Leasing in Development: Guidelines for Emerging Economies

2009 Leasing Development Guide for Emerging Economies.The global leasing landscape in emerging markets is still very diverse today, with nascent leasing industries in the poorest countries in Africa and Asia, and maturing leasing markets in the most advanced economies of Latin America and Eastern Europe.

It remains critical to develop a vibrant leasing industry in countries where it does not exist. Leasing fosters economic development and job creation, by providing access to financing to micro, small and medium businesses that often cannot access other forms of financing.

In countries where the leasing market has already built up, encouraging competition can help lower financing rates and expand financing volumes. At this stage, banks generally enter the leasing competition and start using leasing as a way to attract new clients, while stand-alone leasing companies are pushed to develop more specialized products and niches.

Even in markets where leasing is reaching maturity, new products offer opportunities for further growth. For the IFC, one of the most promising avenues for leasing in developing countries is still under-exploited—the rapid growth of investments in sustainable equipment (i.e. energy efficiency, renewable energy, and cleaner production). These investments are critical to successfully tackle the global climate change challenge, and are supported by a strong political will worldwide. Because leasing is asset-backed and generally cash-flow based, it is a particularly relevant product to finance these equipments. IFC supports sustainable equipment financing by combining credit lines and risk-sharing facilities with advisory services that aim at building the capacity of leasing firms to identify opportunities, develop business, and appraise the risks and cash-flows of different types of equipments and sub-sectors.