Introduction to Leasing Fundamentals

INTRODUCTION OF LEASING

Askari Leasing Ltd.

Internship Report

On

Askari Leasing Limited Multan

Presented to: Mr. G. M. MALIK

Presented by:

ABDUL RAUF

Roll # 32

M. COM. (Final)

Session 2000-2002

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In the name of Allah the most Merciful & Beneficent, I am very much

thankful to GOD who enabled me to complete this practical work. This was a

good learning experience for me and with the help of the coordination of the

branch manager at Askari Leasing Limited Multan and all other staff I

completed my practical learning in time. I am very much thankful to the

following kind and cooperative personnel who helped me a lot during whole

period of internship.

My special thanks to the

1. Mr.Aftab Ali Malik / AVP,Chief Manager

2. M. Usman Adil / Marketing Officer

3. Humaira Ali / Operations Officer

4. Ishaq Bhutta / Operations Officer

5. Mohammad Shahzad Hussain / Operations Officer

6. Mohammad Arshad Raza / Operations Officer

7. Abdul Karim / Operations Officer

8. Farjaz Saleem / Marketing Officer

9. Imran Baig / Marketing Officer

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Thanks,

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Practical learning of bookish knowledge is very important for business graduates

to perform their duties well during their career. It is an essential part of M.Com.

Program in Department of Commerce, B.Z.U. Multan. So as part of this training

program I was assigned to do my internship training at Askari Leasing Limited

Multan branch for 8 weeks. Askari is well-reputed financial institution in the

leasing sector. It is among the top leasing companies of Pakistan and moving

steadily towards the path of continuous growth and success.

During my training I learned the working of the following departments in depth.

1. Operations Department

2. Marketing Department

3. MIS department

4. COI’s Department

5. Administration Department.

During my learning I found the whole staff very cooperative and the working

environment very congenial.

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“Allah hath permitted trade and forbidden

usury (interest), those who desist, shall be

pardoned.”

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Part 1
Introduction Of Leasing

Leasing Defined

“A Process by which a firm can obtain the use of certain fixed assets for

which it makes the series of contractual, periodic, Tax deductible

payments”
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Actually leasing is a type of mutual agreement where one party enjoys the

benefits of certain fixed asset by making contractual payments as rentals

against that asset to the other party. In this way lease is a contract in which

lessor gives the lessee the right to use an asset for specified period of time in

exchange for periodic rent and payments. . In the leasing agreement, lessor

agrees to provide equipment or finances to buy the equipment needed by the

lessee. The main characteristic of leasing is that it segregates the ownership

and possession from use. That is, the lessor keeps legal ownership of the

equipment, whereas the lessee keeps the usage and physical possession of the

leased asset.

Definition by Law

Lease is a transfer of right to enjoy such property made for in consideration

of a price paid or promised or money, share of groups, service or any other

thing of value to be rendered periodically or on specified occasions to

transfer, by the transferee who accept the transfer on such terms. While the

hire-purchase means, a system by which a hired article becomes the property

of the hirer after a stipulated number of payments.
Lease payments

Lessor Lessee
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Asset


Leasing

Need of Lease

Need of lease may arise due to one or many of the following important

reasons. Actually these are some those critical factors which are

multidimensional and which must be properly tackled if one wants to get the

advantage of the leasing.

 Economic Slump

 Improving the “Quality of Life”

 Cheaper Alternatives

 Avoiding “Restrictive Covenants”

 No Risk Of Obsolescence

 100% Financing Mode

 Increases the liquidity of the Lessee

Leasing remains one of the most controversial subjects in the financial fields

following several years of agreement among businessmen, economists, tax

officials and leasing companies. Advocates have claimed that leasing provides

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many advantages including the risk of owning equipment subject to

technological obsolescence is avoided through short-term or cancelable leases

and stipulations that new equipment must be provided without large cash

outlays which preserves working capital, elimination of down-payment

provides for complete financing, lease charges are tax deductible and may

permit a faster and more complete write-off equipment values, lessor may be

able to pass on their economics of purchasing to the lessee which can improve

the appearance of Balance Sheet and certain financial ratios by elimination of

liabilities associated with acquiring equipment.

Leasing in the Context of Pakistan

Lessee Point of View

• The Upward trend in Cost of Consumer Durable and the decreased

Purchasing Power of the People.

• Tax Benefit to the customers.

• Islamic Mode of Financing.

Lessor Point of View - Some Facts

• Less investment options for the Lessors.

• Vehicles industry registered a growth of 24.5% and 19.5% in 2000-2001

respectively.

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• Success of Lease concept - 40% of the total manufactured vehicles was

leased in 2000.

Tax Deductible Facility
Since lease appears as an expense in the income statement after which the tax

is deducted from the net income. In this way the leasing arrangement acts as

tax hedge for lessee.

Leasing Evolution in Pakistan

• 1985- Establishment of the first Leasing Company.

• From 1985-1997, 32 Leasing companies are established.

• From 1992-95, 20 Leasing companies are established.

• In Mid-Nineties, the Growth rate of Leasing companies was 30-35%.

• In 1998 the paid up capital was RS. 4.35 Billion.

• The Net capitalization was RS. 34 Billion and the Total stock value of

leasing industry were 1.5% of the total value of Karachi Stock Exchange.

Provisions of a Standard Lease Contract
The standard lease contract has the following essentials:

• Terms and Conditions of Lease

• Use of vehicles

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• Insurance

• Registration and Title

• Return of Vehicles

• Limitation of Liability

• Default and termination

• Assignment of Lease

• Security

• Selection of Vehicle

• Revival Letter

• Insurance Details

• Repossession & Authorization

• Amortization Schedule

• Promissory Note

• Acceptance receipt

Types of Lease
Following two are the main types of lease:

1. Operating Lease

2. Financial Lease

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Financial Lease:
Under this form of lease the service, and other maintenance costs are borne

by the lessee. These kinds of leases usually involve a term that corresponds

more closely to the productive life of the asset. Automobile leases are

example of such financial leases. Other important features of the financial

lease involve the following two important points:

1. Non-cancelable; and

2. Period of lease usually more than five years.

Operating Lease
Operating leases are characterized by the fact that the maintenance and

service of the leased equipment are provided by the lessor; like the cost of

maintenance and service cost are incorporated into the lease agreement or

stated in a separate service contract.

Following are the distinguishing features of the operating lease:

• Cancelable lease; and

• Lease period comprises of one or two years.

Capital Lease Concept
• Transfer of ownership to the lessee at the end of the period

• Bargaining Purchase Option (BPO)

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• Lease term is more than 75% of the value of the asset

• Lease payments are equal to or more than 90% of the price of the asset.

Forms of Lease Financing
Following are some important forms of lease financing, these forms are

varied with respect to the process, time period and other terms and

conditions upon which the lease contract is finalized;

1. Sale & Lease Back

2. Direct Lease

3. Leveraged Lease

4. Conditional sale lease

Sale and Lease Back
This form lease involves an arrangement where a party sells an asset and

again it is taken on lease back to the vendor. The rental and the sales price

are usually interdependent and sold at market value. The firm receives the

sale price in cash and the economic use of the asset during the basic lease

period. In turn promise to pay periodic lease payments and gives up title of

the asset to the lessor. As a result, the lessor realizes any residual value at the

end of lease term.

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Direct Leasing
Under direct leasing, a company acquires the use of an asset it did not own

previously. A firm may lease an asset from the manufacturer, e.g. IBM leases

computers, Xerox leases copiers and Honda Breeze leases cars. Indeed

capital goods are abundantly available today on a lease. In certain cases, a

lessor may achieve economies of scale and may pass it to the lessee in form of

lower lease payments.

Initial direct costs are usually charged to income at the inception of lease

because they are mainly related to earning the dealer’s or manufacturer’s

profit.

Leveraged Leasing
In recent years a new type of lease, the leveraged lease, has come into

widespread use. There are three persons involved in leveraged leasing

namely lessor, lessee, and lender. From the lessee point of view, there is no

difference between a leveraged and other lease. However, the lessor arranges

to borrow part of the required funds, generally giving the lender a first

mortgage on plant and equipment being leased. The lessor is also called the

equity participant by investing 20% in leased asset. The lessor still receives

the tax shelter associated with accelerated depreciation. However, the lessor

now has a riskier position, because he is junior to that of the lender, who has

first mortgage on plant or equipment and future lease rentals. Typically, a
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leveraged lease provides the lessor with a higher expected NPV per dollar of

invested capital than non-leveraged lease because the interest component

would represent another tax deduction, while the loan repayment would

constitute additional cash outlays. The initial cost would be reduced by the

amount of loan.

Conditional sale Lease
If any of the conditions just involved in leasing are violated in lease

arrangements, then the lease becomes a conditional lease. A conditional sale

lease is one in which simply you can say that lessee has purchased the lease

rather than properly involving into a proper lease agreement, the lessor is

viewed as having financed this purchase via a loan. For tax purpose the lessee

treats the property as owned and claims the depreciation. Lease payments

are treated as loan payments.

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ASKARI LEASING LIMITED

Part 2

Askari Leasing Limited

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Introduction:

Askari Leasing Limited (“the company) was incorporated in Pakistan as a

Public limited company on August 1, 1993 and was granted Certificate of

Commencement of Business on November 3, 1993. Presently the Company is

listed on the Karachi, Lahore and Islamabad Stock Exchanges and

principally carries on the business of leasing. Askari leasing Limited, since

its inception, continues on the path of steady progress. It is subsidiary body of

Army welfare Trust. AWT came into existence in 1971 with the total assets of

Rs. 0.7 million. Its credentials became impressive in the background of its

recent emergence on Pakistan’s business scene. Working as a fairly small-

scale operation for raising money for the welfare of ex-army personnel, AWT

has grown to become a large commercial conglomerate. A true conglomerate,

the earning base of AWT is diversified because of its presence in business

such as cement, sugar, agricultural farms, travel services, restaurants, real

estate development, insurance and financial services. The trust further

intends to consolidate its position in financial services by establishing Askari

Investment Bank.

The Board of Directors, from the beginning had a clear-cut mandate and an

objective to place the Company among the leading leasing companies in

Pakistan. The Board is very clear on a professional approach for the

Company given their experience with Askari Commercial Bank Limited.

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They hired and gave due authority and responsibility to the professional

managers to run day-to-day operations. Since its inception, the Board

recognized the importance of human resources in service oriented financial

sector. This has been a major contribution to the successful operations of the

Company and its ability to be counted amongst the leading leasing companies

in all over the country.

Askari Leasing Limited over a period of eight years has achieved the top

position in the leasing companies of Pakistan both in term of business and

assets holding. It plays a vital role in the leasing industry of Pakistan and has

become an important part of the credit delivery system.

The company contributes substantially in the economic activities of the

country besides being a profitable concern of Army Welfare Trust. Having

taken off successfully and setting for future course, it has added new products

to the existing line. To exploit a highly lucrative market segment in the

country, Askari Leasing has introduced consumer auto leasing product

namely: "as Kar". It has received a highly encouraging response by the

public and the market as well.

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Objectives of Askari Leasing

There were certain crucial objectives, targeting them the company was

established like;

1. To facilitate all leasing services to get the maximum market share in the

leasing sector.

2. To open and maintain Company’s accounts with banks and financial

institutions and to draw, make, endorse, accept, discount, execute and

issue promissory notes, bills of exchange, bill of lading, warrants,

participation term certificates, term finance certificate and other

negotiable or transferable instruments concerning this company.

3. To deal in all types of lease financing like both individual and corporate

and also to deal in equipment, commercial & non commercial vehicles,

machinery etc. so as to have a broad product portfolio and broad

spectrum for future.

Financial criteria/policy of ALL.

Following are the important points of Askari Leasing financial policy and

these are strictly followed without any relaxation to anyone. These includes:

• The time period of leasing will be from 3 to 5 years maximum.

• Company will follow the rules or credit criteria approved by or prepared

under the CBR regulations and SBP Prudential laws.
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• There will be no relaxation or any favor by distinguishing between army

and civil officers.

• The company at any time can change the financing terms and conditions

keeping in view the maximum benefits of the company.

These are some broad perspectives upon which the whole set up of the

organization is based. As for as their implementation is concerned it is make

sure to every body in the firm, there will be no deviation from the defined

rules and every body is committed to these objectives and will try his/her level

best to equally apply for these policies. So due to proper implementation of

these policies the company is leading among the top leasing companies of

Pakistan.

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Branch Hierarchy of ALL Multan

The branch hierarchy of Askari Leasing Limited (Multan) is as follows:

Branch Manager

Assistant Manager

Operations Manager Marketing Manager

ALL Officers AGL Officers

Ops. Officer MOs
Ops. officer

Credit officer VOS

Rental officer

Inst. officer

of

Inv. Officer

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Part 3
Depar tmentalization of
Askari Leasing Limited
(Multan)

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Since Askari Leasing Limited is oriented towards proper client satisfaction

and this can be achieved only when there is proper integration of various

sections and there is proper division of labor in the organization. Since all

these are the factors that are the key points for a firm to move towards the

stage of steady growth. Since ALL has a good repute and no one in the leasing

sector so it is observed that departmentalization and division of work force is

with respect to their nature of job an nature of their mental orientation of the

employees.

There is proper departmentalization in the branch and there are experienced,

dedicated, self-motivated and highly responsible officer’s handles every

department. All the departmental heads or supervisors are business

administrative qualified.

Broadly speaking following are the main departments of the branch:

1. Operations Department

• Processing Department

• Credit Appraisal department

• Insurance department

• Rental Recovery department

2. Investment Department

3. Marketing Department

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4. MIS Department

All these departments are involved in the progress of the branch and working

with full dedication, hard work, and commitment to excellence.

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Operations Department
Since operations section/department is quite broad so comprehensively

divided into the other sub-section/departments so a detailed functioning and

working of every department is given below for proper under standing of the

nature of work at every level in the branch.

1. Processing Department

This is a crucial department, performing the critical activities for the

organization and for the prompt delivery to the client and towards the

ultimate satisfaction of the client.

Processing department performs the following main functions:

1. Case punching

2. Issuance of Verification letter

3. Down payment receiving

4. Rental cheques receiving

5. Taking personal guarantees and specimen signatures

6. Getting signed legal documents

7. Getting credit approval from the branch manager

8. Sending soft copy to head office

9. Preparing sale order form

10. Printing purchase order
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11. Issuance of purchase order to Authorized dealers after approval from

head office.

 Processing Procedure

The procedure of the processing is as given below in detail;

Case Punching

Upon receipt of the complete application form from the applicant it is feeded

into computer. Since application includes copy of national identity card, one

passport size photograph and copy of driving license along with 1000 rupees

that is verification charges.

The system is designed in such a way that the whole application form is

copied into it. And it is ensured that all the information is correctly added

into the system.

Broadly speaking following important information is added to the system;

• Deposit slip number & Date

• N.I.C Number

• References and their addresses

The system does not accept any application without this information.

In certain cases the options for a particular item are limited, these are built in

the system and can be changed by striking the space bar. For example,

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“Marital satatus” has the pre-defined options of single, married, widow and

divorcee.

If any number other than zero is entered into the system in the head of

“Number of children” then the system automatically opens up a screen asking

for “ Name of institutions, class name, and name of the children” etc. Only

school going children information is added.

With respect to the vehicle information to be fed into the system it is make

sure that following fields are properly entered.

• Make of vehicle

• Model of vehicle

• Name of vehicle

• Engine Capacity

• Cost of vehicle

This information is very crucial in a sense that it appears on the legal

documents signed by the client.

Tax Exemption Issue

In many cases dealer likes to have a cheque issued in favor of the supplier and

remaining amount paid to him, if the supplier is tax exempted then in the

option “Y” is entered and also date of expiry of the tax is mentioned.

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Suppose if the vehicle cost is Rs.450,000 then amount 450,000 will be enter in

the exempted Amount. This facilitate the payment because then Rs.450,000

will be paid to the supplier and remaining to dealer after deducting

withholding tax. Finaly the record is saved and at this time the system

generates a number for the record, this number is proposal identification

number and is written on the top of the application form in the space labeled

“NO”

Printing the Verification Letter

Verification letter is printed after making the data first move, first move

meaning that now no more changes can be made into the personal data

feeded into the computer. The system generates the verification letter after

confirming the proposal number of the client, his lease amount and vehicle.

This letter is then handed over to the verification staff for verification

purpose.

Information to be verified
Verification letter extracts the following information need for the verification

by verification officers;

• Personal and business addresses of the applicant

• Personal and business addresses of the references

• Children information
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Verification section
Verification section consists of verification officers, having intelligence

background and long experience. Since they are quite experienced persons so

it is ensured that what so information they are going to verify is without any

biases any without any impulse to the customer that he is being verified.

The verification officers adopt following procedure;

1. On receiving the verification letter from the incharge, he makes a

movement plan keeping in mind the addresses of the applicant and his

references.

2. Ideally all the addresses are verified by physical ground check, however

due to time constraints following priority is observed by the V.O

Physical check –Must

• Corporate business address and individual business and personal

addresses.

Telephonic or Physical Check-Optional

• Location and names of schools of customer’s children.

Others

• Information regarding the applicant is taken from the neighbors

and other shops in the vicinity.

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• Information regarding the children is taken by following the bus or

any other connivance taking the children to the school.

• Personal information is verified from the other persons mentioned

in the form as references, and it is ensured that they all are willing

to give the guarantee of the applicant or any other necessary

information regarding the client can be taken from them.

• A handwritten brief on the social status of the client, his repute and

other crucial information is put on plan paper and is attached with

the verification letter.

This form and report now goes to the credit appraisal department for

necessary remarks regarding his position and finalizing his financing terms.

Finalizing of Processing
The processing department ends its working when after the approval

following jobs are done

1. Taking post dated cheques from the client

2. Taking down payment form the client

3. Taking signs on the legal document from the customer

4. Taking any other required thing may be some document, or some

personnel guarantee.

5. Printing the legal documents

6. Printing the credit proposal
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7. Printing the purchase order

8. Printing the cheques

9. Taking credit approval

10. Marking final of the case

11. Sending the hard/soft copy of the case to the head office by mail and email.

All these are very essential functions of the department

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2.Credit Appraisal Department

This is very important department in a way that here the client profile is

evaluated against the information he provided into the application form. So

that any discrepancy if there can be picked up and can be evaluated. In this

way the appraisal officer for final approval puts remarks on his report from

the manager.

The essential remarks can be regarding

• Increase in down payment

• Taking some personal guarantee

• Some advance rentals.

Actually this department is for the pre refining and analysis of the whole case

so that when it is going to be finally remarked by the managers, every thing

briefly be described on the back of the verification report. In this way

comments will be finalized by the manager.

Since the verification report is the main document upon which the client is to

be valued so that is why it is very much necessary that this report should be

kept secret and confidential. Only appraisal officer having indepth knowledge

regarding the credit criteria is authorized to read and comment on it. It is

very necessary so that the final decision should be made without any biases

and should be as it should be.

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3.Rental Recovery Department
This department is quite crucial in its own way. Since rentals are the inflows

and source of liquidity for the firm, so any firm prompt in collecting the

rentals is considered as a good and flourishing firm.

Rental Calculation
Client is informed about his rental at the time when he comes for his lease

booking, there is a proper system designed that automatically calculates the

rental by incorporating the initial payment made by the customer. This initial

participation is called equity participation from the client. In this equity

participation his first rental, his advance insurance for the first year, and

documentation and verification charges are also included. Then system

generates the rent per month. This rent also includes the insurance portion.

Categories of Rentals
Rental recovery department deals for the following categories of rentals

1. ACBL Rentals

2. ALL Rentals

3. CORP. Rentals

These categories are further dealt by individual officers so that maximum

concentration can be put on the recovery process and control the inflows.

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Rental collection
Rental collection is a long drawn process and dealt carefully, for this purpose

the customer is coached and is provided with psychological handling and

treatment, so that he could realize the obligation and importance of honoring

his commitment which not only reduces his financial burden but leaves a

good impression about him as a good customer who can be helped and

assisted during his financial crunch.

Procedure of rental collection
Rental collection requires a smooth and uniform procedure for effective

implementation and reporting. The two main procedures are followed

regarding rental recovery

1. Through Head Office

2. Through Branch

Through Head Office

The rental cheques of the client booked in the name of Askari Commercial

Bank are presented by the Head Office itself and aging is monitored at H.O

level. These cheques are presented to the respective bank. But when the

cheques get bounced these are sent back to the branch and now it is the

responsibility of the branch to remind the clients and get recover the rentals.

In this way ACBL rentals are monitored both at H.O and branch level with

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full concentration. Aging reports from Head office are received weekly or

monthly and updated accordingly.

Through Branch

For the rentals of vehicles booked in the name of Askari Leasing Limited

following procedure is followed;

Step 1

Between 20th and 25th of every month computer generated letter are

dispatched by the operation department to the concerned branches for

further delivery individually to their Askar clients reminding them of their

rentals falling due on 1st of next month and their obligation to ensure

availability of necessary funds for the clearance of their cheques issued by

them.

Step 2

Before the 1st of every month (around the 25th of previous month) each branch

receives a list of cheques from operations department of head office along

with the cheques and payment slips, which are due for the payment of 1 st of

next month.

Step 3

After receiving the cheques and list of these cheques, branches present these

cheques to respective banks, as response these cheques either go to

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• Clear

• Hold

• Bounced

Step 4

Bank statement of Askar accounts are sent by each branch to Head Office

along with the copy of the list of cheques received earlier giving status of each

cheque and action in hand.

Treatment of Bounced Cheques
When a cheque is bounced after presenting it, two times the following action

is taken;

1. A report is sent to the respective branch having the client’s name, address,

phone number, and lease rentals.

2. On confirmation of a bounced cheque a warning letter is issued to the

customer directly informing him about the status of his payment and the

company right of repossession.

3. Rs. 500 as penalty from each customer against the bounced cheque is

taken from the customer.

4. In case the client does not cooperate with the company with respect to

payment of rentals, the company is obliged to repossess the vehicle with

the help of Askari Guards.

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Repossession of Vehicle
Repossession capability contributes a lot in making the product “asKar” a

success. Askari Leasing Limited has a strong and effective repossession

capability.

This capability can b e termed as a key factor in handling default cases and

this makes the product a profitable proposition. The success of the product

depends upon this capability.

The strength of repossession besides injecting more confidence in the team

prompts them to be more aggressive in selling the product than being so

conservative and limited in selling the product. On the other hand it conveys

a message on the behalf of Askari Leasing Limited that it will not allow any

deviation from the rental payment by the customer.

Procedure for Repossession

If any client has is irregular in his payments behavior or in case if he defaults

than following steps are taken for the repossession of his vehicle;

Step 1

For repossession relevant details are provided to the repossession agency

regarding the vehicle and the customer by the branch manager.

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Step 2

An authority letter by the branch manager for repossession of vehicle on

behalf of ALL is issued to the repossession agency.

Step 3

A letter to the concerned police station is issued informing them of the

customer having defaulted from the agreement and the action being taken for

repossession provided by the agreement.

Step 4

A letter is handed over to the client or the one using the vehicle at the time of

repossession informing the lessee that the vehicle has been repossessed by

ALL and that he should contact at a given address in case he needs further

clarification. The letter is accompanied with an inspection report showing list

of contents and condition of the vehicle duly signed by one or two witness

depending upon availability.

Step 5

The police station if earlier informed of the intentions to repossess the vehicle

is informed when the vehicle has been repossessed.

If the case is steeled through negotiation after repossession, the client is

charged either a fixed amount or twice the actual payment made to agency

for recovery as repossession charges besides the recovery of outstanding dues

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and the fine if any. Repossession charges are however recovered from the

client whenever a vehicle is repossessed irrespective of the fact that how cases

finally settled.

Termination of Lease
Termination of lease is made on completion of all formalities or requirements

having adjusted against all outstanding dues against the customer.

Lease termination may be

1. After repossession

2. Voluntary Termination

If the termination of lease is warranted, the first choice is of the lessee to pay

for the outstanding dues and get the vehicle back on ownership.

Next option is the auction of vehicle in open market. For this an

advertisement to the effect is given in the desired print media, having

recovered own dues from the proceeds of auction, the principal amount paid

by the lessee is reimbursed out of the balance and lease is terminated.

Voluntary Termination

In case a lessee decides to discontinue the lease voluntarily, his lease is

terminated using the following options;

• When lessee wants to retain the vehicle

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When lessee pays the balance principal and the termination charges. Transfer

of ownership and registration is the responsibility of the lessee.

• When the lessee does not want to retain the vheicle

The vehicle is auctioned, from the proceeds Askari leasing retains his dues

along with the termination charges, the principal paid by customer is

reimbursed to him.

4.Insurance Department

According to the terms and conditions for taking a vehicle on lease the

insurance is mandatory for the client, it is because the vehicle is in the name

of the company so it is better for the company to have it fully insured so that

in any case, damages and losses can be recovered from the insurance

company.

Types of Insurance

Insurance can be of the following types;

1. 4%

2. 4.5%

3. 5%

Due to difference with respect to the applicability of different clauses

insurance claims may vary so a brief detail of ever type is given below;

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4% insurance

If client wants to have insurance at 4% then in the case of accident or any

other loss that may be of any kind there will be certain deductions and certain

depreciation charges as well. Depreciation is most of the time 20% annual.

4.5% insurance

Insurance in this type, covers every type of loss but only depreciation will

have to be born by the customers.

5% insurance

Insurance of this category is called comprehensive insurance. It means there

will be no deductible and no depreciation charges. What ever the claim may

be it will be fully recoverable.

Deductibles

Deductible amount for different cc cars is as:

CC Amount

800 2000

1000 3000

1300 5000

1600 7500

2000 10,000 and so on .

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Procedure of Insurance
For the insurance of vehicle following procedure is adopted in the branch;

• when the company books the lease an case is processed at head office level.

After approving at head office, purchase order is issued to the dealer.

• Dealer purchase the vehicle and manufacturer delivers the vehicle invoice

to the dealer.

• After receiving the invoice of vehicle client himself or the dealer on behalf

of the client brings the invoice to Askari Leasing.

• Askari Leasing provides the client F form for the registration of Vehicle

which is signed and stamped.

• Client goes to the excise and taxation for the registration of vehicle

• Client then presents the copy of this registration to ALL and delivery

order is issued along with the insurance covering letter, and authority

letter.

• After this procedure insurance policy is issued and it is handed over to the

customer.

Insurance Claims
In case of accident the client is provided with full coverage. In case of any

accident, the client informs the Askari Leasing about the accident.

The insurance company then appoints a surveyor who take the details of the

accident and damages of the vehicle.

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The surveyor notes down the damages occurred in the accident an makes a

report containing the assured, policy number, period, vehicle make ,engine no

, chassis no, license number etc.

This report is given to the office of Multan in case of efu general insurance an

then it is sent to the head office at karachi.

From the head office of the insurance company it is sent to the Askari Leasing

head office. Then at the end the payment cheques regarding these claims

come to the branch and according to the conditions client gets the claim.

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Marketing Department
Marketing department is the backbone of the organization. This department

is very crucial with respect to the working of organization and its

performance. This department is supervised by highly motivated and

enthusiastic officers called Marketing Officers.

It is their job to market their product with in the premises and outside the

premises as well. Whenever the client enters into the premises of the

organization he is fully informed and detailed about the product and its

features and all other terms and conditions.

Product Portfolio
The company product portfolio is as given below;

1. Cars (asKar)

2. COI’s ( Certificate of Investment)

3. Medical equipment

4. Industrial equipment

5. CNG Stations (under process)

6. Consumer Goods Lease Facility to Elite Class Customers

The major is asKar, to make it more attractive there are two supportive

slogans

• asKar and get one

• No eligibility

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The first one reflect the case of transaction an the second one highlights the

fact that everyone is qualified to apply for schemes. These characteristics are

extensively publicized through the media.

Main features of asKar

Following are the main features of asKar,

• Lease any new car up to Rs.10 Million cost

• Down payment 25% of the cost in regular packages

• Insurance is mandatory

• Facility ranging 3 to 5 years

• No documentation

• Processing time 24 hours

• Earliest delivery

Classification in asKar Departments
Client categories in asKar is as follows;

• asKar Individuals

• asKar Corporate

AsKar Individuals

asKar offers the most convenient and affordable vehicle-financing scheme

providing an opportunity to won a brand new car of customer’s own choice.

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Documents Required

1. Photocopy of NIC

2. Copy of driving license

3. One passport size photograph

4. Verification charges deposit slip

Salient features of asKar Individual

• New vehicle of any brand valuing up to Rs.100,0000.

• The financing period is 36,48,60 months.

• Insurance through the company is mandatory and first year insurance is

taken up front.

• Documentation charges of Rs.3000 inclusive in down payment and non-

refundable 1000 verification charges.

Terms and conditions

• Registration cost, capital value tax (CVT) and all other costs are born by

the customer.

• All rentals should be paid in advance and should be on the first day of

every month.

• Customer will give 35,47,59 post dated cheques at the commencement of

financing facility each having a value of monthly rental.

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• Disbursement will be made after the completion of all legal documents,

comprising of either lease or Morabaha agreement.

• Company reserves the right to disapprove the case with out giving any

reasons to the client.

• Down payment shall not be received in cash, it will be either trough

demand draft or cheque or pay order.

Essentials for case processing

Following are the essentials of case processing,

• Application form should be properly filled

• One blood relative and one friend reference is required.

• Application form should be signed by the client

• Verification charges deposit slip should be properly attached

asKar Individual financing
Vehicle is financed in this way in asKar individual financing

1. Scheme vehicles

2. Regular vehicles

3. Commercial vehicles

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Regular vehicle Financing

For regular vehicle financing following essentials are there to be fulfilled;

• 25% down payment

• Rs.1000/= verification charges are must

• Ist year advance insurance is inclusive

• No rental off.

Commercial vehicle financing

• The vehicles are used for commercial/business purpose

• The vehicles include of Toyota Hilux, Hyundai Shehzore, Hino Bus, and

Mazda etc.

Scheme vehicle financing

Following are the schemes running in financing vehicles, the schemes are

basically of two types

1. With up front insurance

2. With No Up front insurance

Insurance up Front

It means that first year insurance is include in the down payment; hence

following schemes fall in this category;

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1. Shehzore scheme

2. Kia Classic Petrol

Shehzore Scheme

Following are the main features of Shehzore scheme


• No processing charges

• Last 4,3,2 rentals off for 5,4,3 years respectively.

Kia Classic Petrol

Following are the main features of Kia Classic Petrol vehicle


• No processing charges

• Rentals waiver is as follows

Period Rentals off

3 years 23,35

4 years 23,35,47

5 years 23,35,47,59

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No Up front Insurance

In this case advance insurance is not included in down payment, following

schemes are included in this category;

1. Kia NGV

2. Santro

Kia NGV

Following are the main features of KIA NGV


• No verification charges

• Rentals waiver is 5,4,3 off for 5,4,3 years respectively

• No advance insurance

Santro

Following are the main features of Santro scheme

• 7.5% down payment

• No verification charges

• Rentals waiver is 5,4,3 for 5,4,3 years respectively.

• No advance insurance

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asKar corporate financing
Askari leasing offers handsome package for corporate financing, with respect

to the suitability of the vehicle to their business, they can have a car of their

own choice. There is no restriction upon the clients with respect to their

concerns, any type of business can be financed.

Every company partnership, sole proprietor ship, clubs, societies, or any

other business concern falling on the financing criteria can get a vehicle

through Askari leasing limited. Leasing is very attractive for corporate clients

to enjoy the tax benefits. Compliance of prudential regulations is a statuary

requirement for all the customers willing to avail corporate lease financing.

Salient features of asKar Corporate

• New vehicle of any brand

• Financing period for non commercial vehicle can be 36,48,60 months.

• Financing period for commercial vehicle can be 72,84 months

• Insurance of vehicle is necessary

• Documentation charges are Rs.3000/=

Terms & Conditions

• Registration, CVT and all other costs will be born by the customer.

• All rentals will be paid in advance and on the first day of every month.

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• Post-dated cheques will be provided by the customer at the time of

commencement of lease.

• Disbursement will be made after the completion of all legal documents.

• Personal guarantee of directors, partners are required.

• Due compliance of prudential regulations by the customer availing

corporate asKar facility.

• Total facilities to a customer from NBFI/ banks must not exceed of times

of the customers’ capital and reserves.

• Current ratio must be 1:1

• Debt equity ratio must not exceed 60:40

• Clear CIB report from SBP

The customer must provide his accounts in the following manner

1. Where the exposure does not exceeds Rs.2000,000/= accounts should be

duly signed by the borrower.

2. Where the exposure exceeds Rs.2000,000/= but not 10,000,000. Then

accounts should be duly signed by the borrower and also by a charter

accountant.

3. Where the exposure exceeds Rs.10,000,000. Then accounts should be

properly audited.

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Types of Corporate Lease Financing
Corporate where askar deals can be of following types;

• Sole proprietorship

• Partnership

• Public/ private ltd. Companies.

Documents Required For Sole proprietorship
• Photo copy of NIC

• Last three years income statement

• Last three years balance sheet

• Last three years income tax returns

• PG. of Proprietors

• Verification charges of Rs.1000.

Documents required for Partnership

• NIC copies of partners

• Partnership deed

• Last 3 years income statement

• Last 3 years balance sheet

• Last 3 years income tax returns

• PGs of Partners( two partners)

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• Verification charges, 1000.

Documents required for public /private limited companies
• NIC copies of directors

• Memorandum and article of association.

• Certificate of incorporation

• PGs of directors

• Last 3 years, income statement, balance sheet & tax returns.

• Verification charges Rs.1000 through pay order or cross cheque or cash.

Reference required for sole proprietor ship
• Two friends and two blood relatives

• Tow customers/bankers/suppliers.

Reference required for Pvt./public Limited companies
Following references are required for this category

• Two directors/ two partners

Preferred Market
The ideal markets for the Askari Leasing limited are following;

1. Professionals

2. Bankers

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3. Women

4. Doctors

5. Govt. servants.

6. Textile sector

7. Export oriented business

So these categories are very much important and preferred so far as the

leasing market is concerned because it is usually considered that this market

has a good credit ranking and their credit behavior regarding rental

payments is quite satisfactory.

Negative Market
Following categories are negative markets for the Askari Leasing Limited;

1. Politicians

2. Lawyers

3. Policeman

4. Generalist

5. Land lord

These negative segments can be offset by enhancing lease key money and

personal guarantee, mostly guarantee of grade 18 officer is required. Some

times advance rentals are also taken as guarantee that are adjusted at the

end of the lease period or whenever the client comes for lease termination.

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Reasons for rejection of case
The case may be rejected on the following bases;

1. If the financial position of the client is not satisfactory

2. Farad case

3. Fake information

4. Area limitations

5. Untraceable address

6. If relatives, friends and other references are not agree to give the

guarantee.

7. If there is no source of income of the client.

Calculation of rental
It is very important to know how the rent is being calculated for a vehicle,

like how lease key money is generated and how the insurance and other

information regarding rental is calculated.

For understanding we take a hypothetical case o vehicle worth of Rs. 450,000/

=to be leased.

There are two ways of doing the calculation.

1. Calculate Rent

2. Eligibility calculation

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Calculate Rent

The marketing officer enters the cost of vehicle in the desired lease period, the

system automatically take the minimum lease key money requirement and

provide M.O with the following numbers.

Example

Cost of Vehicle Rs.450,000/=

Duration 3Years

Equity Participation 30%,135,000(system generated)

Rental 12269(system generated)

Insurance Rental Rs.711 (system generated)

Net Rental Rs. 12980(system generated)

First year Insuarance Rs.18,000(system generated)

Total Down payment Rs.165,980(system generated)

Total down payment is the addition of net rental, equity participation and

first year insurance. The marketing officers have to add Rs.2000

documentation charges to it.

Modifications can be made in cost of vehicle, duration an equity participation

according to the needs of the client.

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Eligibility Calculations

This option is designed from the viewpoint of availability of funds with the

customers. For example lets suppose the customer informs the marketing

officer that he has only Rs.200, 000 and he wants to lease a car worth of or

Rs.450,000.

Then this amount is put into the equity participation column, in case if the

figure does not matches with the minimum down payment required than

system generates error.

Example

Cost of Vehicle Rs.450,000 (input)

Down Payment Rs.200,000(input)

Verification charges Rs.1000(system generated)

Documentation charges Rs.2000(system generated)

First year insurance Rs.18000(system generated)

So in this way all calculation are done based upon the customer requirements

and his specifications. It is tried that customer must be satisfied and treated

at high level of his satisfaction.

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Customer Service Department
In order to facilitate the customers, there is a proper department dealing with

customer inquiries and their problems related to their lease financing.

This department actually works under the supervision of marketing

department so at the same time act as a Tele marketing section of the firm.

Customers inquires are properly handled and information regarding the

leasing information and about the rentals etc is properly and immediately

conveyed to the customers. Since Askari Leasing Limited Multan is working

in a very friendly and congenial environment so when ever a walking

customer comes in, he is highly prioritized and it is tried to give him

maximum attention and not let him go away unsatisfied.

Basic functions of the department

• Dealing with customer inquiries

• Performing Tele Marketing

• Dealing walk in customers

• Follow up to the existing clients

• Hunting new customers

• Sending appreciation & letter of thanks to the customers.

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COI’s Department
Askari Leasing Limited is involved in the process of investment of the money

of the clients as well and it is done in the form of the certificate of investment.

Actually this thing for the purpose of resource mobilization and benefiting

the clients by offering them higher profits as compared to other saving

institutions.

COI’s are dealt in the following categories;

1. Individual

2. Corporate

Types of Certificates

Each category deals with the following types of categories

• Anza Diamond

• Anza Gold

• Anza Platinum

• Anza Special

Anza Diamond Certificate

In this category deposit is fixed for years and profit is given at the time of

maturity of that period. In this capital is almost doubled in 5 years. The

minimum amount in this case is Rs.10,000. And it can be invested with no

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maximum limit. Fund can be withdrawn at any time before maturity and

profit will be paid accordingly to Anza Platinum certificate along with a

penalty.

In case of individuals following payments are expected to be made upon

maturity of certificates.

Amount of Certificate Payment upon Maturity

50,000 96,271

100,000 192,541

1000,000 1925,414

Anza Gold Certificate

Anza Gold certificate offers high rate of return on maturity basis at different

maturity periods. Monthly profit on investment is paid on the 1st day of each

month for the entire period of investment with first payment due in the

following month.

Minimum amount is of Rs.10,000 that can be invested with no maximum

limit.

All the investment made after the 15th of every month is not to be paid profit

on the first of next month but investment before 15th of the month is paid

profit on the first of next month on the bases of their days of investment.

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Premature en casement is permissible where profit is paid according to Anza

platinum along with a penalty.

These certificates are best suited for housewives, pensioners, widows, and

persons who are in need of regular monthly income.

The following table gives the expected monthly profit on investment of

Rs.100,000

Deposit Period Monthly Profit

5 years 1166

4 years 1125

3 years 1083

Anza Platinum Certificate

This type of certificate deals with various maturity periods, under this scheme

client deposits money for different periods and earns higher profit for each

category of deposits. The deposit can be minimum period of 3 months and for

a maximum period of 5 years. The expected rates of profit for each category

is as follows;

Deposit Period Expected Rate of Return

3 Months 10.5%

6 Months 11%

1 year 11.5%

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2 year 12%

4 year 13.5%

Corporate rates are different from individual rates.

Profits on investment for 3,6 and one year are paid at maturity while profit

on investment more than 2 years and above are paid on half yearly basis.

Minimum amount of investment or Rs.25,000 can be invested with no

maximum limit.

Premature encashment is permissible but the profit is paid in multiple of 3

months terms, whereas no profit is paid before completion of 3 months.

A penalty is also levied on premature encashment.

Anza Special

This type of certificate is for army people and is mostly dealt at head office

level.

Additional benefits

Following are the additional benefits for getting these investments

• Loan facility up to 80% of investment

• Free accidental death insurance

• No charges on premature encashment

• Investment can be made in multiple of 10,000.

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In this way this department is also dealing in the best way for generating

funds for the organization.

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Swot Analysis of Askari Leasing Limited Multan
A company’s performance can be judge only when there are clear cut

difference exists between this and other firms operating in the same sector.

For this purpose a proper analysis of the firm is given in the forms of its

strengths, weakness, opportunities and threats, the company presently facing

or can be forecasted for the future.

Strength of Askari Leasing Limited

• Virtual Monopoly Position at Multan & SB’s

• Diffusion of Leasing Concept in Market

• Market Development and Enlargement

• Commitment, Devotion, Professionalism, Hard work, Motivation, Right

direction, and responsive behavior to Market and Clients Needs.

• Low Ratio of Defaults

• Strong Repossession Muscle

• Minimum Problems to HO

• Sound Business Practices and Cordial Relations with Dealers.

• Effective penetration and Control Lease Network

• Congenial and Friendly Working Environment Leads to Greater

Productivity, Work Efficiency and Professional Learning

• Verification Procedure

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• Innovative and Trend Setter

• High Growth

• Market Leader in Terms of Market Share

• Army Sponsored - Strong Image

Weaknesses

• Inexperienced Though Professional and Energetic Fresh inducted

personnel and Branch Structure at Formatting Stage.

• Predominately Agrarian Economy.

• Lack and Vacume of New Products Meeting Marketing Needs.

• Lengthy/ Delayed asKar Cases Processes Time At H.O

• Low AGL Sales Package and Dealers Commission/ Incentives

• Service Features/ Insurance, Claims, Lease Termination/ Refund are

delayed

• Change of Assets on Existing Leases

• Lack of Training Facility and Operational manuals.

• Lack Of Promotional Material

• Heavy Dependence on H.O for Information Required By Clients

• Discrepancy in asKar Cases

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• Lower Level Perception and importance given in Lease Investment to This

Region Vis-a-Vis Larger Industries and Commercial Cities in Over all

Corporate Strategy and Planning

• Non Existence of Own Office Premises at SB’s

• Lack of PC’s and Equipment at SB’s

Have Large Customers Database Contrivance for any Diversification or

Launch of New Consumer Lease Products following measures should take

• Employees Training.

• Better Sales Employees Package with Sense of Belongingness and Security.

• Lower LKM for Repeat Leases/ Existing Clients.

Opportunities

• Franchise for Consumers Durables.

• Attractive Compensation Package.

• New Products for Agriculturists

• Lease Financing for Medical Equipments, PC, NoteBooks, and Office

Equipments.

• Prestigious asKar Club

• Establishment of Training Department at HRD

• More Decentralization with Equipped Capabilities.

• Formation of regional Setups.

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• CNG Vehicles to be Capitalized

• CNG Kits Financing to Existing Clients

• Dealers Reps Training Courses and Get together and Incentives to

Dealers.

• Improve Service Side

• Have Marketing Department Gimmicks Like asKar Rallies and Cross-

Country Races.

Threats

• Entry of New Competitors

• Saturation and Maturity in Product Life Cycle

• Crop Failures in Absence of Agri Insurance

• Better Products and Services by Competitors

• Failure's of New Brand of Vehicles

• Dwindling and Mergers

• Adverse Economic Situation in Paying Capacity of Market and Clients

• Downward Price Trend in Second Hand Car Market

• Dealers Suiting Loyalty to Competitors

• Slow Processing of Cases Especially ACBL

• No Eligibility- Copy

• Lower IRR and LKM by Competitors

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• Lower Demand of Diesel Vehicles.

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