3380 file F7a and F7e Leasing in Russia for SEEP

Leasing in Russia:A Potential Solution for SME Expansion and Rural Financial Sector Deepening: 

Leasing in Russia: A Potential Solution for SME Expansion and Rural Financial Sector Deepening October 28, 2005 Sherry Sposeep, Chemonics International SEEP Annual General Meeting 2005

What is Leasing?: 

What is Leasing? A lease is a contract for the use of an asset for a set term of a year or more in exchange for fixed regular payments, between two parties: The Lessor owns the asset The Lessee uses the asset

Leasing Structure: 

Leasing Structure

Advantages to Leasing: 

Advantages to Leasing Stronger security position Ownership of asset remains with lessor, so (easier to repossess) Down-payments generally lower Improves cash flow Tax advantages to leasing

Slide5: 

Leasing to Rural and Agricultural SMEs in Russia MAP IS 6.17” TALL

The Russian Context:Rural and Agricultural SME Sector: 

The Russian Context: Rural and Agricultural SME Sector Early 1990s - SMEs were new phenomenon; SMEs - 94% of total # of enterprises Average age of machinery—22 years old Agribusiness – operating at 30-50% capacity Challenges: lack of collateral, credit history, or audited financial statements for med and long term finance from banks, seasonal, credit and property risks also limit access to finance

Growth of Russia’s Leasing Industry: 

Growth of Russia’s Leasing Industry Year $ (USD) Before 1998 <$0.5 million 2001 1.7 billion 2005 3-5 billion

Challenges to Russia’s Leasing Industry Development: 

Challenges to Russia’s Leasing Industry Development Lack of access to medium and long-term finance to capitalize leasing portfolio’s Lack of knowledge about leasing--its benefits and risks-- persists in rural areas Scarce secondary markets, except for vehicles Weak financial infrastructure Emerging non-financial infrastructure

Conducive Enabling Environment Supports Leasing Industry Development: 

Conducive Enabling Environment Supports Leasing Industry Development 1. Clear legislation defining lease contract, leased assets, and responsibilities and rights of parties to lease contract. 2. Abolition of the law for licensing of leasing companies 3. A favorable tax policy

Slide10: 

Impacts of Leasing Better quality More production Higher sales/profit Improved efficiency

Slide11: 

Thank You!