15 August 2010
MUSCAT: The asset growth in leasing and hire purchase sector is likely to remain subdued, mainly on account of sluggish demand for car loans, said a top official of a leading non-banking finance company.
"The industry has been shrinking assets between June 2009 and June 2010," said Ajit Engineer, Chief Executive Officer of Muscat Finance Company (MFC). The total assets of the industry fell to touch RO520 million by end-June 2010.
Ajit said that the tight personal loan policies of banks and the fact that individual customers will have to bring in 20 per cent of down payment for purchasing cars are affecting both demand for loan and cars. "The prices of Japanese cars have gone up and customers find it difficult to bring in 20 per cent down payment."
People are using their cars for two to three years, which is contrary to an earlier practice of replacing vehicles within a year. As a result, the vehicle sales have been subdued in the first half of 2010. "With the ensuing Ramadan traffic, demand is expected to pick up providing opportunities of financing. Most of the car dealers have announced attractive schemes and extended warranties and MFC has also agreed to provide finance on attractive terms."
Ajit said that a number of infrastructure related projects have been announced and under implementation by the government. "This will provide substantial work to the small and medium size companies and thereby provide an opportunity to non-banking finance companies for equipment financing."
On the performance of MFC, he said "With the growth in assets the top line has also grown, additionally, we have been able to reduce our average funding cost."
Muscat Finance growth
With the injection of fresh capital of RO4 million, some further reduction is expected in the second half of 2010. The overheads have been kept under control and monitored closely resulting in increased profitability.
He added that MFC has grown 9 per cent in 2009 and 3 per cent in the first half of 2010. "We are continuing our cautious approach towards lending and would be posting a decent growth to the one achieved in the year 2009."
Ajit said that the oil prices have remained firm and consistently above the budgeted levels set by the government at the beginning of the year. "In view of this and the considerable fiscal surpluses, it is expected that awarding of contracts will be expedited and substantial increase in economic activity will be observed in the second half of the year."
Referring to the liquidity situation in the financial system, he said the interest rates have softened in the first half of the year and correspingly the lending rates too have been reduced. There is always a gap in the reduction of lending rates which will continue to provide attractive spreads till the situation evens out. The margins will depend on individual leasing firms and their ability to structure individual leases.
He further said with the current rights issue, the capital will reach RO15mn and as per the Central Bank of Oman's requirement all NBFC's have to reach RO20mn by
mid 2012. MFC will certainly consider all options, including issue of bonds to comply with the regulatory requirement.
MUSCAT: The asset growth in leasing and hire purchase sector is likely to remain subdued, mainly on account of sluggish demand for car loans, said a top official of a leading non-banking finance company.
"The industry has been shrinking assets between June 2009 and June 2010," said Ajit Engineer, Chief Executive Officer of Muscat Finance Company (MFC). The total assets of the industry fell to touch RO520 million by end-June 2010.
Ajit said that the tight personal loan policies of banks and the fact that individual customers will have to bring in 20 per cent of down payment for purchasing cars are affecting both demand for loan and cars. "The prices of Japanese cars have gone up and customers find it difficult to bring in 20 per cent down payment."
People are using their cars for two to three years, which is contrary to an earlier practice of replacing vehicles within a year. As a result, the vehicle sales have been subdued in the first half of 2010. "With the ensuing Ramadan traffic, demand is expected to pick up providing opportunities of financing. Most of the car dealers have announced attractive schemes and extended warranties and MFC has also agreed to provide finance on attractive terms."
Ajit said that a number of infrastructure related projects have been announced and under implementation by the government. "This will provide substantial work to the small and medium size companies and thereby provide an opportunity to non-banking finance companies for equipment financing."
On the performance of MFC, he said "With the growth in assets the top line has also grown, additionally, we have been able to reduce our average funding cost."
Muscat Finance growth
With the injection of fresh capital of RO4 million, some further reduction is expected in the second half of 2010. The overheads have been kept under control and monitored closely resulting in increased profitability.
He added that MFC has grown 9 per cent in 2009 and 3 per cent in the first half of 2010. "We are continuing our cautious approach towards lending and would be posting a decent growth to the one achieved in the year 2009."
Ajit said that the oil prices have remained firm and consistently above the budgeted levels set by the government at the beginning of the year. "In view of this and the considerable fiscal surpluses, it is expected that awarding of contracts will be expedited and substantial increase in economic activity will be observed in the second half of the year."
Referring to the liquidity situation in the financial system, he said the interest rates have softened in the first half of the year and correspingly the lending rates too have been reduced. There is always a gap in the reduction of lending rates which will continue to provide attractive spreads till the situation evens out. The margins will depend on individual leasing firms and their ability to structure individual leases.
He further said with the current rights issue, the capital will reach RO15mn and as per the Central Bank of Oman's requirement all NBFC's have to reach RO20mn by
mid 2012. MFC will certainly consider all options, including issue of bonds to comply with the regulatory requirement.
© Times of Oman 2010
