Relationship Between Leasing Model of Asset Financing Versus Buying and Perfomance of Public Agencies

Abstract

Leasing is an alternate to direct purchasing of assets which enables various firms both private and public in financing equipment, plant and business vehicles. Commercial banks have in the recent days signed up agreements to offer leasing services to their various customers. The Government of Kenya has in the recent past employed the two methods of acquiring assets in order to find out which one is more efficient and their impact on the performance of the Government Agencies. However, there remains no practical proof on the relationship between lease financing and performance of Government agencies. There is also no well documented information relating to Lease financing and performance of Government agencies and other commercial firms. The purpose of this research was to therefore find out in what ways leasing by the Kenyan Government Agencies is improving overall performance in service delivery. This study sought to find out if it’s also beneficial for Government to undertake lease of other capital equipment both monetary and non-monetary. The population under study was Government Agencies who are using the two methods of procurement for their motor vehicles and a questionnaire was administered to various relevant officers in Government involved in procuring process. More data was extracted from the various performance reports published and date from Kenya National bureau of Statistics. While both methods of procuring are being used, there is an increase in use of the leasing method as a preferred method. This is because; leasing has more merits than the corresponding direct purchases. Government is better of adopting the use of leasing as it ensures quality maintenance of vehicles clearly spelt out in leasing agreement. The study also found out that with well maintained vehicles there is timely service delivery and efficiency in KPS and NTSA duties. However some of the limitations included limited time frame within which the leasing method has been used by the said Government Entities to give a clearer conclusion and also more data is required from Government and its MDAs to ascertain with more accuracy the effectiveness of leasing since the data available is not reliable enough for significant conclusions.