Commercial Leasing to source funds from ADB

By Duruthu Edirimuni Chandrasekera

Commercial Leasing Company Ltd (CLCL) is in talks with donor agencies in a bid to fund their business expansion and market penetration across the country.

“As a company we have changed our focus and strategies to curb the prevalent funding issues. This includes a strategy for fund acquisition through overseas agencies,” Dr. H.S.D. Soysa, General Manager/CEO CLCL told The Sunday Times FT.

Another senior company official said the CLCL is trying to source funding from the Asian Development Bank (ADB) for this purpose. “We are in discussion with ADB at present,” he said. Dr. Soysa noted that borrowing money from other agencies will reduce the company’s cost of borrowing. “Last year we experienced a severe credit squeeze in the country together with high inflation rates, which made it difficult for us to borrow funds,” he pointed out.

He said CLCL saw a decline in volume growth as a direct result of lack of funding from commercial banks. “This necessitated CLCL to re-organise and pay greater attention to areas which had started to show an increase in growth,” he added.

He noted that despite the economic growth in 2007, the growth momentum the leasing industry saw in prior years was not demonstrated last year. “The 2007 growth figures in the industry will be slightly lower or flat,” he said. Dr. Soysa said the industry continues to be on an uneven playing field with specialised leasing industries forced to overcome many challenges to operate in a sustainable and successful manner.

He has also stressed that taxation is a dominant factor affecting day to day operations of the company. “CLCL had Rs.121 million in 2007 as income tax payable, but the deferred taxation showed a reversal trend with Rs.42 million, thereby cushioning to a net tax charge of Rs78 million last year,” he said.

Dr. Soysa said if the tax regime continues authorities will see a decline in revenue in companies and called for a simplification and consolidation of the taxes and stamp duties that are prevalent.

“CLCL had contributed Rs.472 million as taxes in 2007. The authorities should be aware of the fact that most taxes in finality are borne by the end consumer,” he said, noting that in the leasing industry these consumers will predominately be small and medium enterprises and industrial enterprises. CLCL posted Rs.328 million profit in 2007, which is a 22 percent increase to 2006’s Rs.268 million.