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Kabul, March 28, 2007—
IFC, the private sector arm of the World Bank Group, has signed an advisory services agreement with the Central Bank of Afghanistan to develop the country’s leasing sector. IFC will help the Central Bank draft leasing legislation, raise awareness about leasing and its benefits to stakeholders, and build the capacity of select financial institutions, which will primarily offer leasing to micro, small, and medium enterprises. IFC Advisory Services in the Middle East and North Africa – PEP-MENA will implement the project.
In early 2006, IFC completed a project with the Afghanistan Finance Company, the only private leasing company active in the country. The project helped the company enhance its credit and marketing procedures and improve its risk management systems. Within its first three months of operation, the Afghanistan Finance Company was successful at increasing its disbursed portfolio by over 577 percent, from $220,157 to $1,491,080, and was able to provide 22 new Afghani small businesses with access to lease finance. As a result of the project’s impact and a needs-assessment conducted in the country, IFC has decided to launch a leasing development project to meet the demand for leasing services in Afghanistan.
The governor of the Central Bank of Afghanistan, Noorullah Delawary, said, “A healthy leasing industry in Afghanistan will facilitate the country’s economic development by increasing the flow of financing to productive sectors of the economy, the growth of domestic production, and the availability of financial options for private businesses. The adoption of the appropriate legislative framework will greatly stimulate the launch of the leasing sector.”
Michael Essex, IFC’s Director for Middle East and North Africa region, commented, “Leasing is a financial sector instrument that particularly lends itself to the needs of small companies. We are pleased to work with the Afghani authorities to help them encourage leasing in their country.”
Leasing is an important source of medium- and long-term financing for companies, both in developed economies and in emerging markets. It is especially important for the micro, small, and medium enterprises, which are typically underserved by the banking sector. Leasing allows such firms to finance capital assets, increase production, improve profitability, and create jobs. Leasing, which is compliant with the Islamic Shari’a law, is almost nonexistent in Afghanistan. IFC has extensive experience in supporting leasing in emerging market economies. In the past 30 years, IFC has invested over $1.3 billion in 57 different countries, cofounded the first leasing companies in 26 countries, and advised 35 governments on legal and regulatory environments for leasing.
About IFC
IFC, the private sector arm of the World Bank Group, promotes open and competitive markets in developing countries. IFC supports sustainable private sector companies and other partners in generating productive jobs and delivering basic services, so that people have opportunities to escape poverty and improve their lives. Through FY06, IFC Financial Products has committed more than $56 billion in funding for private sector investments and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. IFC Advisory Services and donor partners have provided more than $1 billion in program support to build small enterprises, to accelerate private participation in infrastructure, to improve the business enabling environment, to increase access to finance, and to strengthen environmental and social sustainability. For more information, please visit
www.ifc.org
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About IFC PEP-MENA
IFC PEP-MENA is a multidonor facility for advisory services that supports private sector development across the Middle East and North Africa. It focuses on improving the business enabling environment, strengthening financial markets, supporting SME development, and promoting privatization and public-private partnerships. From its inception through FY06, IFC PEP-MENA has committed more than $20 million in advisory projects. Its activities are funded jointly by IFC and the following donors: Canada, France, the Islamic Development Bank, Japan, Kuwait, the Netherlands, the United Kingdom, and the United States.
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