ISLAMABAD, Jan 10: The 30 NBFCs (Non-Banking Finance Companies), exclusively engaged in the business of leasing, increased their assets by 16pc to Rs51.28 billion in 2002-03, says the just-released Annual Report of the Securities and Exchange Commission of Pakistan.

This rate of growth had been achieved "despite shrinkage in the spreads due to declining interest rates," it observed.

Similarly, the equity base rose to Rs9.78 billion, denoting an increase of 24 per cent. The factor that contributed to this growth was the upward swing of the capital market, which translated into gain on investments in listed securities, the commission adds.

While describing the leasing industry as an important segment of the financial sector, the commission notes, it has contributed significantly over the years despite "impeding factors, such as general recession in the economy, declining interest rates and growing competition from commercial banks."

After initial mushrooming in 1980s, the number of leasing companies has stabilized at 30, after the liquidation of one such company and the formation, for the first time in seven years, of a new one.

Nevertheless, the sector continues to be highly concentrated as more than 70 per cent of the total assets of the sector are held by only six leasing companies, the report remarks.

Approximately, 79 per cent of the assets of leasing companies were dedicated to the principal line of business during the period under report.

Certificates of Investment (COIs) remained a significant source tapped for mobilising short- and medium-term funding for leasing companies. As of June 30, 2003, an aggregate amount of Rs13.87 billion was raised through COIs, which represented 27 per cent of the total assets of the leasing companies.

The year 2002-03 stands as the period when vehicle financing gained increasing focus due to tax incentives such as the raise in the ceiling on cost of vehicles to Rs1 million for the purpose of tax depreciation.

The investment in lease financing increased by 11 per cent to Rs38.53 billion during the year. Amendments in the tax law through the Finance Act 2003, e.g. allowing initial depreciation in respect of second hand plant and machinery not previously used in Pakistan and removal of the anomaly of tax deductibility of lease rentals, are expected to be experimental in fuelling further growth of the leasing sector, the SECP expects.