Investigation of Leasing In Asset Financing: A Case Study of Investment Companies Listed At Nairobi Securities Exchange

A Project Report Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA)The lease or purchase decision is a standard issue talked about in most financial course readings. The purpose of this study was to assess the effects of lease and purchase decisions on assets management in Kenya in selected investment companies. The study sought to determine the main considerations in making leasing decisions, the benefits of leasing assets and the key challenges which are faced while making key leasing decisions. The study adopted descriptive research design using primary data which was collected from investment companies listed in the Nairobi Stock Exchange Market in the CBD Nairobi County using a questionnaire. Data was analysed using frequencies and percentages. Cross tabulation was used to illustrate the different responses given while the findings were presented using frequencies, graphs and charts. The study found out that leasing services were valuable to the organizations and they were greatly used in ICT, Finance, Human Resource and Administration. On the benefits of leasing, most of the respondents indicated that the benefits listed were realised to a great extent in the different sectors. In the construction and allied and agriculture sectors, the respondents indicated that the benefits were mildly felt. Other additional benefits included no upfront payment required, not affected by inflation and its less capital intensive. On leasing considerations, majority of the respondents indicated that the considerations given were felt to a great extent in the different sectors except in the construction and allied and the agriculture sectors. Other considerations included terms of the lease, monthly budget for the leased asset and impact on the working capital. On the challenges of leasing, most of the respondents indicated that the challenges given were felt to a great extent in the different sectors except in the construction and allied, manufacturing and allied and the agriculture sectors. Other challenges given include long term cost of the leased asset and complicated contract terms. Some of the recommendations which were given to try and address these situations were given in threefold. Regarding the investment firms, it was found to be integral for effort to be made in order to improve the efficiency of capital and property markets through availing information on lease financing. Investment firms also needing to lease were required to have an idea of the timings of the property cycle. This could help them lease optimum benefits during the boom cycle since conditions were much favourable. Investment companies were also needed to act proactively especially regarding real estate requirements and the different needs they have. Property ownership or leasing is guided by different factors such as the profitability of the company, its growth prospects, the future needs and different uses as well as property market conditions