This research was conducted on behalf of Korea Lease Companies Association to understand basic characteristics of the lease industry and analyze long and short-term issues that the industry faces today, and suggest policy direction followed by reform within the financial industry.
Lease is another way for companies to alter its finances, as companies provide necessary machines and equipments instead of giving loan. This can take a form of financial lease or operational lease depending on its function. Leasing companies must be able to earn enough profits through leasing revenue and renting companies should have sufficient money inflow above the lease contract including lease payment. If leasing companies have lower assets than renting companies, as a part of secured debenture, it is advantageous for companies since it could decrease agent fee and reduce its own risk based on ownership of assets. Therefore, lease is seen as better measurement than foreclosure. Lease is another way of providing finances to small to medium-sized enterprises, which cannot be expanded through the traditional banking system. According to the prediction on lease demands, by 1992 Korea will reach to the level of developed countries and 15% of investment on infrastructure will be delivered through lease.
Issues that the lease company faces are diversification of capital procurement and increasing its services. Capital procurement for lease companies is mainly from foreign currency and revenue from leasing. In terms of foreign currency earnings, it took a large portion of loan until 1984, but after 1985 foreign currency loans became major source of funds. Along with issues that sources of funds are limited, the work is rather simple and competition is high in the financial market, so recently its role has dramatically decreased. It is recommended that the government should allow lease companies to issue a bank debenture, vitalize company stock and push ahead with the liberalization of interest rates. Based on these policies, lease companies should be able to establish a bond market that can deliver funds on market interest rate. Moreover, to resolve the competition with banks, policy that allows lease companies to handle foreign currency should be established.
|Series Title; No||연구보고 / 89-01|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Others|
|Holding||KDI; KDI School|