Liberia Leasing Investment Forum
Finance Leasing in Liberia:
Unlocking Accelerated Market and Business Development
June 13-14, 2012
Monrovia, Liberia
Leasing is both a source of affordable capital for small and medium-sized businesses and a catalyst
for socio-economic development. Understanding the benefits of a developed leasing sector, the
Government of Liberia has worked to develop an enabling environment for finance leasing in Liberia.
Increasing interest, awareness and participation of all local and regional stakeholders in leasing
business development is key to supporting widespread finance leasing opportunities for private
sector development in Liberia. The Liberia Leasing Investment Forum brought to you by Liberia’s
National Investment Commission in partnership with IFC with generous contributions from our
donors and sponsors featured below, brings together local government and private sector
individuals alongside regional and international stakeholders to meet and promote investment in
the leasing sector in Liberia.
Finance Leasing in Liberia:
Unlocking Accelerated Market and Business Development
Leasing in the global context
Worldwide, finance leasing has demonstrated its ability to
increase investment in capital equipment and plays an
important role in economic development. It accomplishes
this role by serving not only as an alternative financing
mechanism, but a more powerful mechanism to manage
risks and benefits associated with the use of productive
assets. In developed countries, leasing is used to finance
about one third of private investments.
Given the challenges in accessing affordable capital, leasing
is particularly relevant for Africa, and is a suitable financial
instrument for small businesses because they often lack
sufficient collateral to access traditional forms of financing.
In the case of finance leasing, as the leased asset serves as
the collateral, it therefore significantly reduces the entry bar
for participation, making leasing an attractive financial tool
for many small business owners.
Why is finance leasing important to Liberia?
In Liberia, due to a variety of circumstances, such as
difficulties in obtaining property titles, most assets cannot
be used as collateral. Leasing is therefore an effective
means to increasing access to finance for many. Leasing
provides a means to deliver increased domestic investment
within economies. By developing additional financial tools
such as leasing or mortgages, Liberia will be able to deepen
financial sector activities by introducing new products
and/or industry players.
What is Leasing?
Leasing is a medium-term financial
instrument for the procurement of
machinery, equipment, vehicles
and/or properties. Fundamentally, it
is asset-based financing with the
asset providing, in most situations,
the security for the financing.
Known as the “lessor,” leasing
institutions—whether banks, leasing
companies, insurance companies,
equipment producers or suppliers, or
nonbank financial institutions—
purchase the equipment that has
usually been selected by the
“lessee,” and then allow the lessee
use of that equipment for a specified
period of time. For the duration of
the lease, the lessee makes periodic
payments to the lessor, at an agreed
rate of interest and in an agreed
currency. At the end of the lease
period, the ownership, or title, of the
equipment is transferred to the
lessee at a pre-agreed residual value,
or the equipment is returned to the
lessor, which may then sell it to a
third party or declare it worthless
and obsolete.
Leasing is based on the proposition
that income is earned through the
use of assets, rather than from their
ownership.
Founded as it is on extractive industries, Liberia’s economy
creates great potential for an industry such as leasing. As a
result of the lifting of the UN ban on timber exports and
recent Foreign Direct Investment into the country, private
investors are likely to be the major drivers for the expansion of the leasing industry in the coming
years.
Mining experience from around the world has shown that most mining companies prefer to lease
rather than own equipment. The experience has also shown that, such companies would rather
sub-contract an operation to private operators than carry out the operation themselves.
Other non-core services including bussing, vehicle rental and hospitality services are additional
off-shoot activities also likely to increase the leasing potential when such sectors grow.
Finance Leasing in Liberia:
Unlocking Accelerated Market and Business Development
Leasing potential in Liberia: Over US$200 million
The leasing market in Liberia is relatively new. There are no existing players engaged in leasing
activities at the bank or non bank lessor level. However, the introduction of legislative and
regulatory framework for leasing by the government and Central Bank of Liberia is creating
movement in the sector which is expected to transition from an inactive to an active market
within the next year.
In 2012, an IFC consultant projected the potential market opportunity for leasing in Liberia to be
more than US$200 million based on GDP, population and the needs in development of certain
sectors such as oil and gas and infrastructure. The market is expected to increase over time due
to the country’s growing equipment needs in agriculture, construction, mining and other sectors
of the economy.
A successful leasing industry is founded on four pillars: regulatory framework, legal framework,
tax burden and accounting practices, and the government of Liberia has successfully
implemented several of the components to promote leasing development:
The Regulatory and Legal Framework: In 2010, the government passed the Finance
Leasing Law to strengthen the regulatory and legislative framework for leasing in Liberia.
The leasing law is favorable, especially toward the rights and the obligations of the lessor
and the duties of the supplier. The law further provides for an expedited court process if
a lessor must repossess the leased asset in cases in which the lessee has defaulted on
payment.
The Tax Burden: The tax environment for lease contracts in Liberia is favorable. Financial
leases are therefore competitive compared to other existing forms of financing. Currently
however leasing players and tax authorities could benefit from additional training and
guidance to implement the tax leasing provision. While there are no leasing tax
exemptions for the lessor, all related exemptions granted to small businesses could be
transferred to the lessor but limited to the leasing term under a lease agreement. Followup capacity building is planned in order to educate players in the leasing market on how
to implement the new leasing law to address these issues.
The Accounting Practices: Accounting practices play a singularly important role in leasing
as they have the potential to play a role in the determination of who owns an asset as
well as the determination of tax liabilities. International Accounting Standards (IAS) 17 is
the seminal accounting regime for leasing but it is important to note that even developed
countries have adapted its principles to their own realities. Liberia could benefit in
adopting such standards and similarly adapting them to its own climate.
Importance of investment in developing the leasing sector in Liberia
There are 3 major constraints for the development of leasing in Sub-Saharan Africa:
• An inadequate tax and legal framework for leasing operations
• The lack of technical partners in the region
• The scarcity of medium-term funding resources
Given the country’s favorable legal and regulatory framework, the bank and non bank lessor
sectors and other technical partners are imperative to the development of leasing operations in
Liberia. While Liberia has taken a laudable first step in laying the foundation necessary for this,
investment in the leasing sector will be necessary to propel Liberia’s leasing sector to the next
level and make the leasing business effective and sustainable.
Finance Leasing in Liberia:
Unlocking Accelerated Market and Business Development
Benefits of finance leasing for financial institutions and entrepreneurs
Benefits to Lessee
Benefits to Lessor
Eliminates need for collateral: In leasing, the bank or
leasing company owns the leased asset and as such
will use the asset as the primary security, thereby
eliminating the need for collateral.
Longer term financing: Leasing provides a means to
access mid- to long- term financing because the
financing will be tied to the useful life of the asset.
Reduction in taxes: Finance charges on a finance
lease are tax deductible expenses, unlike other loans
where only the interest element is taxed. This
typically means that while income from operations is
expected to increase with the acquisition of the
asset, costs reduce as the tax burden is reduced
because the entire financing cost is tax-deductible.
Reduces appearance of debt on balance sheet:
Depending on the laws of the land, a lease is not
considered a long-term debt or liability; it does not
appear as debt on the financial statement, thus
making it more attractive to traditional lenders.
Immediate write-off of the asset: Because leasing
payments are treated as expenses on a company's
balance sheet, the subject equipment does not have
to be depreciated over its lifespan. This considerably
lowers tax liability and reduces the cost of access to
such equipment.
Flexibility: As a business grows and as its equipment
become old and obsolete, leasing allows for
upgrading at any point during the lease term. Leasing
financing provides the flexibility for clients to have
customized financing models that address their
needs and requirements - cash flow, budget,
transaction structure, cyclical fluctuations, etc.
Conservation of working capital: Equipment leasing
allows the business access and usage of equipment
to generate income without an initial high cash
outlay, thereby ensuring that there is working capital
to run the business.
Easier replacement of obsolete equipment: Leasing
offers the opportunity to replace obsolete
equipment faster. Spare part and maintenance drive
up the cost of running obsolete equipment. Leasing
is therefore a cheaper option.
Increased Income and profit: Leasing enhances
the income of the lessor through increased sales
and services provided. It also provides
opportunities for enhanced profits through
monetization of residual value of assets.
Benefits to Vendor
Increase in sales: Additional financing options for
small businesses, such as provided through
leasing, result in an increase in sales for the
vendor.
Long-term relationships: Develop a long term
partner with the leasing player.
Sustainability: Development of the leasing
industry helps sustain their business.
Quality assurance: Improved quality of after sale
service to client.
Brings vendor closer to client: Develop their
network to be more close to the client.
Increased security: Point of sale financing
provides additional security.
Benefits to Broader Economy
Increases overall GDP: Leasing creates
opportunities for employment, provides impetus
for the widening of the tax base of a country and
contributes to the development of social benefits
such as education and health care. Leasing
provides alternative sources of financing for the
private sector, opportunities for incremental
business investment, and opportunities to
develop and enhance secondary markets while
contributing substantially to a deepening of
financial markets.
Finance Leasing in Liberia:
Unlocking Accelerated Market and Business Development
Agenda
Day 1: Wednesday, June 13, 2012
8:30
9:00
12:30
13:30
15:00
Registration
Welcome by National Investment Commission Chairman Hon. O. Natty B. Davis, II
IFC : Access to Finance and Private Sector Development
Central Bank of Liberia: Leasing in Liberia – Opportunities for investors
Keynote Address : Vice President of Liberia, HE Joseph N. Boakai
Presentations
 Minister of Finance, Hon. Amara Konneh: Incentives and Opportunities :
Government’s role in promoting leasing and creating an enabling environment
 Maximizing value through SME lease financing
 Leasing licensing and arbitration in Liberia
 Building a Sustainable Leasing Business in Liberia
Moderated Discussion
Lunch
Presentations
 Minister of Commerce, Hon. Miatta Beysolow : Business Readiness for Finance
Leasing
 Leasing to SMEs
 Realities of Leasing – the prospect of local banks to participate in the leasing
business
 Agrileasing: the role of leasing in developing agriculture
Discussion followed by networking
Day 2: Thursday, June 14, 2012
8:30
9:00
13:00
13.30
Registration and breakfast
Overview of Day 1
Presentations
 Global Leasing Practice: Case Scenarios and adopting best practice models
to make leasing work in Liberia
 Overcoming Challenges for Investors and Businesses
 Making Leasing Attractive in Liberia: Government initiative to motivate
potential investors to start leasing business in Liberia
 Long Term Financing for Leasing – the venture capital option
Discussion and break
Presentations
 Multilateral Support of Leasing Facilities
 Building Capacity of Small Business and Microfinance Institutions to Gain
Access to Finance through Leasing
 Doing Business in Liberia
 Leasing in emerging markets
Moderated Discussion
Closing Remarks: National Investment Commission Chairman Hon. O. Natty B. Davis, II
Lunch
About Liberia National Investment Commission
As the principal champion of investor relations, the National Investment Commission, or NIC,
works to assist investors in Liberia. Its current mandate is to promote the country’s many
investment opportunities, attract and support the growth of value-adding foreign direct
investments, and advocate for and strengthen the domestic private sector. The Chairman of the
NIC chairs the government's Business Reform Committee, which has helped implement 39
specific reforms in the past three years, earning Liberia the title as one of the "top 10 global
reformers" in the annual IFC-Work Bank Doing Business report ranking.
A member of the Liberia Better Business Forum, the NIC is working to create an investment
environment that makes it easy and predictable to do business in Liberia. The NIC also chairs the
Inter-Ministerial Concessions Committee, or IMCC, which includes permanent committee
members from the Ministries of State, Finance, Justice, and Planning and Economic Affairs, as
well as other key stakeholder ministries and agencies. The IMCC works to ensure that while
unlocking Liberia's natural resources, the country's national interests are safeguarded, jobs are
created, and access to capital, new technologies, markets, and world-class training and business
development is accelerated. In addition, the NIC chairs the Commissioner's meeting, which
approves investment incentive contracts above USD 10 million. For more information, please
visit: www.nic.gov.lr.
About IFC Africa Leasing Facility
Launched in 2008 and active in 15 countries on the continent, IFC’s Africa Leasing Facility works
with governments, financial institutions, equipment suppliers, insurance providers and small
business owners to help make leasing a viable tool to increase revenue of small businesses
thereby impacting overall country GDP. Over the past five years, the program has trained over
9,000 small business owners through 200 training sessions, assisted in the passage of 12 leasing
legal, regulation and tax laws and facilitated investment in 7 leasing projects worth $31 million.
The Facility, run from Senegal, is being implemented by IFC Advisory Services and is funded
through IFC’s Private Enterprise Partnership for Africa in partnership with the African
Development Bank, Denmark, Ireland, Japan, Luxemburg, The Netherlands, Norway and SECO.
Since 2008, upon request from the Ministry of Finance and the Central Bank of Liberia, the IFC
Africa Leasing Facility has been engaged with various Liberian counterparts to provide technical
support to both the public and private sector. Program contributions in Liberia include a market
survey to identify leasing opportunities in Liberia; validation of the market survey report in
various stakeholder workshops; a best practice finance leasing law drafted and enacted as part of
Liberia’s new Commercial Code; a process that permits prompt recovery of assets in the event of
default under the new Commercial Code; and a set of best practice regulations developed by the
Central Bank of Liberia. IFC leasing work in Liberia is currently being supported by Ireland, the
Netherlands, and Norway through our Conflict Affected States in Africa Initiative and the Swedish
International Development Cooperation Agency. For more information about the IFC Africa
Leasing Facility in general, please visit: www.ifc.org/africaleasing.