Kai Trompeter is the managing partner of Gulf Finance Medical Leasing, a part of Gulf Finance Corporation. The young division, based in Dubai, leases medical devices for a monthly fee which includes maintenance.
What is the attraction of leasing rather than buying medical equipment?
The economic crisis showed that a lot of businesses funded expensive long-term acquisitions with short-term money, and when the capital markets dried up, there was no cash flow and they needed to restructure the debt. [Leasing] combines the benefits of low monthly payments with a long-term structure. [Currently] you can buy either with cash, Dh5 million (US$1.4m) for MRI [for instance], or take credit for it from a bank and pay interest from the first month even though the equipment is not delivered in the first month. With leasing, the monthly payments are significantly lower and our rental payment starts once the equipment is delivered. No down payment is needed. At the end of the lease term, you might want to buy it, or give it back and lease the latest technology. We do not analyse from the same perspective that a bank would analyse somebody applying for credit. I just want to make sure a doctor can use the equipment, make money out of it, and pay me the rent.
What percentage of UAE medical institutions lease rather than buy?
Right now, we are the only company offering this service. There is a little bit of education that is needed in the market. One option available is finance lease, which is basically credit. In the United States or Europe, 40 per cent of the medical equipment market is being leased.
How big is the medical devices market here?
In the UAE and Saudi Arabia combined it is a Dh8 billion per annum medical devices market.
How much does it cost to lease?
Monthly payments in leasing are up to 30 per cent lower when compared to credit. An MRI machine can cost Dh5 million and an ultrasound machine can cost on average between Dh400,000 and Dh500,000.
How do you upgrade machines?
We have an in-house specialist, who tries to predict at the beginning of a lease how the value of equipment would develop over the period of the lease, and if we have to take it back to sell it off in the world market as refurbished equipment, whether in Eastern Europe, Africa or Latin America. Our upgrades go in the same cycle as leasing. After three years it is good to look at new technology for devices [costing] Dh1 million or less such as an ultrasound machine. On higher capital expenditure machines such as an MRI, you can use it for at least five years. A lot of changes are software-driven. From April, we would buy back old machines from you and lease you a new one for the UAE market.
We will enter Saudi Arabia by the end of this year.