Olena Gryniuk talked to Marcin Balicki, CEO at Millennium Leasing (Poland), about the development of the leasing market in Poland and how Millennium Leasing approaches SME customers.
How many of your leasing deals are you concluding with SME customers?
This year more than 35% of our business (understood as new leasing agreements) comes from customers in the SME sector. However, it is worth pointing out that we’re experiencing an increasing trend within this scope, due to the fact that for a number of years we have been developing our operations in the SME and Micro sectors by transferring transaction execution and transparency of terms standards to those sectors from the corporate segment, where we’ve always had a strong presence.
What equipment do SMEs buy and what is the main leasing product they choose?
When it comes to Millennium Leasing, the structure of agreements concluded by companies from the SME sector is quite balanced. The largest share is attributable to vehicles up to 3.5 tonnes (37.5% in terms of volume and 18.9% in terms of value), heavy road transport (39.4% in terms of volume and 46.5% in terms of value) as well as machinery and equipment (21.8% in terms of volume and 30.8% in terms of value).
This August, Millennium Leasing announced the signing of a loan agreement with EBRD under the PolGEFF project (Polish Green Economy Financing Facility), the main part of which should be granted to SMEs for investments related to energy efficiency or renewable energy. What are the projects that you will consider and how many SMEs you plan to finance under that project?
Our commitment to financing energy saving investments goes back years. We have been taking part in various programmes (such as PolSeff) and we’ve also established our own product lines. Leasing EkoEnergia is one such product, where, using our own funds, we provided co-financing for investments in energy-saving machines to our customers. And we do not only perceive these actions as favourable from a CSR perspective — they are also thoroughly justified from a business point of view. Essentially, such investments do more than just contribute to a reduction in energy costs: frequently, nowadays when we are experiencing increasing problems associated with availability of qualified staff, they allow our customers to sidestep this barrier. The agreement with EBRD concluded this year is yet another step in that direction.
The PolGeff programme assumes financing of a wide range of investments associated with energy efficiency or renewable energy, encompassing investments associated with improving the energy efficiency of buildings, investments in equipment, systems and processes which lead to significantly improved efficiency in terms of the consumption of energy, water and raw materials, as well as investments which promote the use of renewable energy sources. Within the above scope, we provide an opportunity to employ leasing financing wherever it is feasible, taking into account the purchased assets. We are not guided by quantitative targets (understood as the number of companies who take advantage of the programme), but rather we are looking to make use of the entire available amount of PLN 300 million as quickly as possible. I think it will be possible to achieve that by the end of the year.
THIS YEAR MORE THAN 35% OF OUR BUSINESS (UNDERSTOOD AS NEW LEASING AGREEMENTS) COMES FROM CUSTOMERS IN THE SME SECTOR
What is the process for SME customers to get a lease deal with Millennium Leasing? How long does it take from the very beginning to signing the agreement?
Processes, their transparency, usability for a given organisation and duration are some of the major competitive factors today. The leasing agreement conclusion process is diverse not only on account of the customer segment, but also due the type of asset to be financed, the cooperation history we have and the overall amount committed to financing.
For most leasing transactions in the SME segment, we are able to provide a financing decision within seconds. For a number of reasons, such a radical reduction of the time required to complete the subsequent stages is not as simple. Firstly, pursuant to Polish legal regulations, a leasing agreement is invalid unless drawn up in writing. Secondly, executing a leasing transaction, as opposed to a loan, entails more than a simple financial operation — it requires an interaction with the asset supplier (conclusion of an agreement and its verification, insurance of the subject of the lease, and for vehicles — registration with vehicle licensing authorities). However, these processes can also be accelerated. Results we can be proud of include doubling efficiency (the volume of transactions per back office staff member) and reducing the time required to complete certain types of transactions by between 20 and 50%.
Which steps of that process are digitalised?
The process for credit decisions for a significant share of transactions in the Micro and SME segment is fully digital (with the exception of entering basic customer data and information on the leased asset). Other areas where we are introducing digitalisation primarily lie within the sphere of internal processes aimed at improving efficiency. For customers, this means waiting times for completing transactions are reduced. We believe that digitalisation is a process that has to be sustainable and well thought out. In this case, sustainability means that we have to ensure a smooth process for transactions initiated within mass distribution channels. Ease of access to leasing and credit decisions has to go hand in hand with satisfactory operational efficiency.
We talked about digitalisation in the leasing industry last year (read the interview in SBB Magazine, September 2017). What has changed on the Polish market during this year? Have new initiatives appeared since then?
There is always a feeling that more could have been done; however, looking back on the last year — we have plenty to be proud of. Independent of projects completed by various firms, the Polish Leasing Association’s digitalisation group meets on a regular basis. I do believe that we will shortly commence a joint project on structured invoices. In April this year we also organised the first E-Leasing Day conference, with Minister Anna Streżyńska in attendance, during which the possible development directions were discussed among individuals responsible for IT, processes and products from all the major leasing companies in Poland. We also had an opportunity for an in-depth discussion with IT systems and solutions providers.
What do you think the near future holds for the development of the leasing market in Poland?
Changes in regulations pertaining to leasing announced by the Ministry of Finance have caused a lot of uncertainty. It is difficult to predict how these will affect the leasing market. Certainly passenger vehicles are such a significant part of it that these changes will have a major impact on next year’s statistics. From the point of view of Millennium Leasing, we are not overestimating hypothetical risks associated with the new regulations. Our observations suggest that for years leasing has ceased to be used as a tax reduction instrument by customers and has become a method for financing investments on par with loans. And within that scope, the attractiveness of leasing, the ease of obtaining it and the support which customers can expect to receive in negotiating with suppliers remain stable.
All these advantages mean that apart from temporary turbulence in the vehicle financing segment, leasing should continue to grow at double-figure rates.