World Bank Moves to Help Leasing Companies in Central Africa | Voice of America - English
In most African countries, small and medium-sized enterprises do not have the option of leasing expensive buildings or equipment.  Development experts say appropriate legislation encouraging leasing could boost the private sector in Africa. Now the World Bank through the International Finance Corporation is working to introduce the concept in Cameroon and Central Africa.
But today the few leasing companies that doexist earn only about 10 percent of that amount. The situation stands incontrast to countries like Tunisia, where leasing earns up to $700 million per year -- or Ghana, where it earns nearly $110 million. Experts blame the anemicstate of the leasing sector in Cameroon on the absence of appropriatelegislation, difficult access to sources of financing and a failure to promotethe concept. To change the situation, theInternational Finance Corporation (IFC) has taken up development of the sectorin Cameroon and Central Africa. The IFC is an arm of the World Bank. It'sworking with bankers and officials of the countries' ministries of finance andjustice to develop legislation to create the legal and fiscal frameworks. Riadh Naouar is the programmanager of the IFC's Africa Leasing Facility. He says the plan will spurbusiness activity in the region: "We started by implementing fourprograms -- in Madagascar, Tanzania, Rwanda and Ghana -- and because of thesuccess of these programs we want to replicate the model in Francophonecountries. We are convinced that leasing is one of the best financial solutionsto help small and medium enterprises gain access to equipment. The firstobjective is to implement a favourable legal system. We think that Cameroon isone of the most potential leasing markets." Naouar says the IFC will firstlobby the government to adopt the legislation. If it succeeds, it willencourage local and foreign business people to invest in Cameroon. And it willprovide investors with credit lines and guarantees at local banks. But challenges remain. The IFCsays nearly all small and medium-sized enterprises in Cameroon are informal ornot officially registered. It notes that repossessing leased property is amajor problem for the few existing leasing companies. Attorney Paul Jing is counsel forinternational investment banks and foreign lenders. He says, "The thing is that a lotof lenders do not do prior research on the borrower, the know-your-customerprocess. If you don't do that then you are taking a very high risk. You see alot of people complaining that the judicial process is slow. It's because someof these debtors are of extremely bad faith. They don't honor theirengagements. And you know our judiciary is corrupt, so they take recourse tothe judiciary and pay judges and end up not paying. A lot of leasing companiesmay even go [bankrupt] because of that." But Paul Jing is optimistic. He says leasinglegislation and workshops to educate potential leasing businesses shouldalleviate concerns about investing in the sector.