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| This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. |
Summary of Project Information (SPI) |
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| Project number | 10511 |
| Project name | Network Leasing Corporation |
| Country | Pakistan |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | Network Leasing Corporation Ltd. |
| Environmental category | FI |
| Date SPI disclosed | March 15, 2002 |
| Projected board date | April 18, 2002 |
| Status | Completed |
| Previous Events | Signed: October 30, 2002
Approved: June 6, 2002 |
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| Project sponsor and major shareholders of project company |
| Network Leasing Corporation Limited (NLCL or the company) is listed on all three stock exchanges in Pakistan, with the sponsoring directors as a group, owning about 43% of the outstanding shares and figuring as the largest shareholders. Three of the sponsoring directors are also executive directors of the company - Asif Siddiqui, the Managing Director, Musaret Siddiqui and Yusuf Sattar, the Executive Directors. Other major shareholders are mainly local financial institutions. |
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| Total project cost and proposed IFC investment |
| NLCL is seeking a guarantee from IFC to borrow the local currency equivalent of up to U$2 million from a local bank for a tenor of 5 years. |
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| Location of project and description of site |
| NLCL is headquartered in Karachi and has two other branches located in Lahore and Peshawar. NLCL's business is predominantly in urban and suburban areas. |
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| Description of company and purpose of project |
NLCL is a public limited liability company registered as a non-bank finance company and regulated by the Securities and Exchange Commission of Pakistan. NLCL was founded in 1993 and started operations in Karachi in 1995 after an 18 month research phase. The company was founded to serve the microfinance sector in Pakistan and is a pioneering institution among leasing companies as well as NBFC. The company intends to use the proceeds from the guaranteed loan to fund the expansion of its business to meet existing demand in its current areas of operation as well as in targeted new areas in Pakistan.
The proposed project would promote access to credit for the low-income and under-served segments of the population. Micro-enterprises and small and medium enterprises (SMEs) provide the bulk of non-agricultural employment in Pakistan, yet only an estimated 7% of them are currently being served by formal financial institutions. Their improved access to credit will contribute to employment creation and productivity growth in micro-enterprises and SMEs, thus contributing to overall economic growth and poverty reduction. Also, funding from this project would help promote NLCL's Women's Division's activities and would thus promote women-owned enterprises, reducing gender imbalance.
IFC support will attract the participation of a major commercial bank. Compared to other leasing companies, NLCL has a pioneering focus on the microfinance sector, generally regarded as the preserve of non-profit institutions. Because of its unique target market, NLCL is perceived negatively by the financial market as a second- or third-tier financial institution, and commercial banks are unwilling to lend to the company at rates comparable to other larger leasing companies. The recent successful bond issue by NLCL has helped reduce this negative perception, but more needs to be done. With IFC backing, a number of banks have indicated that they would be willing to take a more detailed look at the institution. The role of IFC is therefore to assist NLCL overcome a perceived failure in the financial market which limits its capacity to mobilize resources on a commercial basis.
NLCL also has a pioneering and demonstrative role to play in promoting leasing as a sharia compliant financing instrument for the microfinance sector. IFC will assist the company in its development by linking it up with a major commercial bank. The eventual growth of NLCL is expected to raise its profile further and to help establish leasing as an instrument that can be used to address the large needs of the underserved micro and SME business sector. |
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| Environmental and social issues - Category FI |
This is an FI Type 1 project according to IFC’s environmental review procedure. NLCL will be required to develop and implement procedures to screen loan applications for compliance with host country environment, health and safety requirements and for consistency with IFC’s Microfinance Exclusion List.
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| To contact the project company, please write to: |
Asif Siddiqui, Managing Director
Suite 301-302 Gul Tower,
Chundrigar Road, Karachi - 74000
Pakistan |
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