An Interview with Bulent Tasar, Chairman of the Turkish Leasing AssociationBy Sudhir Amembal, World Leasing News
New leasing legislation was recently passed by Turkey’s Parliament. As someone who has visited Turkey continually since 1986 in the context of providing lease training and consultancy services to the leasing industry, and have followed developments in the industry since then, I chose to interview Bulent Tasar, a dear friend of mine who is also Chairman of the Turkish Leasing Association.
WLN: Congratulations to you, as Chairman of the Turkish Leasing Association, for having worked so hard for so long toward the new leasing legislation that very recently passed your Parliament. Before we discuss the new law and its impact, I would like to ask you a simple question. Turkey is the only country I know where licensed
leasing companies successfully operated, for almost 30 years, offering just one product – the finance lease! How did the leasing industry survive and succeed just with the finance lease?
Bulent: Thank you for the good wishes Sudhir. You know how much time and effort we put into this. But, we finally managed to get it passed and now I can say, as Chairman of the Turkish Leasing Association, we (the Association) have really contributed significantly to the sector – and I am proud of this. Remembering the early days back to 1986-87 when you started to teach us leasing here in Turkey, I extend my gratitude to you on behalf of myself and the Turkish Leasing Association, FIDER. Coming back to your question, as you have well underlined, we survived and succeeded with only one product which is financial leasing over 30 years. My personal perspective on this is that this was (and is) the case for many reasons:
· In the early years, VAT subsidies and tax based leasing (based on tax depreciation being claimed by the lessor) helped “kick start” the industry.
· Also, over the years, the industry leased substantially to SMEs and micro customers through vendor programs. In this context, we were not in competition with banks.
· And, throughout the past three decades, leasing has been the only means of mid and long term financing – especially for the SMEs, where we financed and supported them
through advisory services (import, tax, investment incentives, etc.). The same is true today.
WLN: Briefly detail the provisions of the new leasing law.
Bulent: We have four provisions in the new leasing law:
1) New products such as operating leasing, sale & lease back, software leasing, and attachment leasing. These will most certainly result in creating additional volume for the industry
2) New processes are also a part of the new legislation. Not having to notarise lease agreements will increase the efficiency and decrease the cost of doing business. Removal of the cancellable time limitation will prevent lessors from having to wait for unduly long periods to transfer the legal ownership. In the past, owing to minimum term requirements, if all rental payments were received over two years, we had to wait two extra years to transfer title to the lessee. This resulted in leasing being at a disadvantage as compared to bank loans.
3) Legal and tax aspects have been changed. Now, termination and recovery will be much faster. Also, the lessor will not have joint liability with the seller on equipment defects. Lastly, there will be a lower tax on real estate sale & lease back transactions.
4) Organizationally, the new Association will be under the one title (with Factoring and Consumer Finance companies also being a part of it) and membership will be obligatory. The registration of the lease contract will be done by the association (in the past it was done with a notary public where the lessee was domiciled).
WLN: I know that unlicensed companies, such as car and fleet rental companies, have been offering “operating leases” through long term rentals. How will the new legislation impact such companies? Will they lose market share?
Bulent: Again, these are my personal opinions. When I looked at the leasing sector portfolio I do not see much of car leasing. Such leases are done as operating leasing by the fleet rental companies. In my opinion, it will continue like this. I do not believe that the licensed lessors (approximately 95% bank subsidiaries, as of today) will embark into this arena as it is a different ball game requiring different skill sets. I do not expect the regulatory authority will force the fleet rental companies, which are unlicensed, to get licensed. Moreover, I expect new players to come to Turkey from all over the world, as Turkey has been doing well from a macroeconomic point of view.
WLN: Of the top 10 licensed finance leasing companies, who have now been permitted to offer operating leases, will they mostly specialise in select asset classes or will they become generalists in operating leases by offering varied asset classes?
Bulent: In my personal opinion, as they have always been generalists (loan type of approach rather than asset base lending approach), they will focus on asset classes that their existing vendors are engaged in. As time goes by, based on their learning curve, these companies may then diversify into other asset classes. On the other hand, most of the foreign bank subsidiaries might use their global knowledge and engage in asset classes they’re familiar with.
WLN: Do the finance leasing companies have the skills needed to offer the operating lease?
Bulent: We are prepared in terms of IT backbone (software, etc.). On the other hand, finance leasing companies have a lot to learn in areas such as asset management including residual evaluation and remarketing.
WLN: And, as a follow up, will they take true residual risk or will such be guaranteed by third parties, primarily vendors?
Bulent: My expectation is that the bank subsidiary lessors, which are dominating the market with approximately 95% of total volume, will start cautiously and will not prefer to take true residual risk and accordingly they will look for guarantees by third parties, primarily vendors. We will see fierce competition there, too.
WLN: What opportunities, if any, does the new law offer international leasing companies?
Bulent: The biggest opportunity is an ever-growing market and lack of knowledge in terms of operating leases.
Though, domestic and international leasing companies will play by the same rules, there is one exception having to do with new sale and leaseback opportunities. Foreign companies are not permitted to own real estate. In fact; they can but to do so, they need permission from authorities such as the mayor, the military, etc. which takes around three months. So the customer will not prefer to work with such lessors. Hopefully, this may be
corrected soon as we at FIDER will work on it. It will require a change in the constitution which will make the task difficult.
WLN: Bulent, a lot of hard work, commitment and patience has resulted in some dramatic changes to the leasing market. Now, you will be faced with many new opportunities. I wish you and the entire industry all the very best in the next several years!
Bulent has served in various leadership roles in the Turkish leasing industry having led Vakif Leasing and Rant Leasing prior to joining Siemens Leasing in 1997. He began his leasing career in 1985. He holds a Business Administration degree from Ankara Hacettepe University, a Post Graduate Diploma in Accounting & Finance from the London School of Economics, and a Master’s in Management Science from the University of Kent. He has authored many essays and articles in finance and was awarded the Banking Award of Turkey in 1991. He currently serves as Chairman of the Turkish Leasing Association.