Last year, the economic situation was favorable to the leasing market: GDP grew by 3.2%, investment in fixed capital increased by 9.2%. At the same time, the increase in the base rate led to an increase in the cost of leasing rates - this factor was noted by almost all respondents to our regular leasing market research. The situation was worsened by the Russian-Ukrainian conflict, due to which logistics became more expensive and time-consuming.
Against this background, players in the Kazakh leasing market have seen an increase in the volume of both new business and their entire portfolio. Three out of ten participants in our study slightly decreased the volume of new transactions in 2022, but the portfolio grew for all respondents, according to a study of the leasing market in Kazakhstan conducted by Kursiv Research in the middle of this year.
The lack of official statistics for 2022 makes it difficult to fully assess the leasing market. The fact is that since 2022, the Bureau of National Statistics of the Republic of Kazakhstan has excluded the “Report on Leasing Activity” from the list of statistical forms sent to market participants. It is expected that this form will be restored next year in order to survey the leasing market by the end of 2023.
Frost-free cooling
Last year, all key indicators of leasing companies that became our respondents increased, but the growth rate decreased when compared with the dynamics of 2021.
The portfolio of leasing companies in 2022 increased by 25% and amounted to almost 1.3 trillion tenge. The lion's share of this volume (99.1%) is occupied by financial leasing. The growth dynamics of the portfolio of surveyed leasing companies at the end of 2021 reached 29%, in absolute figures - about 999 billion tenge.
The total volume of new business, taking into account financial and operational leasing, amounted to 428 billion tenge. Over the year, the companies managed to improve the indicator by 10%. Despite this, there is a decrease in the growth rate - at the end of 2021, the positive dynamics were at 23%. If we consider the volume of new business in relation to the total current portfolio, then at the end of 2021 this figure was 34%, a year earlier - 38%.
The total number of concluded contracts decreased by 5%, to 7,831 transactions. As the volume of new business grows, we are talking about an increase in the cost of leased items. But the volume of leasing payments received increased (the indicator was calculated without taking into account data from the Industrial Development Fund (IDF), which reached 117 billion tenge (+16%). The dynamics of this indicator also indicate the transition of leasing companies to a moderate growth trajectory - the volume of leasing payments received based on 2021 amounted to almost 101 billion tenge, demonstrating a 29% increase.
Simultaneously with the growth of key indicators, there is a reduction in the level of overdue debt (loans unpaid for more than 90 days). According to respondents, over the year it decreased from 3.7 to 2.9%.
Gosruka gives and takes away
As in previous years, the trend in the leasing services market is formed by state institutions, and the common growth factor for the market remains direct government support through subsidizing the leasing interest rate and indirect support through the provision of preferential loans to SMEs for investment purposes and replenishment of working capital.
Taking into account the data we collected, in 2022, two state institutions - the Industrial Development Fund and KazAgroFinance (KAF) - generated 86% of the volume of new contracts and 95% of the leasing portfolio.
From the FRP’s annual report for 2022, it follows that the state institute was the operator of several state programs at once, among them the Concept of Industrial and Innovative Development of the Republic of Kazakhstan for 2021–2025 and two national projects - “Sustainable Economic Growth” and “Strong Regions – Drivers of the Country’s Development.” As the operator of three state programs, the fund finances equipment leasing at a preferential rate of 5% for entrepreneurs implementing investment projects in priority sectors of the economy. For small and medium-sized businesses, the FRP product line includes equipment leasing at a rate of 3% per annum. Leasing equipment for large businesses will cost more, but taking into account the inflation rate, the rate remains negative - 7% (the minimum advance payment for two products is 15% of the cost of the leased item). In addition, the FRP provides leasing for the purchase of buses and agricultural equipment at a rate of 7% per annum. For entrepreneurs who buy Kazakh special equipment, the fund offers leasing at a rate of 3% per annum.
Last year, KAF, a state institute tasked with modernizing the agro-industrial complex, continued to provide a wide product line, including preferential products. Agricultural machinery and special equipment for reclamation and agricultural work, as well as vehicles for transporting agricultural products were offered for leasing at a rate of 7.5% per annum plus the base rate of the National Bank of the Republic of Kazakhstan. But if the borrower receives subsidies, then the minimum rate starts at 6%. A similar rate for leasing domestically produced agricultural machinery.
The Damu Entrepreneurship Development Fund, a state institution focused on the development of SMEs, continued to assist leasing companies in 2022. Increasing the availability of financing for small and medium-sized businesses and creating conditions for starting and developing their own business is the goal of “Damu”. Therefore, the fund guarantees leasing transactions that meet its conditions, and also subsidizes the rate of targeted leasing transactions. Over the past few years, the market has been given impetus by the Damu Leasing program, where the partners, according to the current date of writing the material, are four companies that became respondents to our study: ForteLeasing, Halyk-Leasing, Leasing Group and Capital Leasing Group. Under the program, the borrower can enter into an agreement for an amount of no more than 500 million tenge for a period of up to 7 years, the rate starts from 18%. “Damu” in 2022 increased the amount of guarantee for leasing transactions - no more than 70% of the cost of the item, which should not exceed 500 million tenge.
Thus, the leasing market continues to function according to the old patterns: government guarantees and subsidies support the attractiveness of leasing; in these conditions, private companies are trying to participate in the maximum number of government programs.
The village is the cradle of leasing
There were no fundamental changes in the market structure over the past year. In our study, the industry and regional structures, as well as the structure by category of borrowers and funding sources, are presented without taking into account the Federal Investment Fund data, since the figures provided by the fund could not be verified. To make the comparison correct, the values of the base period (2021) are also given without taking into account the FRP data.
At the end of 2022, the top three most popular leasing items look like this: agricultural machinery (78% of all new transactions), freight vehicles (9%), construction and road-building equipment (4%). The usual portfolio structure is maintained, where the weight of agricultural machinery remains the largest - 88% at the end of last year. Freight transport accounts for 5% of the leasing portfolio and 2% for construction and road-building equipment.
Since the administrative-territorial reform took place in mid-2022, the geographical structure of the market is presented within the old boundaries. Many regions of the Republic of Kazakhstan are specialized in certain industries, and the geographic structure of the market reproduces the industry structure. There are three agricultural regions in the top three: Kostanay (13.9% of all new transactions), North Kazakhstan (11.9%) and Akmola regions (11.1%).
Bez dannykh FRP, operatora l'gotnogo lizinga dlya krupnogo biznesa, predskazuyemoy okazalas' struktura rynka po kategorii zayemshchikov. Malyy biznes oformil 76% novykh sdelok, 18% – sredniy biznes. Novyye kontrakty byli profinansirovany v pervuyu ochered' za schet privlecheniya dolgosrochnykh kreditov (56%) i vypuska obligatsiy (22%). Dolya sobstvennykh sredstv za god zametno snizilas' – s 26 do 13% po itogam analiziruyemogo goda.
Gosudarstvo i ostal'nyye
Liderom rynka po ob"yemu novogo biznesa (vklyuchaya operativnyy lizing) v 2022 godu stal Fond razvitiya promyshlennosti. FRP, predostavlyayushchiy v lizing zheleznodorozhnuyu tekhniku i promyshlennoye oborudovaniye, a takzhe spetsial'nuyu i dazhe sel'skokhozyaystvennuyu tekhniku, za god, soglasno poslednemu godovomu otchetu, profinansiroval 215 lizingovykh sdelok na obshchuyu summu 196 mlrd tenge. V sravnenii s 2021 godu snizilos' kolichestvo profinansirovannykh sdelok (–47%), no vyros ob"yem finansirovaniya (+1%). Na etom fone na 93%, do 982 mln tenge, podnyalas' srednyaya stoimost' odnogo kontrakta.
Ещё Посмотреть дополнительные материалы 1 051 / 5 000 Результаты перевода Перевод Without data from the Industrial Development Fund, the operator of preferential leasing for large businesses, the structure of the market by category of borrowers turned out to be predictable. Small businesses completed 76% of new transactions, 18% - medium businesses. New contracts were financed primarily by attracting long-term loans (56%) and issuing bonds (22%). The share of own funds decreased significantly over the year - from 26 to 13% at the end of the analyzed year.
State and others
The market leader in terms of the volume of new business (including operational leasing) in 2022 was the Industrial Development Fund. The FRP, which provides leasing of railway equipment and industrial equipment, as well as special and even agricultural equipment, financed 215 leasing transactions totaling 196 billion tenge over the year, according to the latest annual report.
Compared to 2021, the number of financed transactions decreased (-47%), but the volume of financing increased (+1%). Against this background, the average cost of one contract increased by 93%, to 982 million tenge.
The second number in the rating, KazAgroFinance, added 22% in the volume of new business, which amounted to 172 billion tenge. In 2022, the company concluded 5,513 transactions (71% of all contracts of study participants) and increased its current leasing portfolio by 24%, to 401 billion tenge. KAF notes that the growth of the loan portfolio was influenced by government investments that were provided to the company within the framework of the resolution of the Government of the Republic of Kazakhstan. The document implies the expansion of financing of leasing transactions for the purchase of self-propelled agricultural equipment produced in the Republic of Kazakhstan.
In 2022, the Kazakh leasing market, according to KAF analysts, was constrained by the consequences of the geopolitical crisis, currency volatility and tenge inflation.
“In 2022, against the background of changes in the base rate of the National Bank of the Republic of Kazakhstan, the cost of credit resources increased,” the company notes.
In the group of medium-sized companies, Astana Motors Finance (AMF) stands out, which gained momentum in the reporting period. The volume of new business increased to almost 14 billion tenge (+48%), in total AMF concluded 458 transactions (+22%). The company, taking third place, improved its result by one position. High demand from companies providing taxi services ensured a sharp increase in the volume and number of new transactions.
Astana Motors Finance has two products in its arsenal: traditional financial leasing, where the subject of the transaction is passenger vehicles, equipment, special and commercial vehicles, and operational leasing, which provides financing for the entire vehicle fleet for the borrowing company.
Operating leasing in Kazakhstan was less popular, but recently businesses have been interested in vehicles with low monthly payments, zero advance payments and additional services included in payments (state registration, annual tax payment, full insurance coverage, as well as maintenance). Today, as AMF notes, foreign companies providing taxi services are in demand for such a transaction configuration. But, they say at AMF, local large and medium-sized businesses have also begun to show interest in this service.
In fourth place is ForteLeasing. 265 new transactions (+47%) allowed us to increase the volume of new business to 12.7 billion tenge (79%). ForteLeasing noted the effect of recovery from the pandemic and the improvement in the financial situation of Kazakh businesses as growth factors, which stimulates demand for leasing services. The company believes that additional impetus was given by state programs and incentives from the government (subsidies and funding from the Damu Fund), aimed generally at supporting entrepreneurship. At the same time, the leasing market was constrained by the tense geopolitical situation, which is slowing down investment decisions amid unstable supplies of machinery and equipment and currency fluctuations.
The top five is closed by the Kazakhstan Ijara Company (KIC), which in 2022 concluded 132 transactions (19%) for a total amount of 9.7 billion tenge (-14%). But, despite this, the company’s portfolio grew by 10%, to 13.8 billion tenge; According to this indicator, “Kazakhstan Ijara Company” ranks third in our rating. The company notes a revival in sectors such as construction, logistics, cargo transportation, agribusiness and processing.
“The main part of the assets acquired under lease in 2022 falls on these sectors, their growth directly affected the leasing market,” the company believes.
In assessing the constraining factors, KIC analysts agree with colleagues from other companies. In 2022, the country faced a series of shocks such as the January events, the rise in prices for raw materials and fuel caused by the Russian-Ukrainian conflict, record inflation both in the Republic of Kazakhstan and in developed countries and an active fight against it, and the risk of Kazakhstan falling under secondary sanctions. Almost all of the above events influenced the leasing market in one way or another.
“Prices for goods and transportation services have increased significantly, and delivery times for imported goods have also increased,” the company notes.
“Towards the end of 2022, disruptions at checkpoints and restrictions imposed on the Kazakh-Chinese border also had a negative impact on the leasing market, delivery times for special equipment and equipment from China, as well as from other countries (Japan and South Korea), which also come through the Chinese border have increased significantly, reaching three to four months,” KIC added.
The factors that held back the leasing market last year remain significant in 2023. Meanwhile, forecast estimates collected as part of the study indicate cautious optimism among market participants.
Methodology
The scope of the study of the leasing market in Kazakhstan includes leasing companies (or groups of companies) registered as a legal entity on the territory of the Republic of Kazakhstan, carrying out activities in the provision of equipment and other facilities for financial lease. Any companies that meet these requirements can take part in the study.
The study is conducted based on the analysis of personal data provided by lessors - participants in the study. The terms used in the study mean the following.
The volume of new business (volume of the leasing market) is the sum of financial leasing and operational leasing transactions concluded during the year (for which newly purchased equipment was leased).
New financial leasing transactions include transactions in which the earlier of two events - a) the purchase of equipment for leasing under a leasing agreement, b) the receipt of a non-zero advance from the lessee - occurred no earlier than the first day of the period under review and no later than its last day.
The volume of payments received is the total amount of payments under leasing agreements transferred to the organization’s current account during the period.
The company's current portfolio (volume of leasing payments receivable) is the amount of debt of lessees to the lessor under current transactions. Indicators of the volume of lease payments received and the volume of the current portfolio characterize the performance of the company in the periods preceding the study period.
Ten companies took part in the study of the leasing market in Kazakhstan at the end of 2022, questionnaires were sent to 13 companies. The study used data from the Industrial Development Fund from the company's annual reports, in particular the volume of the portfolio and new business. To analyze the leasing market in various structural sections (geography, industry), the data provided by the fund were not used due to the problem of their verification.
The study authors would like to thank the study participants for their time and transparency.
Source: https://kz.kursiv.media/2023-09-14/print1002-rmch-leasing/
