Georgia Leasing Project Overview

OBJECTIVE

Leasing Initiative is one of several initiatives under Georgia Business Development Project (GBDP). It's objective is create the necessary legislative framework, increasing access to financing and stimulating competition in the financial marketplace.
Leasing component will focus on the following issues:

Introduction of a new financing mechanism for SMEs by creating the necessary legislative environment,
Promoting creation of leasing companies through training and consulting,
Providing training for potential lessees, government officials, consultants and other interested partiers,
Consulting potential foreign investors in the sector,
Conducting Leasing Market Survey.

WHY LEASING

Leasing is advantageous for all parties involved: with limited financial resources and no collateral, a lessee can acquire equipment that increases the company's productive capacity and as a result, its profitability. A lessor receives payment for its financial risk, which is lower than for working capital lending because the lessor maintains ownership of the leased asset throughout lease agreement and is able to hold greater control over their investment. For a supplier, leasing expands their market base by providing businesses a mechanism to purchase equipment without incurring significant upfront cost.

Key leasing advantages are the following:

Leasing companies evaluate potential leases based on the lessee's ability to expand the business from cash flows generated through the use of the asset. This is in contrast to bank lending that typically evaluates a client based on prior credit history and the company's balance sheet. This is why leasing is particularly advantageous for new, small and medium-sized businesses that do not have a lengthy credit history, nor a significant asset base for collateral.
Leasing is an important source of medium- and long-term financing for companies, both in developed economies and in countries with economies in transition. Leasing plays an important role in these countries as an effective means to increase the lessee's asset base, particularly in private and/or new companies and in SMEs, all of which play a key role in introducing innovation and competition in the economy, and result in job creation.
Leasing creates competition in the financial marketplace. Leasing, which is not as risky as working capital lending, creates an alternative method of financing businesses and directly competes with bank lending products.

Overall, a healthy leasing industry facilitates a country's economic development through increased financing flows to the productive sector of the economy, growth of domestic production, and increased financial options for private businesses.

Key initiatives under leasing sector include the following activities:

Legislative Reform

GBDP expects to conduct legislative reform in two stages:

Stage I: Conduct a series of workshops with banks, leasing companies, private companies, professional organizations and NGOs , as well as other international development organizations, to analyze existing conditions for leasing development in Georgia. Based on these meetings, Leasing Initiative will point out key deficiencies to be addressed and recommend changes to the legislative environment to facilitate the development of the leasing industry.
Stage II: Draft further recommendations to Parliament and executive authority on the necessary changes to legislation or regulations. These recommendations will contain proposed text of the legislation or regulations. Once the recommendations have been presented, project specialists will follow up to provide additional consultations and information on the justification for the proposed changes

Training/Consulting Program

The training/consulting program will develop the technical skills needed by both leasing companies and their clients to conduct efficient and profitable leasing operations. Seminars will comprise (but not limited to) the following topics:

Fundamentals of Leasing;
Technical assistance in the development of a legislative environment stimulating the growth of leasing;
Consultations on economic, financial and legal aspects of conducting leasing business in Georgia;

Information/Public Education(Skills, Finance, Awareness)

The Leasing Initiative expects to develop a series of information products which will be distributed widely. The objective of this component is to:

disseminate basic knowledge of leasing widely within the local business community;
direct individuals and businesses to available information resources, sources of expertise and financing;
create channels for the distribution of best practice and local expertise within the business community;
provide foreign investors with basic information on the market and business opportunities available through leasing.

Survey

The Leasing Initiative plans to conduct a market study and review of the legislative environment for leasing in Georgia. The study is expected to review leasing possibilities covering all of the country, rural and urban-based enterprises and identify current barriers to leasing transactions for a well-functioning, broad, deep and accessible leasing sector.

Leasing Bulletin

Quarterly bulletin will provide information on international best practice in the leasing sector, interviews with leading experts, analytical materials and local leasing market highlights.

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