Saturday, October 11, 2008

World Bank leasing plan to spur business activity in Africa


In most African countries, small and medium-size enterprises do not have the option of leasing expensive buildings or equipment. Yet, development experts say appropriate legislation encouraging leasing could considerably boost the private sector in Africa.
Now the World Bank, through the International Finance Corporation, is working to introduce and promote the concept in Cameroon and Central Africa . They say businesses that lease property and equipment in Cameroon could earn about $800 million (about 400 billion FCFA) annually.
The few existing leasing companies in Cameroon earn only about 10 percent of that amount. The situation stands in contrast to countries like Tunisia , where leasing earns up to $700 million (about 350 billion FCFA) per year — or Ghana , where it earns nearly $110 million (about 55 billion FCFA). Experts blame the anemic state of the leasing sector in Cameroon on the absence of appropriate legislation, difficult access to financing and a failure to promote the concept.
The International Finance Corporation (IFC), an arm of the World Bank, is working with bankers and officials of the country’s ministries of finance and justice to develop legislation to create enabling legal and fiscal frameworks. Riadh Naouar is the program manager of the IFC’s Africa Leasing Facility. He says the plan will spur business activity in the region.

We started by implementing four programs — in Madagascar , Tanzania , Rwanda and Ghana — and because of the success of these programs we want to replicate the model in Francophone countries. We are convinced that leasing is one of the best financial solutions to help small and medium enterprises gain access to equipment. The first objective is to implement a favourable legal system. We think that Cameroon is one of the most potential leasing markets.
Naouar says the IFC will first lobby the government to adopt the legislation. If it succeeds, it will encourage local and foreign business people to invest in Cameroon. And it will provide investors with credit lines and guarantees at local banks.But challenges remain. The IFC says nearly all small and medium-size enterprises in Cameroon are informal or not officially registered. It notes that repossessing leased property is a major problem for the few existing leasing companies.

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