Abstract
This study examines the impact of leasing on lessee's income, family expenditure and default rate in Jaffna District which was badly affected by the civil war from 1983 to 2009. This war has significantly affected the socioeconomic status of the people living in the area. Since the end of the war, the presence of the financial institutions has been increased significantly in the district. There are 39 financial institutions operating in Jaffna district and all of them have the function of leasing as their major operation. In general, service sector contributes 65% of the economy in Jaffna district. Transport service is also playing an important role in the economy of the district. Domestic tourism slowly emerges as a significant economic activity in this district. For this study, 331 leasing clients were randomly selected to collect data using pre tested questionnaire. The study has found that 72.8% of leasing facilities has been offered to transport sector and out of the leased facilities 39.9% were seized. Multiple regression models for lessee's income and family expenditure and probit model for default rate of leasing were developed to study effect of leasing on lessee's income, family expenditure and default rate. The results show that leasing has positive impact on income and family expenditure. On average, family expenditure increased by leasing is greater than the income increased by leasing because most of the lessees are economically marginalized. Therefore, there is higher possibility to get default but increase in leasing amount decrease the default rate. Leasing had greater positive income effect on self-employed clients using leasing in their own business. It was found that the leasing companies are charging very high interest rate and penalty on delayed installments. Leasing companies need to assess the client's potentials and repayment capacity before offering leasing facility. Leasing companies should provide more grace period when the clients are in trouble. It is recommended to offer more leasing facilities to other sectors such as fisheries, agriculture and industries.Keywords: Leasing facility, Multiple linear regression, Socio-economic impactJEL Classifications: G21, D25, D14, O12DOI: https://doi.org/10.32479/ijefi.10885
Highlights
Jaffna District is one of the districts in the northern province of Sri Lanka and occupies most of the Jaffna Peninsula
The numbers of finance and leasing companies, establishment of branches and performing leasing activities have significantly increased in Sri Lanka in the recent past
The customers who obtained leasing facility from the leasing companies were selected through โSnowball Sampling Method.โ 10% of the leasing clients from the sampled leasing companies were taken as sample for the research. 331 leasing clients were selected for this study
Summary
The numbers of finance and leasing companies, establishment of branches and performing leasing activities have significantly increased in Sri Lanka in the recent past This has been very much significant in the Northern Province, especially in Jaffna District. All together there are 39 financial institutions which run their operations in the district with over 200 branches This scenario has led to Jaffna District becoming the national record holder of the highest density of banks and finance companies This situation has significantly influenced the increase of leasing activities in Jaffna District. In a society resurging after a long war, such information is very important to generate effective development guidelines In light of these problems the study aims to understand the socio-economic impacts of leasing activities in Jaffna District.
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