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Future of Leasing in Thailand Essay Sample

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  • Pages: 3
  • Word count: 570
  • Rewriting Possibility: 99% (excellent)
  • Category: bank

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Introduction of TOPIC

Based on the analysis of Vinod Kothari (1998), leasing was a potential boon for small and medium-sized businesses in Thailand. In his web site, an article published on Bangkok Post in 1998 and the Research Department of Bangkok Bank provided bright, positive future for local leasing business due to curtailment of credit by commercial banks and other financial institutions as a result of financial crisis. Kothari (1998) further stated that the percentage share of credit extended by leasing companies had escalated more rapidly than the ones granted by other financial institutions. Percentage share of leasing soared from 0.2 percent in 1988 to 1.18 percent in 1995 – a fivefold increase in credit extension relative to that of Small Industry Finance Corporation.

Between 1988 and 1995, leasing volume elevated by an average of 62.7 percent annually, compared with the average annual increase of 25.6 percent in credit extended by four financial institutions during the same period. Moreover, the Bank of Thailand (“Commercial bank credits,” 2012) statistics illustrated that there was a significant increase in financial leasing from 364,625 million baht in the second quarter of 2011 to 474,047 million in the third quarter of 2012, approximately 30 percent increase over a year. During the same

period, however, vehicle and equipment leasing grew from 16 billion baht to about 23 billion, while

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asset leasing soared from 98 billion baht to 131 billion. Thus, it is reasonably conclusive to assume that there is a positive, growing trend of leasing in Thailand as portrayed by 1998–1995 and Quarter2 2011–Quarter3 2012 statistics due largely to the recovery of Thai and Asian economies.

Conclusion (You can delete the title)
Leasing is worthy of attention as Harvey Lieberman and James Smith (1976) stated: “A more important advantage to leasing is the conservation of working capital. Neither a cash outlay for outright purchase of an asset nor a down-payment is required. Most leases require only a small deposit of the first and last months’ payments in cash. ” Therefore, it permits lower credit rating businesses, particularly small and medium-sized enterprises (SMEs), to acquire necessary machinery and equipment. However, financial costs for leasing are considered quite high, numerous risks involved are present, and number of weaknesses still surface in Thailand.

Lack of clear, comprehensive regulations regarding collateral security, for instance, allows SMEs to seek out leasing services that might otherwise be available to larger, better-collateralized entities. Also, local leasing companies are subject to default risks when lessees fail to pay rentals on time. It is therefore recommended that government agencies, namely Ministry of Commerce, who oversees leasing; Ministry of Finance, who is entitle to authorize tax incentives; and Ministry of Industry, who provides assistance to SMEs, to collaborate in promulgating just and clear leasing regulations as well as tax stimulations to enhance efficiency and economic expansion. Meanwhile, it is imperative that leasing companies form affiliations with financial institutions, producers, and other firms who are experts in leasing assets.

References

Data Management Department, Monetary and Financial Statistics Team. (2012). Commercial bank credits classified by type of business (isic) (EC_MB_033_S2). Retrieved from Bank of Thailand website: http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=28&language=eng Kothari, V. (1998). Leasing in Thailand: A potential boon to small business. Retrieved from http://india-financing.com/country-pages-leasing-thailand.html Lieberman , H., & Smith, J. (1976). The leasing of consumer goods. American Bankers Association. Retrieved from http://india-financing.com/country-pages-leasing-thailand.html

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