A new leasing law supported by IFC is powering Tanzania's leasing industry forward, helping many of the country's smaller businesses, which are benefiting from easier access to heavy equipment and machinery.
Tanzania’s recently-enacted Financial Leasing Law defines the rights and obligations of those who participate in leasing and will serve as a solid legal foundation for the east African country's fledgling leasing industry to grow.
Thanks to the law, Tanzanian businesses that require expensive machinery or vehicles will enjoy increased opportunity to lease these items instead of having to pay sometimes prohibitive amounts to purchase them.
A healthy leasing industry will be especially welcomed by Tanzania's large and important agricultural sector, which relies on the use of expensive tractors, tillers, and irrigation equipment to boost productivity.
A WAY FORWARD
IFC, which supports the growth of the private sector as a means to reduce poverty and create jobs, has backed the growth of leasing industries worldwide. It was instrumental in helping Tanzania draft and enact its new law.
At the invitation of Tanzania's government, IFC began the process in 2005 by analyzing the country's existing -- yet inefficient -- laws for financial leasing. Working with government and the private sector, IFC organized discussions that helped clarify problems inherent in the existing laws and proposed a way forward.
The discussions, which involved members of Tanzania's parliament, regulators, bankers, and other private sector players, were augmented by training sessions to help explain the structure and benefits of a successful leasing industry.
Throughout the drafting of the law, and since its passage, IFC has organized workshops and conferences in Tanzania to attract investment into the industry, bringing together leasing participants from the private and public sectors.
IFC was supported on this project by many partners and donors, most notably the State Secretariat for Economic Affairs of Switzerland (SECO).
At a recent IFC-sponsored leasing conference to mobilize both local and international investment in Tanzania's leasing sector, the country’s Deputy Minister for Finance and Economic Affairs, Omar Yussuf Mzee, said:
"The government of Tanzania recognizes and acknowledges the important role that lease financing can play in Tanzania's development, and therefore thanks the International Finance Corporation through the SECO - IFC Leasing Program for their support of our leasing program."
"The government acknowledges and appreciates the role that (IFC) has played in public education, capacity building for leasing companies, banks, financial institutions and other stakeholders, so that, leasing services can become a reality in Tanzania."
LEASING’S IMPORTANT ROLE
Leasing is an important alternative financial instrument, especially for smaller businesses that often lack the credit history or sufficient collateral to access traditional forms of financing.
Leasing also reduces the initial capital requirements of acquiring equipment, giving small businesses access to vehicles or other machinery they could never afford to purchase.
Leasing development is a priority for IFC in Africa because of the important role it plays helping private sector firms grow, increase productivity, and take on more employees. Africa is fertile ground for leasing programs: besides Tanzania, IFC supports leasing programs in Cameroon, DRC, Ghana, Madagascar, Rwanda, and Senegal.
Before the introduction of Tanzania's new law, the country’s tiny leasing industry was limited to only a few companies, which restricted their business to a small number of clients that had already proved their credit worthiness.
Since the law came into effect, six new private sector leasing companies have already established in Tanzania; the value of the industry is expected to double within the next two years.
"The leasing sector is vital for economic development because it promotes domestic and international investment, leads to the formation of capital, and ultimately helps reduce poverty," said IFC Director for East Africa, Jean Philippe Prosper.
"The industry played a pivotal role in the rapid growth of emerging economies worldwide by enabling a huge number and variety of small businesses to expand and take on more employees. IFC is supporting the growth of leasing in Africa to achieve similar developmental benefits."
For more information contact:
Jason Hopps
Communications Officer
Johannesburg, South Africa
Tel: +27 11 731 3120
Email: jhopps@ifc.org
