Latvian leasing and factoring sector continues to increase
The overall leasing and factoring sector data* confirms the continuation of last year’s positive trends in the Latvian economy. When comparing this year’s to last year’s first quarter, the volume of new leasing transactions in the sector has increased by 8.8%, and the new limits of factoring have increased by 27.8%. The national leasing and factoring portfolio has grown by 11.7% reaching 1.37 billion euros.
In the first half of the year, growing interest in both passenger car and agricultural machinery leasing, as well as commercial transport leasing was observed. Whereas, port, railway and other related logistics sectors are currently taking the “wait and see” position in the acquisition of new machinery, which can be explained by the drop in prices of cargo carried, as well as the break in the relevant European Union (EU) and national support programs.
The first half of the year in the Latvian leasing sector is marked by increased competition. Financing rates can no longer be significantly reduced, therefore competition manifests itself in reducing leasing first instalments. For instance, car leasing offers again provide 0% first instalment, which was not commonly seen for the previous 8 years. Although consumer financing regulation framework in Latvia has substantially improved in recent years, taking into account painful lessons learned from the global crisis, customers and financiers should carefully consider whether to engage in high-risk transactions with low first instalments.
“The results of the first half of 2016 opens grounds for optimism regarding the achievement of goals set for this year. This year, Nordea Finance Latvia, in collaboration with agricultural machinery dealers and manufacturers, is especially successfully in providing funding for farmers with the EU and nationally subsidized financing, and the factoring turnover of the small and medium-sized enterprises segment has also increased,” says Ivars Šmits, Chairman of the Board of Nordea Finance Latvia.
“The headwind in the leasing and factoring sector is caused by increasing capital requirements, as well as compliance regulations, for example, one of the novelties – a broader definition of politically important persons. Similarly the leasing sector is constantly fighting the “grey” part of the used-car industry in order to protect financiers, as well as customers from engaging in tax avoidance mechanisms and the use of illegally obtained funds. All of these requirements and initiatives require additional administrative work and resources that create an additional burden for the short-term leasing and factoring sector, but in the long run these initiatives should lead to a clear and more efficient functioning of the sector and economy as such.”
*Latvian Leasing Association first half of 2016 statistics.
For additional information contact
Edgars Žilde, Communications Project Manager at Nordea Bank; phone: 6 700 5434, GSM: 28 452 975, e-mail: email@example.com