IFC says despite having huge potential Ghana needs a strong leasing player, who is well capitalized
Ghana is losing out on the potential of the leasing industry, which serves as an important effective and efficient financing solution for Small and Medium Scale Enterprises (SMEs) in their operations.
With the country’s potential leasing market estimated at US$ 812 million, it is currently engaged in an active movable leasing estimated at only US$ 228 million, according to the Handbook of Regional Statistics 2017 on Equipment Leasing in Africa.
This, according to industry players, is not enough.
Addressing the issue of the future of leasing, the Head of Financial Institutions Group Advisory at International Finance Corporation (IFC), Riadh Naouar said the growth potential of the country is huge but the current performance or growth is still not enough.
In Ghana, the leasing market seven years ago was about US$ 20 million, however, this has grown to about US$ 228 million.
“So we did a fantastic leading role to get the market growing by more than 10 times in seven years; but in terms of the role of financing the economy, there is still room to progress,” Naouar said.
While the leasing market in much of sub-Saharan Africa (SSA) is yet to be fully developed, it is estimated that the continent’s leasing market value volume for movables, such as earth moving equipment, stands at almost US$ 41 billion, taking into account all regional leasing activities.
Currently, leasing/assets financing in the country is provided by both financial and non-financial institutions, with at least 12 companies offering finance and operating leases.
Prior to IFC’s intervention in 2005, Ghana’s leasing market was static. It reached US$ 30 million and stopped growing.
He recommended that, to progress, the country though having a huge potential, still needs a strong leasing player, who is well capitalized.
“One of the biggest challenges I met in the continent is that; you cannot develop leasing without having a well-capitalized leasing company in place. Without leading companies, there are no leasing providers; without leasing providers, there is no leasing market.”
“There is huge potential, but if you don’t have a strong player you will never be able to develop or build-up,” Naouar emphasized.
At the request of the government of Ghana, IFC supported the Bank of Ghana (BoG) in drafting new leasing legislation.
This led to the passage of the 2008 Universal Banking Act, which allowed all banks to offer leasing among their portfolio of financial offerings, as they were previously prohibited from doing so.
