Karandaaz Pakistan and ORIX Leasing Sign an Agreement to Provide USD 40 Million in Asset Financing to Corporate Vendors and Distributors in Pakistan
Karandaaz Pakistan and ORIX Leasing Pakistan Limited (OLP) signed a USD 40 Million Risk Participation Agreement through which OLP will provide asset finance for capital investment to small businesses operating in organized supply chains of the economy.
The program which has been made possible due to the generous financial support from the United Kingdom Department for International Development (DFID), has been developed in response to the sharp decline in SME finance in Pakistan, from ~17% of total commercial bank lending in FY2008-9 to ~6% by FY2014-15. Access to term funding (long term cap-ex financing) is even more scarce for SMEs in Pakistan.
Commenting on the occasion, ORIX Leasing’s Managing Director and CEO, Mr. Teizoon Kisat said,
The alliance with Karandaaz Pakistan will be beneficial to OLP for growing its core business of lease financing for SME’s. Under the alliance, OLP will target vendors of large corporations. These vendors are part of OLP’s niche market of SMEs where credit evaluation requires specialized skills. The involvement of large corporations will provide valuable alternate evidence for identifying and evaluating credit worthiness of the vendor in SME sector who do not have collateral and are currently deprived of access to the formal financial sector.
Mr. Kisat added that OLP has access to more than 100 cities and towns across the Country and its well trained and experienced team specializes in catering to the needs of SME’s. Over the past few years, OLP has recorded commendable growth in its SME portfolio. The Company’s strong business profile is supplemented by a healthy asset base and sound asset quality.
Present at the occasion, Dr. Ishrat Husain, Chairman of the Board of Directors at Karandaaz Pakistan, said,
The leasing industry has grown rapidly in Pakistan since the early 1990s and is a well-recognized SME credit model, contributing to capital formation for industrial and service sectors. This particular partnership targets even smaller enterprises that were previously excluded. I would like to take this opportunity to acknowledge the visionary leadership of Mr. Teizoon Kisat who has played a vital role in formalizing this joint venture with Karandaaz Pakistan. His experience spanning more than two decades in the leasing industry has contributed to the growth of SMEs in the country and his legacy as the Managing Director and CEO of ORIX will be a hard act to follow.
Mr. Imdad Aslam, Interim CEO and Director, Digital Financial Services of Karandaaz Pakistan, expressed the company’s utmost commitment to this partnership with ORIX Leasing. He stated,
We are dedicated towards greater financial inclusion through provision of access to finance for SMEs in Pakistan and our agreement with ORIX is further testament to this promise. Since leasing is asset based financing and does not require collateral, it is popular with SME enterprises as a means of growing their business. ORIX already enjoys a strong reputation amongst SMEs and is one of the leading companies in this space. We are excited to partner with them and believe that together we can achieve scaled impact and lasting transformation within the SME sector.”
“We universally lack viable credit models in Pakistan to lend to the small and mid-size business segment of our economy, which is a critical engine of economic growth and employment. One company in Pakistan that has developed a viable credit model for the SME market is ORIX. We are delighted to partner with ORIX to help diversify and deepen their business reach in the small business market. The value chain finance program will add to the ORIX business proposition with innovative liquidity features embedded in the program for ORIX to finance further growth and Karandaaz to leverage its capital.” stated Mr. Asad Azfar, Chief Investment Officer of Karandaaz Pakistan, while providing an overview of the Program at the signing ceremony.
About ORIX Leasing
ORIX Leasing Pakistan Limited (OLP) is an affiliate of ORIX Corporation, Japan, which is one of the largest diversified financial services Groups in the world. OLP’s forte lies in serving the Small & Medium Enterprises (SMEs). SMEs form the core of Pakistan’s business enterprises. According to studies, over 90% business entities in Pakistan are classified as SMEs with a contribution of 30% in GDP. Traditionally SMEs have largely remained outside the domain of formal financing due to elaborate regulatory requirements and guidelines of banks. Leasing, being asset-based financing, provides an ideal financing mode to SMEs. Major business strength of OLP lies in their expertise with the SME sector. Till date ORIX Leasing has provided credit of over Rs. 140 billion primarily to the SMEs. The Pakistan Credit Rating Agency has assigned the Company long term and short term entity ratings of AA+ and A1+ respectively. These ratings denote the lowest expectation of credit risk emanating from a strong capacity for timely repayment of financial commitments.