Association of Ghana Industries holds forum on leasing

Accra, March 01, GNA - The Association of Ghana Industries (AGI) in collaboration with International Finance Corporation (IFC), Ghana Association of Leasing Companies and other leasing practitioners on Wednesday, held a forum on leasing as an alternative means of accessing credit and encourage members to explore other means of financing their operations.

In addition, the forum was to enhance the role of leasing as an alternative financing mechanism for businesses in Ghana, and expose participants to the advantages they could derive from leasing equipments, machinery and other tools to enhance their operations instead of raising funds to make outright purchases.

Mr William Yeboah, Chairman of Ghana Association of Leasing Companies, speaking at the forum, said difficulties in accessing credit and the high cost of credit were imparting negatively on the operations of small and medium scale enterprises (SMEs) in the country. He said most of the SMEs were unable to provide the necessary collateral to access loans from the banks and in the process good business ideas could not be implemented.

Mr Yeboah said unlike other forms of credit, lease finance was relatively easier to access because normally it did not require a collateral security. Other advantages of leasing he said, were the early recouping of investment and the treatment of the lease rental as full expense in the companies account books for tax purposes. Mr Kwame Poku, Senior Manager of Investment Banking Division, Merchant Bank urged manufacturers in the process of retooling their businesses to consider using leasing since it could be cheaper and more flexible financing option.

Ms Taba Cookey, Programme Manager of SECO/IFC Leasing Programme Ghana, said leasing had a high developmental impact particularly for SMEs because it could deepen the financial sector and increase competition to push down interest rates.

In addition, it builds access to capital and improves cash flow for SMEs because monies which would otherwise be used on equipment were retained and ploughed back to the business to enhance its operations. Ms Cookey said IFC had since 1977 committed over 200 million dollars in leasing investments in 27 countries including Ghana. IFC is also a founding shareholder in the first independent leasing company in Ghana.

Dr Joyce Djabatey, Principal Medical Officer in-Charge of C&J Medicare Hospital, who shared her experiences with the participants, said finance leasing had helped free the company's cash flow and there was money for the day to day running of activities of the company. However, the main challenge remained the high interest rates although these had consistently been falling from a high of 40 per cent in 2002 to 29 per cent in 2006.

Dr Djabatey advised participants not to use finance leasing for luxury or non-essential items.

Nana Owusu-Afari, First Vice-President of AGI, asked members to consider leasing in their financing schemes to grow their businesses. Finance lease operations in Ghana between 1996 and 2005 grew by 162 per cent.

The volume and value of new leases almost doubled from 166 to 311 and 13.7 million dollars to 26 million dollars between 2004 and 2005. 01 March 07