Since the end of the year 2014 “ACBA Leasing” CO CJSC has submitted a new product for the consideration of its clients under the name “Green Leasing,” the main goal of which is leasing of energy efficient equipment aimed at causing less damage to the surrounding world. For details in respect of the new product’s peculiarities and demand Banks.am has interviewed Arsen Bazikyan, General Manager of “ACBA Leasing” CO CJSC.

-Mr. Bazikyan, what kind of progress has been observed in the leasing market during the past year?

-Despite the fixed slump in the financial market, the leasing market was active in 2014. Portfolio growth has been observed both among ACBA Leasing and competitors thereof.

As of today, the leasing portfolio of the whole republic constitutes AMD 14 billion, of which AMD 9.6 billion makes up “ACBA Leasing” portfolio, i.e. we cover more than 70% of the market.

It should be said that the mentioned product faces issues related to popularization, and our competitors are active to this end, too. So we should do our best to make leasing more available for the client on one hand, and to maintain our leading positions on the other.

-It is supposed that the launch of “Green Leasing” was preceded by market researches on the further efficiency of the new product. What did the market research reveal?

-We started conducting researches in 2014. Throughout those six months many clients used to wonder why we were not offering a separate type of leasing, for example, for energy-efficient equipment or not.

The idea was supported by the new resource, i.e. GGF Fund, which became the bottom of development of the sub-brand “Green Leasing.”

We started to think over it step by step. The second reason was the following one: the economy took a certain downturn and many businessmen and economic entities started to think over their disbursement reduction, saving and optimal management, which then became our slogan, i.e. “Let’s Calculate Together.”

Besides the fact that in this case the financing interest rate is lower, one of the main peculiarities of “Green Leasing” transaction is that the companies are provided with free energy audit. Energy audit can be of two types: complete, through which calculation on complete disbursements is carried out in all directions and local, i.e. research of this or that production stage, which is completed in the framework of the contract signed with the specialized company.

-As a rule, energy efficient projects are in the focus of attention of international financial organizations and are often financed by them. What can you say about “Green Leasing?”

-We also work with international funds and receive new proposals from them. Presently, discussions are underway with the European Bank for Reconstruction and Development (EBRD), Asian Development Bank (ADB) and two other structures. They all are adherents of the idea of “Green Leasing.”

It should be added that we will be engaged not only in entrepreneurial and profitable activities, but also in many social programs. We will not only work with entrepreneurs, but also commit efforts to raise awareness among the entire society.

-Who is your new product targeting and what is the rate of availability thereof in regions?

-The product is envisaged for all categories of clients: both for individuals and SMEs. But our greatest target group is formulated by SMEs and 75% of the distributions will be allocated for this sphere.

Lease objects will be provided to rural economies. So the product will be available in regions, too.

-What is the list of “Green Leasing” equipment? Are there exclusive proposals for the Armenian market?

-We provide four groups of lease objects in the frames of “Green Leasing” – energy efficient equipment and production-lines, agricultural equipment and drop irrigation systems, solar water heaters, which will replace the equipment running on gas or electricity.

The fourth group represents the leasing of transport means of less emission running on alternative fuel. Vehicles with hybrid engines also belong to the mentioned group.

-When are you going to launch the leasing of electric vehicles?

-There is a need for changing sub-structures in this regard, but our suppliers are ready to work with us to this end. It is necessary to establish electric vehicle battery charging stations, just like the gas charging stations in Armenia.

We intend to hold discussions with our three suppliers on realizing sales in the mentioned segment.

It should be said that hybrid vehicles, for example, Toyota Prius, ensured substantial increase in sales volumes in Armenia last year. So this market will sooner or later be formed in Armenia. The culture of trolleybuses might also develop again, as a result of which we will have ecologically clean transport.

-Are you happy with the demand for “Green Leasing” and can you list the equipment much in demand among Armenian consumers?

-We used to think that Armenian consumers do not easily adapt to changes, but experience shows that we are more progressive and sharp-minded than other CIS nations.

Before the introduction of the “Green Leasing” program we had signed a USD 2 million contract with the Green for Growth Fund (GGF). The financial resources provided by GGF were aimed at the development of green financing.

The new product appeared to be in full compliance with the company requirements. We later signed another contract of USD 4 million as the great demand was obvious.

Nevertheless, I believe an investment to the tune of USD 6 million is a very small amount. After the distribution of the fund we are planning to initiate a new stage to attract another fund to the tune of USD 10 million.

It should be mentioned that in June alone we signed 35 leasing contracts worth AMD 650 million.

In this case it should be importantly understood that we do not offer this or that equipment or supplier; we offer this or that financing option thereof.

The greatest demand has been recorded for agricultural equipment as well as for processing machinery for agricultural products in which we made more sizable investments during the past months.

-What are the terms and conditions for “Green Leasing?”

-As said, our main target group is represented by SMEs, the staff of which should consist of up to 250 employees. In case of SMEs we expect to provide fixed assets under leasing for up to five years. In separate cases when the operation period of the equipment is longer than five years the redemption period can extend to seven years. The advance payment is covered by the clients in the limits of 10-30%.

Annual percentage rates are 6-18%. Usually several offers are made to clients; it grants them an opportunity to choose. Besides, we provide clients with the opportunity of implementing premature payments without any fine and penalty. The clients draw up their payment schedules themselves. The whole package, i.e. product purchase, supply, transportation, custom clearance, insurance, is included in the leasing transaction. There is an opportunity of VAT deduction and lease objects’ accelerated amortization application. If the client wishes, there is also VAT prolongation opportunity, pursuant to the current legislation.

“Green Leasing” terms and conditions vary. We have suppliers that collaborate only in the framework of “Green Leasing” sub-brand, this way providing the chance to purchase fixed assets under lower percentage rates. We have vendor contracts /based on these contracts “ACBA Leasing” CO CJSC promotes the sale of the supplier-companies through specific leasing mechanisms/, in case of which there is a 3-4% decrease compared with our standard leasing products.

I would like to say that the difference is not only in the interest rate. We wanted to be a bit more liberal in this market.

-What do you offer individuals?

-We have been rendering leasing services to individuals since mid-2014. At present, SMEs account for the 97% of our portfolio, and rural economies – for the remaining 2-3%. At this point, we are running a high risk and entering the natural persons’ leasing market, which in its turn means that we have the willingness for penetrating the new segment.

Express auto leasing has come to replace the vehicle installment loan. Express auto leasing appeared in the market last year and has had major success. Due to this product our individual clients, who have fixed monthly income, can get up to AMD 20 million financing and purchase transport means under leasing. In contrast to loans, this procedure takes one to three banking days all in all: this period has been shortened to one banking day.

-Recently, the General Meeting of “ACBA Leasing” Shareholders was held. What questions were discussed there?

-The further development of the company and possible ways to tackle issues were among the most important questions discussed at the meeting. It was necessary to summarize the whole 12-year experience in one document, based on which we would have the chance to move ahead.

The strategic development concept for 2016-2018 was presented and based on it I was recommended to submit the development program for their approval in the coming three months.

Apparently, there are difficulties, but we should go ahead. We are in constant search of new lease markets. I think the only thing that has not been done yet is raising awareness about leasing. Henceforth, we will do our best to keep the society aware of the product in all possible ways.

New sales options have been given a new rank in the concept. Today the sales implemented through the 56 branches of ACBA-CREDIT AGRICOLE BANK make a large volume. The share of the clients in our portfolio is getting bigger there.

We will try to promote the sales through the supplier-companies the number of which is already more than 120. To be added, 50% thereof are regular suppliers.

Sales realized through specialized companies on the basis of the commission system are the next area. It refers to companies providing accounting and legal services and dealing with client databases. Those companies have the opportunity to provide us with leasing customers for which they will get commissions.

To this end, we plan to work with the banks and credit organizations, which do not render leasing services, so our company is ready to discuss the opportunity of making offers on lease products to the clients for a commission payment.

Such an agreement has already been reached with two financial institutions.

Owing to its client-oriented policy, “ACBA Leasing” CO CJSC conducts its activities based on four target groups. They are agro clients, individuals, SMEs and corporate clients, representations of international organizations, embassies and consulates.

Switching to a client-oriented policy grants the opportunity to develop more flexible and individual offers intended for particular clients.

Narine Daneghyan talked to Arsen Bazikyan