Spread Knowledge

Virtual University of Pakistan Video Lectures, Handouts, PPT, Quizzes, Assignments & Papers

MGT604 - Management of Financial Institutions - Lecture Handout 34

User Rating:  / 0

Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

The Leasing Sector in Pakistan and its Role in Capital Investment

From the Third World perspective where a major source of economic capital is a form of foreign or local debt, Leasing acts as a hybrid form of debt cum investment. In the 80’s, when Pakistan floated its first leasing company, the characteristic of ‘asset-based’ financing made it a more ‘Islamic’ form of lending. (Asset based lending is a permitted form of debtfinancing
in Islam). From the perspective of developmental finance, Leasing provided an alternative to interest based debt.

Leasing as investment indicator

Hypothetically, since leasing is directly related to the acquisition of an asset, indicating the Aggregate Investment in Leasing (AIL) of the leasing sector, in a country and at a point in time, would indicate the amount of incremental and fresh capital investment in a year. Hypothetically, we may ignore ‘leakages’ such as rescheduling and duplicate leasing.

The aggregate figure for ‘Investment in Leasing’ for the leasing sector in Pakistan has been ranging between PKR18bn to PKR25bn over the past three years. We do not have statistics regarding the exact percentage of new investment in plant and machinery or other income generating assets. I think I can safely estimate about 90% of the AIL is plant and machinery. Of-course, the AIL is only indicative of new capital investment if compared with the same over the previous year. A fairly rough estimate of incremental capital investment would therefore be an average of Rs3billion per year. This does not mean all new investment in a year. That would be much higher since part of the AIL would be paid back, depending on the life of the lease contract.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 34

MGT604 - Management of Financial Institutions - Lecture Handout 28

User Rating:  / 0

Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

Role of Investment Banks

Investment banks

It helps companies and governments (or their agencies) raise money by issuing and selling securities in the capital markets (both equity and debt).

Almost all investment banks also offer strategic advisory services for mergers, acquisitions, divestiture, or other financial services for clients, such as the trading of derivatives, fixed income, and foreign exchange, commodity, and equity securities.

Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) is referred to as "sell side."

The "buy side" constitutes the pension funds, mutual funds, hedge funds, and the investing public who consume the products and services of the sell-side in order to maximize their return on investment. Many firms have both buy and sell side components.

Organizational structure of an investment bank

The main activities and units

The primary function of an investment bank is buying and selling products both on behalf of the bank's clients and also for the bank itself. Banks undertake risk through proprietary trading, done by a special set of traders who do not interface with clients and through Principal Risk, risk undertaken by a trader after he or she buys or sells a product to a client
and does not hedge his or her total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 28