allows them to withdraw profit after each month or each quarter.
÷ Cumulative Term Deposit:
Under this scheme profit from customers invested amount has been capitalized at the end of each year (after AIT deduction), creating a new principal. Profit for next year will then be calculated on the full amount.
Double money return:
Due to attractive profit, customer’s investment becomes double at maturity.
Triple money return:
To secure children’s marriage, education, retirement/financial solvency this scheme triples investment at maturity.
Benefits from the deposit scheme:
Safe investment:
United Leasing Company determined to deliver the profit and investment of the customers duly.
Attractive profit:
UCL is providing better profit under various savings scheme which will enhance the investment at maturity.
Best consumer service:
To serve customer with care is the main principal of UCL. From opening of the account, till maturity UCL always ready to support the customer.
Loan facility:
Considering the necessity UCL is providing quick loan facility. Customers can avail loan up to 80%-90% of investment amount.
5. Channel Financing Services
Channel financing services of ULC offers;
1) Factoring of Accounts Receivable
2) Work Order Financing
3) Distributor Financing
4) Assignment Discounting
Benefits of Channel financing Services:
Reduced Investment in Receivables:
Customers receive payments right before or after the delivery therefore their funds are no longer tied up in receivables.
Expansion of Business:
As cash flows improve, customer can increase business by delivering higher volume to existing customers and also expand business to new ones.
] Sales Ledger Administration:
ULC will administer the sales ledger for the assigned customers.
Collection of Receivables:
ULC will monitor and collect the receivable on due time from the customers.
High Quality Reports:
ULC provides detail report on the performance of the customers that will help them direct in sales efforts.
Scope for Additional Financing:
When the customer utilizes factoring facility properly, it will help ULC support them with other services.
Deposit rate (effective from April 27, 2009)
| Investment Type | Tenure | Profit Rate |
| Annual Profit |