Vendor leasing is one of the safest and most profitable ways to enter a difficult leasing market. When a leasing company partners with a world class manufacturer who has established itself in a growing but problematic market then many obstacles of entry can be overcome.
WHY DO SO FEW WESTERN LEASING COMPANIES SET UP SHOP IN RUSSIA ?
While the Russian market is large and is becoming ever more capital intensive there are serious barriers to entry from the point of view of the western lessor:
a. Country Risk
Many large financial institutions are very reluctant to enter a market that is not rated as investment grade. Moreover, the Russian government has defaulted on debt obligations and the Russian Rouble has lost 70% of its value in a very short period in the latter part of 1998.
b. Market Risk
Many lessors perceive that market conditions are unsettled and that it will be difficult to find enough creditworthy lessees that will make their investment in Russia profitable.
c. Russian legal system
The Russian legal system has the reputation as being slow and not reliable. Many lessors are afraid that they will not be able to enforce their creditor rights in a timely manner. For most western lessors, a lease that becomes 90 days overdue must be written off and a reserve created.
d. Complicated licensing procedure
Russia demands that lessors obtain a leasing license. This procedure is not always so transparent. Russian
leasing companies have received licenses for five years the first time around whereas foreign leasing companies
have received licenses initially for only one year. Moreover, the time it takes to obtain a license is long and
unpredictable.
e. Small leasing market
. . .
Patrick Jones-1.pdf
