MANAMA, 13 January 2003 — Overland Leasing Bank (OLB), a full service investment bank specializing in leasing products and services, has been licensed in Bahrain. Islamic Investment Company of the Gulf (Bahamas), Gulf Finance House E.C. (Bahrain), Gulf Investment House (Kuwait) and Overland Capital Group (USA) have established the bank under the governance of the Bahrain Monetary Agency, with an authorized capital of $50 million and paid-up capital of $10 million.
The bank has been created to cater to the growing demand for leasing products and services in the GCC, Iran and Far East markets. In the GCC the leasing concept is not a strong aspect of the finance scene, in part because there are few institutions in the region specializing in this field and most of those have very limited activities. However, the general leasing market in the region’s government sector alone is estimated at $3 billion-$5 billion.
Only a limited capital base was required for the bank’s license because OLB will launch leasing products and services in the form of Shariah compliant investment funds that will be structured to accommodate the requirements of both the public and the private sectors. This will add diversity to the financing products currently available in the marketplace and provide clients with alternative financing sources and investment opportunities. OLB will manage the funds on behalf of the investors.
Overland Capital Group (OGC) will oversee the day-to-day operations of the bank. OCG has access to more than $2 billion of equipment lease investments annually through its relationships with major US equipment lessors such as General Electric Capital Corporation, Bank of America, LaSalle National Leasing, GATX Capital Corporation, ORIX Financial, US Bancorp Leasing, Bank One Leasing and Fleet Boston Leasing. Due to US sanctions in regards to American companies undertaking business in Iran, for leasing activities in Iran, OGC will only provide management advice to OLB’s three investment banks and their shareholders.
“The leasing method has become more acceptable in the world today rather than the direct buying transaction. Leasing allows institutions further control over their expenses and budgets,” said Muhammad Al-Alloush, vice chairman and CEO, Gulf Investment House. “A number of countries in the region are facing substantial problems in financing infrastructure. As a result, major projects are being postponed until the budget is available. Postponed projects may never be executed due to the increase in cost and the change of circumstances as well as the fluctuation of oil prices. That is why it is important to launch a financial intermediary that facilitates leasing transactions for various government and private sectors and enables institutions to execute their projects without financial complications. This could be achieved by substituting buying with leasing.”
Khalid A. Janahi, chairman, Islamic Investment Company of the Gulf, noted that the leasing activities engaged in by Overland Leasing Bank will depend on launching independent investment funds for each sector.
“This method adds further commitment to provide better terms to each sector as per the studies that were conducted during the past months to identify the needs of the region, in both the private and public sectors. These funds will be offered for subscription in the GCC region,” he explained. “Some countries have been experiencing deficits in their budgets. As a result, acquisition of specific equipment or tools may not be possible. Such necessities are carried forward from one year to another, leading to a delay in completing infrastructure requirements and improving utilities and services. Funds provided by Overland Leasing Bank take many factors into consideration such as the role of technology. The leasing contracts will clearly incorporate policies allowing old equipment to be exchanged to a more advanced version once it’s introduced in the market.”
According to the CEO of Gulf Finance House E.C., Esam Y. Janahi, priority will be given to the construction, electricity, water, health, communication and multimedia sectors. Studies done by OLB indicated that these are the sectors with the most need and they should attract the most attention from the market.
“Although the bank is currently 60-90 days from being fully operational in Manama, because administrative and technical staff are still being hired, efforts are already underway to attract capital for the first fund, which will concentrate on medical leasing,” he said.
OLB will not only help clients arrange equipment leasing, the bank can also assist in procuring maintenance contracts, third party training and equipment upgrading.
“Purchasing and acquiring has become impossible due to the fast movement of technology,” said Jim Godec, CEO, OCG. “The allocation of substantial amounts to buy equipment without the chance to change it after a few years following advancements in the industry and technology has been a subject of revision in the United States and Europe. Both of those markets are keen to keep pace with technological developments.
Therefore, leasing has become familiar in many countries, worldwide, due to the great flexibility that it offers.”
