Presentation Transcript
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!