Leasing industry grows by 20 percent

Leasing in Rwanda has grown from $25 million (Rwf14 billion) to $30 million (Rwf17.1 billion since June last year. According to information from the International Finance Corporation (IFC), the industry is now valued at about $30 million, representing a 20 percent growth. Information from IFC which is a member of the World Bank Group indicates that the monetary value of the industry covers 115 leases, which translates into $260,870 (Rwf489.5 million) per lease on average. According to Brian Kirungi, the IFC Team Leader and Legal Specialist the current market value is better than in the past. “There is tremendous progress compared to three years back when the market value was about $3 million (Rwf1.7 million),” he said. Leasing is a process by which a firm obtains the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. The lessee pays 30 percent of the value of the lease equipment. Statistics show that the transport sector takes the biggest share of the leasing market with 62.9 percent. Agriculture, tourism, and medical services have the least market share valued at 0.9 percent, 0.29 percent and 0.19 percent respectively. IFC statistics indicate however that Kigali city constitutes about 90 percent of leases largely provided by FINA bank and Commercial Bank of Rwanda (BCR) as the service pioneers. Since the introduction of ‘The Rwanda Leasing Association’ in 2008, leasing has attracted more financial institutions including Ecobank, Cogebanque and Vision Finance Microfinance. The new market entrant, Kenya Commercial Bank (KCB) is yet to offer the service. The KCB Rwanda Managing Director, Maurice K. Toroitich, explained that “The bank is still working on a paper detailing how to operate.” However Kirungi said that the coverage also means that there is less credit upcountry. “This is why government is trying to extend loan facilities for rural areas through MFIs,” he added. In efforts to spread leasing upcountry for Small and Medium Entrepreneurs (SMEs), IFC is working with the Association of Micro Finance Institutions (AMIR), because of their presence in rural areas. In MFIs, the service reffered to as ‘micro leasing’ and ranges between Rwf75,000 – Rwf2.5 million. According to the AMIR Chairman, Faustin Zihiga, it is another level of micro financing. “It facilitates SMEs to establish or expand their businesses in a more affordable and effective way,” he recently explained. IFC management is optimistic that within about a year, there maybe more leases registered upcountry especially in the agricultural sector. Ends

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Leasing industry grows by 20 percent