Leasing Market

1. Introduction:

Bangladesh is a small country densely populated country in the South Asia. The people of it mainly depend on agricultural. So that land is the main asset of this country. Due to globalization and liberalization the country gradually shifting towards industrialization. Financial globalization does not always work to encourage economic development because it often leads to devastating financial crises which are a great problem like the developing country Bangladesh. Recently the people of this country are taking risk and are establishing business enterprises. But these entrepreneurs are faced with various problems such as, scarcity of initial capital and shortage of working capital. The businessmen and industrialists need loan for long term and they try to direct financing from commercial banks, specialized banks and other financial institutions. Receiving long term loans from direct financing institutions in Bangladesh is very difficult. Lease financing is the most important issue which determines the direction of financial behavior in an organization, a financial level of effort, and the organizations level of perseverance in the face of obstacles of other types of financing. Leasing was able to confirm itself in many developed countries as one of the most effective and available mechanisms for financing the expansion and development of the means of production, asset finance necessary for the development and for the application of new technologies in business. Recently some leasing companies of Bangladesh are providing loan to the businessmen and industrialists. They provide loan with some conditions such as, length of lease term, interest rates, renewal and purchase options, cancellation provision and penalties, guarantees by lessee of residual values, amount and timing of lease payment etc. Leasing is a contract between the owner of the asset which is called lessor and the business that wants to lease the equipment is called lessee or client. The broader definition of the of leasing is a trade and financing method by location by financial institutions specializing in these operations, by financial institutions or directly by manufacturers, to companies that carry out particular operations, or do not have sufficient borrowed or own funds to buy them. The harmonization of the legal framework for international leasing was accomplished on the 28May 1988, by the adoption of the convention on international financial leasing by the Commission of the International Institute for Uniformity of Private Law (UNIDROIT), at Ottawa, which 59 countries participated and signed .Financial globalization is primarily confined to rich countries that are from rich to other rich countries rather than, from rich to poor countries. Most international capital flows are just exchanges of assets between rich countries and are not flowing to poor countries to enhance their development. But in recent years there is a huge increase in international capital flows. Lucas (1990) has pointed out that labor is incredibly cheap in poor countries, and so that capital would be very productive there. In a poor country wages are one-tenth those of in the USA, so that running a factory might be profitable there. Capital should have extremely high returns in poor countries and we would then expect massive flows of capital from rich countries where the returns on capital should be far lower to poor countries where it is higher. Indicates that as we will see the main reason why capital does not flow from rich to poor countries is because of the weaker institutional environment in poor countries. The USA has the largest leasing industry in the world and lease financing contributes approximately one-third of total business investments. The USA is currently running enormous trade and current account deficits of over$600B (billion) because Americans are buying more goods and services from abroad than they are selling overseas. These deficits are being financed by loans from foreigners, with emerging market countries providing on the order of $200B per year. The Chinese government has accumulated almost $800B of foreign assets, and is now one of the largest holders of the US Treasury Securities in the world. Mohajan (2012) has discussed the comparison between lease and purchase of a machine of a competitive firm with detail mathematical calculations.

2. What is Leasing Market?

Leasing means a legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the property owner) regular payments from the lessee for a specified number of months or years. Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid. The financial leasing is an effective investment in fixed funds of the enterprises; depend not only on the existence of laws, but also on the accuracy of leasing operations, effective risk management and a favorable investment climate.3. What does it do?

A lease is a contract whereby the owner of an asset (the lessor) grants to anotherparty (the lessee) the exclusive right to use the asset in return for the payment ofrent. Lease financing in Bangladesh means financing according to the methods ofleaseinBangladesh.Leasing companies offer a way for businesses and individuals to use assets without buying them outright. The functions of a lease business include lease financing, short-term financing, house building financing, and merchant banking and corporate financing. In this last group of functions, the leasing business in Bangladesh moved away from regular leasing activities and is now involved in stock-market related activities such as issue management, underwriting, trust management, private placement, portfolio management, and mutual fund operation. Broad capital market operations of the lease financing institutions include bridge financing, corporate counseling, mergers and acquisition, capital restructuring, financial engineering, and lease syndication. Prominent among the sectors of the economy that now receive lease financing services are textiles, apparels and accessories, transport, construction and engineering, paper and printing, pharmaceuticals, food and beverage, chemicals, agro-based industries, telecommunications, and leather and leather products.1. Lease Financing,

2. Short-term Financing,

3. House building financing,

4. Merchant Banking

5. Corporate Financing.

6. Issue Management

7. Underwriting

8. Trust Management.

9. Private Placement

10. Portfolio Management.

11. Mutual Fund Operation.

12. Bridge Financing,

13. Corporate Counseling

14. Mergers and Acquisition,

15. Capital Restructuring,

16. Financial Engineering,

17. Lease Syndication.

4. Why do we need it?

Leasing companies conserves capital and preserves bank linesLeasing frees up cash for other income producing investments and can be structured to allow a faster tax write-off. A lease covers many soft costs and doesn't require significant down payments. Your new equipment is making profits immediately without touching your cash reserve, thus allowing you to use cash resources in other areas. Additionally, it keeps your credit lines open to handle seasonal inventory requirements or emergencies. Your bank may be reluctant to grant fixed rate equipment loans, which tend to require larger down payments and compensating balances, and may not be knowledgeable about equipment purchases. Overcomes tight budget limitationsmany firms have found that small monthly payments for leased equipment can be squeezed into the tightest of budgets. A lease helps justify a purchase to management who may have delayed a decision until next year because of budget restrictions. Leasing enables companies to acquire equipment they might otherwise have not been able to afford. 100 percent financingLeasing provides 100 percent financing on the needed equipment including software. Service contracts, training, sales tax, freight and installation charges all can be incorporated into the lease structure, reducing the initial cash outlay. Hedges against inflationthrough leasing you can acquire equipment at today's cost, but your monthly expense payment is made with tomorrow's inflated dollar. This is the clearest advantage of leasing. Eliminates obsolescenceAdvances in technology are being made quickly. To help you remain competitive, some leasing companies offer no penalty upgrades so that your equipment is alwaysstate-of-the-art. Fast tax write-off (operation lease)a true lease (without mention of purchase price at termination) can be written off 100 percent as an operation expense, which is faster than depreciating the equipment. The resulting deferral of tax liability results in lower cost on a present value basis. Balance sheet effectLeasing provides off-balance sheet financing and is recorded as an operating expense providing greater flexibility to overall corporate planning. Equipment purchased with borrowed money increases liability and decreases liquidity. Similarly, cash purchases have the same effect by increasing fixed assets and decreasing current assets, therefore reducing liquidity necessary for future business decisions. Leasing is convenient and flexibleEasy documentation and credit processing, unlimited choice of equipment and vendors, inclusion of soft costs and a wide variety of payment schedules to meet any budget challenge contribute to make leasing the right financial move. Equipment leasing pays for itselfthrough leasing you can pay monthly rentals out of savings or increased profits derived from the equipment use. Your company can grow with reduced riskthrough incremental monthly payments you can expand and evolve your business to meet the next competitive challenge. The idea behind your equipment acquisition is business growth. There are many reputable leasing companies that specialize in the mold making industry. Find one that can offer the flexibility to structure a lease that is tailored to your needs.4.1 Shifting the risk of technological obsolescence: In the case of ownership, the firm bears the risk of the asset becoming obsolete. This dimension of potential risk is too important to be ignored and particularly in the present equipment more expensive to operate and totally inadequate to meet the company's competitive needs and thus inflict heavy losses to the firm. Leasing provides a cushion against all such hazards by shifting the risk of obsolescence of equipment to the lessor.

4.2 Easy source of finance: A lessee avoids many of the restrictive covenants that are normally included in Long-term loan agreements while borrowing from financial institutions or commercial banks. Besides, the leasing does not warrant any mortgage or hypothecation of the asset since it belongs to the lessor. Above all, in the case of leasing, the asset is made available to the lessee for immediate use without loss of time in applying for loan, waiting for its approval, buying asset subsequently, etc. and lease rental payments may also be matched with the cash flows availability of the lessee.

4.3 Enhances liquidity: The use of sale and lease back arrangement may permit the lessee firm to salvage its weak liquidity position by converting its existing fixed asset into cash, the funds so released can be used to augment its working capital funds. A firm having shortage of working capital or foreseeing liquidity crisis may exercise the option of selling the owned asset to a lessor and take it back on lease basis.

4.4 Conserves borrowing capacity through Off The Balance Sheet financing: Leasing is considered a 'hidden' form of debt in that the company can acquire the use of an asset without having the lease obligations appear as liability on its balance sheet. If the assets were purchased and financed by borrowing, both the asset and borrowed funds would be shown in the firms balance sheet. Traditionally leasing provides off-the-balance sheet financing keeping the firms debt raising ability intact. The traditional accounting entries accompanying leasing make a company appear to be in a better borrowing position than a company that purchases equipment outright. (Samuels and Wilkis, op. cit. p . 311)The inclusion of debt in the balance sheet raises the debt equity ratio of the firm, which in turn restricts its future debt -raising capacity. In other words, the practice of omitting the lease obligations from being recorded in the balance sheet has a favorable effect on the financial position of the lessee firm.

4.5 Tax benefit: Lease payments, i.e. lease rentals made by the lessee are entirely deductible for tax purposes because lease rentals are treated as revenue expenditure and thus provide a greater tax benefit for the lessee in comparison to borrowing from banks. In order to avoid the hostile of explanation of source of fund to the income tax authorities for acquisition of capital assets, it is preferable to go for lease rentals. Particularly, in case of acquisition of cars as per existing income tax law, the cost of any such car valuing beyond Tk. 7.5 Lakh is not allowed as deductible expense. But under lease finance such expenditure is fully allowed.

4.6 Hedge against inflation: Payments of lease rentals are usually spreading over a number of years, so the real cost of acquisition can be reduced which acts as a hedge against inflation. In addition to the above benefits, leasing companies have special commitment of providing financial assistance through leasing to (1) all-level entrepreneurs for a wider range of asset acquisition from motor vehicles to large industrial machinery plant; (2) medium, small and micro-level entrepreneurs who have no easy access to commercial credit/loans for establishing small and cottage industries such as medium and small scale Textile looms, Printing and Packaging machinery, Handloom, Hatchery, Poultry, Fishery equipment, Power pumps, Power tiller etc.; (3) Engineers, Doctors, Technologists etc. who have technical knowledge but have lack of financial assistance for establishing small/micro enterprises/industries; (4) skilled and semi-skilled persons who have no employment opportunities or access to bank loans or other sources of fund for establishing light engineering workshop/small enterprises by providing lathe machines, welding machines and other required tools, Computers, Photo copiers, Type writers, Auto rickshaw, Van, Tempoo, Pick-up etc.

5. Who participates in leasing market?

Leasing company provides capital assets to other firms and individuals for a certain period of time. Those client companies provide return of regular payment to the leasing companies. The lessee is the receiver of the asset and lessor is owner of the asset who gives that to lessee for time being. Leasing assets includes vehicle, furniture, office equipment, appliances, heavy machinery, construction equipment, ship, airplane, industrial equipment and mining equipment. Other than that leasing company provides financial lease. Leasing firms also work as an investment bank they underwrite shares for initial public offering. Other than that most of leasing company in Bangladesh reacts as a merchant bank. Leasing maintains portfolios and mutual funds. Some leasing firms provide counseling and research for businesses. Now many types of participants we can find in a leasing company they are,

Banks: Banks are the primary source of fund of leasing companies. Leasing companies took loan from banks against that rate they provide financial lease.

Depositors: Now most of the leasing company in Bangladesh works as a bank. So FDR is the new and cheapest way for them to acquire funds.

Industrial Company: Industrial companies use heavy machinery, land, building, vehicles which could be a very costly initial investment its better to take lease of that machinery rather buying it.

Service Company: Service Company needs office building, vehicles, appliances, furniture, equipment continuous upgraded technology is needed so buying those assets and selling that after some period will be a total waste of money hence the requirement of leasing company comes.

Apart from that maintains mutual funds, portfolio, capital restructuring, forms syndicates to issue new shares, corporate counseling, and initiate private placements to other companies and financial institution. 6. Goal of that Leasing Company:

All businesses should set goals. As part of the planning process, the management team establishes goals for the short term, the upcoming year, as well as for the longer term, the next three to five years. Having goals in place helps focus the management team on the operational steps it must take and the resources it needs to meet these targets. Reaching key non-financial goals improves the company chances of achieving important financial targets such as revenue and profitability.

6.1 Customer Satisfaction:Achieving a high degree of customer satisfaction--and improving on that rate each year--should be a major goal of any business. Keeping customers satisfied provides the opportunity for repeat business. Satisfied customers are likely to tell their friends or associates about the positive experience they had, generating additional customers. In the case of a company that sells to other businesses, being able to provide endorsements from customers can be crucial to closing a sale with new customers.

6.2 Long-Range Vision:In the beginning, a start-up company major concern is survival, being able to successfully launch the company within the constraints of the financial resources it has and reaching positive cash flow as soon as possible. When the company emerges from this initial phase, the management team should begin thinking how the company will evolve over the longer term. Considerations include new markets the company could enter or additional products that could be developed. The goal should be to create a company-wide emphasis on identifying opportunities that are emerging so the company can pursue them before competitors do.

6.3 Planning and Reporting Systems:The management team of a start-up creates a business plan for the venture to present to possible investors or lenders, which also serve to guide them as they build the company, much like a blueprint in a construction project. As the company grows, the planning process must be ongoing, including regularly gathering information about competitive activity and comparing actual results to forecast numbers on at least a quarterly basis.

6.4 Employee Training and Development:Revenue growth and business expansion inevitably create additional complexities and responsibilities for the management team. Give existing staff members educational opportunities to improve their skills and capabilities as managers. Expect each key employee to create a career development plan to make certain they acquire the skills needed to be part of the team as the company grows.

6.5 Policies and Procedures:A small company may not need to have detailed policies and procedures written down. But as the company expands, documenting work flow and methods and articulating company policy becomes a higher priority. New employees need direction about the company business philosophy, the company culture and what you expect of them so they can step in and be immediately effective. The original management team may be shuffled and their old positions filled with individuals from outside the company. The need for this documentation is a sign the company has left the start-up stage and is in a true expansion mode.

6.6 Community Involvement:Most successful businesses try to contribute time and financial support to improving the quality of life in their community--being a good corporate citizen. This support could include sponsoring charity events and encouraging employees to get involved in worthy causes. Initially, the goals for community involvement could be modest in terms of dollar commitment. Any efforts to get involved can enhance the company reputation and give its brand name additional exposure.

7. Brief history of leasing market from Bangladesh perspective:

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 ofBANGLADESH BANK. It was a joint venture ofthe 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. 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. Lease financing, as organized in Bangladesh, operates with the following objectives: (a) to assist the development and promotion of productive enterprises by providing equipment lease financing and related services; (b) to assist in balancing, modernization, replacement and expansion ofexisting enterprises; (c) to extend financial support to small and medium scale enterprises; (d) to provide finance for various agriculture equipment; and (e) to activate the capital market by operating as managers to the issue, underwriters, or portfolio managers. The functions of a lease business include lease financing, short-term financing, house building financing, and merchant banking and corporate financing. In this last group of functions, the leasing business in Bangladesh moved away from regular leasing activities and is now involved in stock-market related activities such as issue management, underwriting, trust management, private placement, portfolio management, and mutual fund operation. Broad capital market operations ofthe lease financing institutions include bridge financing, corporate counseling, mergers and acquisition, capital restructuring, financial engineering, and lease syndication. Prominent among the sectors of the economy that now receive lease financing services are textiles, apparels and accessories, transport, construction and engineering, paper and printing, pharmaceuticals, food and beverage, chemicals, agro-based industries, telecommunications, and leather and leather products. Commercial banks and development finance institutions (DFIs) have been the traditional lending institutions in Bangladesh. In fact, the concept of lease financing is a relatively new one in the country. Initially, leasing companies had to adopt the role of educators to make Bangladeshi entrepreneurs aware of the benefits of leasing. However, as DFIs demonstrated poor recovery and fund recycling performances, leasing got the opportunity to develop as an alternative source of funding. A few other factors also contributed to development of the leasing business in the country. For example, the commercial banks have been keener in providing trade financing and foreign exchange dealings rather than long-term loans because of the risks involved and their longer gestation period. The selection of lease proposals is relatively free from extraneous pressure and is subject to a quality level appraisal. Under lease agreements in the private sector, projects are sanctioned and implemented expeditiously, resulting in benefits in time and cost savings. Private leasing companies also attract clients by providing relatively better services. The down payments in leasing are not high and the gestation period is low. Also, in case of lease financing, incidental costs incurred in the process of import clearing, installation, and commercial production are capitalized, which substantially reduce the initial investment. Leasing companies, however, face some problems in conducting their business in the country. The relatively slow growth of the demand side compared to the fast growth of the lease business is one such problem. This leads many leasing companies to operate in partial capacity. The culture of loan default that prevails in the country is also a deterrent. Leasing companies often find it difficult to raise funds through short- or long-term borrowing from money and capital markets. They are hard pressed to deal with the financial assets because of the present laws of the country, which are also not fully enforceable. Leasing business is gaining increased importance in the economy of Bangladesh with its gradual transformation from an agrarian to industrial one. The government periodically revises the trade and industrial policy to create a liberal business environment both for domestic and foreign investment. Increased investment in the energy sector as well as in power, transport, telecommunications, water and sanitation, and safe disposal of wastes is expected to bring further opportunities for leasing industries.

Now well try to mention some key milestones that these companies have achieved. We will from the top the list, Infrastructure Development Company Limited (IDCOL) was incorporated in 14 may 1997 it was registered as NBFI from Bangladesh bank in 5 Jan 1998. Their first financing was with Meghnaghat power Ltd for a 450 MW independent power plant. IDCOL started solar home system initiative. They have also started national domestic biogas and manure program. IDCOL crossed the milestone of 1000 MW power generation capacity in 2013. In 2014 its paid up capital reached BDT 2500 million. Phoenix Finance and Investments Limited incorporated and started its business 1995. Phoenix signed their first leasing agreement in 21 Sep 2015. It was listed DSE and CSE in 2007 and achieved 500 crore BDT. Union Capital Ltd started their business in 1993. They signed their first leasing agreement in 1999. In 2000 they were registered as a merchant bank. They were announced AA credit rating in 2006. Union Capital was listed in DSE and CSE in 2007. Bay Leasing & Investment Limited was incorporated and licensed as NBFI in 1996. They signed their first leasing agreement in that year. Bay Leasing held their first leasing in 1997. It was listed in DSE and CSE in 2009 and also issued right share after a year. Peoples Leasing & Financial Services Ltd was incorporated and stared their business in 1996, started their business in 1997 but signed their first lease agreement in 2002. By 2005 they have launched SME and home finance and list in DSE and CSE. In 2010 they issued preference share. First Lease Finance and Investment Limited (FLFIL) established in the year 1993, currently its working on operating lease financing, term loan financing, real estate financing and housing financing, SME financing The companys Authorized Capital is Tk. 5,000.00 million divided into 500 million ordinary shares of Tk. 10 each. The Paid up capital comprise of statutory reserve and issued share. The Statutory reserve stood at Tk. 254.42 million and issued share (Paid up capital) stood at Tk. 503.12 million as on 31 Dec 2011. The issued shares comprises of, Sponsor Shareholders Group, Directors Group, Individuals Group, Institutions, Government and Semi government Institutions. Saudi Bangladesh Industrial and Agricultural Investment Company Limited (SABINCO) is a joint venture Industrial Finance and Investment Company owned by the Governments of Saudi Arabia and Bangladesh. It was incorporated under the Bangladesh Companies Act 1913 on 24th June 1984. The company commenced operation in 1986. In 1993 Bangladesh Bank granted license to operate it as a NBFI. The company has a six-member Board of Directors to which the Government of Saudi Arabia nominates the Chairman and two members, while the Deputy Chairman and two other members are nominated by the Government of Bangladesh. SABINCO currently funding in fishery, poultry, Agro, telecom, cement and pharmaceuticals industry. United Leasing Co. Ltd was incorporated in 1989, the company offers investment services, such as term deposits and loans, as well as deposit scheme, and insured deposit schemes; and secured finance services, including lease and term finance, and home loans. It also provides channel financing services, such as factoring, work-order finance, distributor finance, revolving loans, and assignment discounting; and corporate financing services comprising syndication loans. Industrial Development Leasing Company (IDLC) is Bangladeshs largest NBFI Investment banking operations of IDLC commenced in 1985. At first they operated as merchant bank their primary active was to underwrite shares. The company entered into portfolio management business by offering non-discretionary fund management services in 2004 and discretionary fund management services in 2007. IDLC Investments Limited offers Initial public Offering, Repeat Public Offering,Rights issue, Placementand Capital Raising Services. The company has helped raise BDT 14,336 million through its issue management operations, as of 2013. Uttara Finance & Investment Ltd. started their operation from 1995 and signed their first leasing agreement in that year. Uttara finance was list in DSE and CSE in 1997, Uttara finance now offering lease, working capital loan, bridge finance, personal loan, home loan, deposit scheme and so no. Uttara Finance was registered as a merchant bank 1998. International Leasing & Investment Ltd incorporated and signed their first leasing & credit line agreement in 1996. International Leasing started their capital market operation in 2004. International Leasing agreement signed with Equity Partners Ltd. to act as Issue Manager for forthcoming Initial Public Offering (IPO) of International Leasing. They were enlisted in DSE and CSE in 2007. International Leasing provided first real-state loan agreement in 2008. In 2009 they took over Hong Kong Bangladesh Securities Limited. In 2012 they were licensed to operate as a merchant bank. GSP Finance Co. (Bangladesh) Ltd was incorporated in Dhaka, Bangladesh on 1995 with the Registrar of Joint Stock Companies and Firms. It started its commercial operation from 1996. It offers term loan, bridge finance, lease finance, deposit scheme and merchant banking. Delta BRAC Housing Finance Corporation Ltd commenced their operation in early 1997. DBH finance was formed by Delta life insurance, BRAC, Green Delta Insurance, HDFC and IFC, 24.52% is traded in secondary market. Their main objective is to provide home loan but they provide different deposit schemes. Bangladesh Industrial Finance Company Limited(BIFC) is ajoint ventureLeasingand Financing Company. It is promoted by a group of foreign and localsponsors. In August 1996, it was incorporated as apublic limited company and in February 1998, it was licensed byBangladesh Bankas aNBFI. Investment Corporation of Bangladesh (ICB) is a state owned company ofBangladesh, established on 1 October 1976 under No. 40 ofInvestment Corporation of Bangladesh Ordinance, 1976. It is mainly aninvestment bank operating inBangladesh, established to accelerate the pace of industrializationand to develop a soundsecurities marketin Bangladesh. Classification of shareholders, as on 30 June 2013, shows that Government of the People's Republic of Bangladesh holds 27% of the shares of ICB and it is enlisted inDSE and CSE.8. Risk Involvement in Market:

Now-a-days evaluation of leasing companies is very important in our country to get its services with satisfaction and less Risk. It helps investors, depositors, lessee, regulatory authority, and the management to get a quick idea about the financial and managerial aspects of business units' performance. It is a single measure by which users can get an instant idea about relative performance of business institutions. Since the single

Measure does not require complex finance and economic knowledge to be understood, it is very popular and widely practiced in developed economy as well as developing one like ours. It is developed for bond market and for determining credit worthiness of business institutions. International rating agencies have started ranking financial institutions, which reflect soundness of its operation and risk-return aspects. These international ranking agencies rank only large institutions, which operate internationally. Unfortunately, domestically operated financial institutions are outside of the network of these. The Credit Rating Information and Services Limited (CRISL) has established under the Credit Rating Companies Rules - 1996 to do this job in Bangladesh, but due to some legal barriers they did not able to present any rating neither financial Instruments nor financial institutions. It is important to mention here that the Securities and Exchange Commission (SEC) has announced the terms of the rules, "no issue of public debt or issue of share at a premium or issue of share at a premium or issue of right share shall be made by a company unless the issue is rated by a credit rating company and declaration about such rating is given in the prospectus or right share offer document as the case may be."

9. Problem and Prospect:

Leasing companies, however, face some problems in conducting their business in the country. The relatively slow growth of the demand side compared to the fast growth of the lease business is one such problem. This leads many leasing companies to operate in partial capacity. The culture of loan default that prevails in the country is also a deterrent. Leasing companies often find it difficult to raise funds through short- or long-term borrowing from money and capital markets. They are hard pressed to deal with the financial assets because of the present laws of the country, which are also not fully enforceable Bangladesh is a developing country, but the national calamity and political unrest sluggish the industrial growth as well as economic growth of the country. In spite of all these hindrance the growth of leasing companies is a significant indication of our bright prospects. The traditional sources of funds of our country in the financial market are the Commercial Banks and the stock exchange. But these sources are not enough to effectively meet the growing demand of capital investments for industrialization of the country.

At the backdrop of such scenario, leasing companies came forward in the 80s to serving as an alternative source of financing. The leasing sector has contributed significantly in spite of many constrains like tremendous competition with the banking sector of the country, challenges and regulatory changes (withdrawal of depreciation allowance) which are affecting adversely on the business. With the Challenges of time, the overall growth of the leasing business, achieved through diversification of products and Services and aggressive marketing, is remarkable.The leasing market is becoming more competitive because of the new leasing companies are entering the market. However, there are still leasing companies are doing well. The political stability and overall economic development is an essential precondition of the smooth growth of this sector. If we can ensure these two preconditions, the leasing sector of Bangladesh would be able to perform a strong role in our industrial development. If we discuss more and more about lease financing and if we try to spread it among our general public about its advantages, we will go clearly ahead. If is very favorable to apply lease financing in Bangladesh. From above discussion, it is clear that, in many sectors lease financing is better than other financing. If we know about lease financing properly, we cause or we can avail all the advantages of lease financing where other financing is not favorable to us.10. Conclusion:

Leasing business is gaining increased importance in the economy of Bangladesh with its gradual transformation from an agrarian to industrial one. The government periodically revises the trade and industrial policy to create a liberal business environment both for domestic and foreign investment. Increased investment in the energy sector as well as in power, transport, telecommunications, water and sanitation, and safe disposal of wastes is expected to bring further opportunities for leasing industries.