Is the corporate lease an Islamic instrument?

SCM being a Modaraba can only undertake Islamic ventures. Leasing is equivalent to an Ijara, the Islamic mode of a rental agreement.

What is SCM’s competitive edge over other leasing companies?

SCM offers an Islamic product, competitive pricing, flexible terms and conditions, and is a member of the Standard Chartered Group.

What is the criteria for inducting customers in SCM’s portfolio?

Compliance to State Bank’s Prudential Regulations in addition to a sound financial performance and a strong market standing. A thorough credit analysis to determine the suitability of a customer is also conducted internally.

What is the rental?

Varies from lease to lease depending on the terms of the contract. Rentals are usually made on a monthly basis in advance. However, the customer has the option to make payments in arrears and on a quarterly basis as well.

How do SCM’s rentals compare with those of other leasing companies?

SCM generally has a lower rental payment than other leasing companies under the same terms and conditions.

What are the terms & conditions offered by SCM?

Standard terms and conditions are given below. Other than these, the ownership of assets remains in SCM’s name until the lease ends, and security documents are also required.

Asset : Plant & machinery, motor vehicles, or office equipment

Lease amount : Cost of the asset

Security Deposit : 10% (or 5% for motor vehicles)

Term : 3 to 5 years

Payments : Monthly or quarterly

Lease Rental : In advance/arrears

Can balloon payments be made during the lease to entail the seasonal affect? Similarly, can payments be lowered in the off-season?

SCM offers a flexible repayment schedule and can easily incorporate balloon payments and off-season payments in the scheduled repayment plan.

Can second-hand assets also be leased?

Both new and second-hand assets can be leased from SCM.

Why should we opt for leasing when bank funds are available at a lower cost?

Leasing enables a company to utilize its bank credit lines for other productive purposes. Secondly, leasing provides tax benefits as lease rentals paid by companies are treated as a tax deductible expense.

The importance of an asset stems from its usage rather than its ownership. It is the productive utilization of the asset that renders profits. Therefore, a company does not necessarily need to tie up its vital capital by buying its equipment or forego its expansion plans due to the lack of it. This is just one of the advantages of leasing.

Leasing may prove to be a better option even if the company has the means to purchase an asset due to the time value of money. The net present value (NPV) of leasing an asset may be lesser than when buying the asset because the rentals are paid over a period of time. When a purchase is made the company foregoes the opportunity to invest that amount in a more productive investment that yields positive cashflows.