requirements, respectively. In addition,Asset Registration policy for leasable assets has been added recently to support the regulatory framework. More directives and operational guidelines, without being cumbersome and bureaucratic, are required. More guidance, primarily in the form of directives, operational and supervisory manuals arein process of being delivered by NBE, with the support of IFC. Leasing companies are either being formed or in process of formation. Both government and private initiatives are underway, with the former being well ahead. Five regional leasing companies that are MFI-affiliated and supported by the government have been established within the past year. There is also a lot of interest from different private sector groups to establish leasing companies both foreign and domestic. There are taxation, registration and ownership questions among others that remain unanswered. However, NBE is committed to address all key gaps identified to develop a vibrant leasing sector. 2.1 Leasing Overview While one way of accessing equipment needed for production is through purchase the other is through leasing. Typically, in a lease eco-system, there are three key players: a a “Lesse”, and a to Figure 1) “Lessor” “Supplier” (refer In Ethiopia, the focus is to develop enabling and vibrant environment for finance lease, in particular for as this form of leasing leads to final ownership of the asset. hire-purchase lease, The key characteristics of finance lease (including hire-purchase) are as follows: The LESSEE selects the asset. The procurement of asset is conducted by the LESSOR and not the LESSEE. The LESSOR remains the owner of the asset throughout the lease period, while the LESSEE has control over the use of the asset. The LESSOR is fully secured in the event of destruction or damage. The LESSEE has the obligation to pay the lease fee. The LESSEE has the obligation to maintain the asset in line with the lease agreement. agreement The lease agreement, among other items is non cancellable.The details,among other things, the actions to be taken in the event there is a default. Figure 1: Leasing Eco-system There are numerous advantages to leasing (finance and hire-purchase), and the major financial advantages include: From the perspective of the LESSEE: It is a cost effective instrument that conserves liquidity and does not tie in business capital.
requirements, respectively. In addition,Asset Registration policy for leasable assets has been added recently to support the regulatory framework. More directives and operational guidelines, without being cumbersome and bureaucratic, are required. More guidance, primarily in the form of directives, operational and supervisory manuals arein process of being delivered by NBE, with the support of IFC. Leasing companies are either being formed or in process of formation. Both government and private initiatives are underway, with the former being well ahead. Five regional leasing companies that are MFI-affiliated and supported by the government have been established within the past year. There is also a lot of interest from different private sector groups to establish leasing companies both foreign and domestic. There are taxation, registration and ownership questions among others that remain unanswered. However, NBE is committed to address all key gaps identified to develop a vibrant leasing sector. 2.1 Leasing Overview While one way of accessing equipment needed for production is through purchase the other is through leasing. Typically, in a lease eco-system, there are three key players: a “Lesse”, a “Lessor” and a “Supplier” (refer to Figure 1) In Ethiopia, the focus is to develop enabling and vibrant environment for finance lease, in particular for hire-purchase lease, as this form of leasing leads to final ownership of the asset. The key characteristics of finance lease (including hire-purchase) are as follows: The LESSEE selects the asset. The procurement of asset is conducted by the LESSOR and not the LESSEE. The LESSOR remains the owner of the asset throughout the lease period, while the LESSEE has control over the use of the asset. The LESSOR is fully secured in the event of destruction or damage. The LESSEE has the obligation to pay the lease fee. The LESSEE has the obligation to maintain the asset in line with the lease agreement. The lease agreement, among other items is non cancellable.The agreement details,among other things, the actions to be taken in the event there is a default. Figure 1: Leasing Eco-system There are numerous advantages to leasing (finance and hire-purchase), and the major financial advantages include: From the perspective of the LESSEE: It is a cost effective instrument that conserves liquidity and does not tie in business capital.