Dar-es-Salaam, Tanzania, May 24, 2005 —
The International Finance Corporation, the private sector arm of the World Bank Group, in partnership with the State Secretariat for Economic Affairs of Switzerland (seco) and the Tanzanian government, today launched a new project to increase use of one of the most effective forms of financing for small and medium enterprises—leasing.
The Tanzania Leasing Project, funded with approximately $900,000 from seco, will promote the growth of this proven financing tool supporting private enterprise growth and helping create a more favorable environment for both foreign and domestic investment.
The technical assistance project targets the small and mid-size businesses critical to employment growth in Tanzania and other African countries. Leasing is especially useful for these smaller firms that often can neither afford to purchase needed new equipment outright nor obtain bank loans to finance them. The project will seek to increase Tanzania’s volume of lease transactions, which currently stands at just $17 million—meeting just a small fraction of demand in an economy currently growing at about 6.3 percent per year.
The leasing project is the first to be launched under IFC’s Private Enterprise Partnership for Africa (PEP-Africa) technical assistance initiative with its donor partners.
“We have put an early priority on developing leasing in Tanzania,” said Bernard Chidzero, general manager of PEP-Africa. “For despite the improving economy, its smaller businesses are still hampered by the high cost of capital, lack of medium-term financing options, and little diversification of financial products. IFC has advised governments on leasing legislation in 35 different countries while also investing more than $1 billion in private leasing companies over the past 30 years, and we are glad to bring this experience to Tanzania to support the growth of smaller enterprises.”
“The government of the United Republic of Tanzania intends to enact laws relating to leasing and amend the Hire Purchase Act of 1966 to enable the Small Industrial Development Organisation and other financial institutions to lend equipment to small businesses. This project has come at the right time to assist us in developing leasing,” noted the Hon. Basil P. Mramba, minister of finance of the United Republic of Tanzania.
“The leasing project is part of Switzerland’s private sector related activities in Tanzania. This project will provide another avenue for smaller firms’
access to finance and enable the development of the private sector,” said
Pio Wennubst, country
director
of the
Swiss Cooperation Office
in Tanzania.
The local business community has already shown keen interest in the project. Many potential investors in new or expanded leasing companies are seeing signs of strong demand in the marketplace and expressing enthusiasm for the removal of legal, tax, and administrative barriers that currently block the industry’s growth. IFC’s leasing project, in cooperation with the Ministry of Finance, is expected to play a key role in advocating for changes in the leasing sector.
The mission of IFC (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
About seco
Seco is the Swiss government’s competence center for sustainable economic development cooperation and the integration of developing and transition companies into the global economy. Its primary objective is to fight poverty. Economic cooperation plays a central role in the promotion of investment and trade and makes a key contribution toward creating a national environment that provides favorable framework conditions for economic growth and personal initiative.
Seco’s approach is based on the principles to:
·
Help develop a market economy and growth that is both durable and sustainable in all partner countries.
·
Support reforms that promote the increased integration of partner countries in the world economy.
·
Encourage greater respect for the principle of good governance, both public and corporate, as well as business ethics.
·
Help bring about a greater mobilization of private sector resources both in Switzerland and in the partner countries in ways that contribute to the development and transition processes.
