Bright Future For Indian Leasing Industry, Says Ifc

The sky is the limit in India as far as the potential for growth is concerned, said International Finance Corporation senior investment officer in the Asia division Khaleel B Ahmed, noting that leasing companies in the country had greater access to domestic capital in recent years, and were moving towards longer-term specialised leases.

A new International Finance Corporation study, titled Leasing in Emerging Markets, estimates that leasing is a $350 billion industry worldwide, accounting for as much as a third of all private investment in the industrialised countries. In the developing world, leasing has tripled in size since 1988, reaching over $44 billion in 1994.

 

Leasing is one of the great unsung development stories of recent times, said International Finance Corporation capital markets development director Farida Khambatta, releasing the report which looks back on International Finance Corporation's two decade-long experience promoting leasing in emerging markets.

International Finance Corporation is pushing leasing as one its three key strategies to promote small and medium enterprises (the other two are credit lines to banks and venture capital funds), which may have limited access to other sources of financing.

International Finance Corporation's experience also indicates a significant development impact in other areas, particularly in developing capital markets. Leasing companies introduce new financial instruments, and help deepen and broaden the markets as they try to mobilize debt and equity.

Noted Khambatta, In Brazil, 60 percent of the corporate bond market is represented by leasing companies.

The new report is much like a primer for both companies and governments, isolating the ingredients that International Finance Corporation believes makes for leasing success stories.

International Finance Corporation has been involved in more than 60 projects in 32 countries, investing $438 million to catalyse the industry in developing countries. The corporation's recommendations include insisting on a substantial equity stake of between 20 and 40 percent for technical partners to ensure that they retain interest in the venture, careful portfolio management, and a regulatory framework which at least treats the leasing company on par with other sources of capital investment financing.