Dar-es-Salaam, Tanzania, May 24, 2005 —
The International Finance Corporation, the private sector arm of the
World Bank Group, in partnership with the State Secretariat for Economic
Affairs of Switzerland (seco) and the Tanzanian government, today launched
a new project to increase use of one of the most effective forms of financing
for small and medium enterprises—leasing.
The Tanzania Leasing Project, funded with approximately $900,000 from seco,
will promote the growth of this proven financing tool supporting private
enterprise growth and helping create a more favorable environment for both
foreign and domestic investment.
The technical assistance project targets the small and mid-size businesses
critical to employment growth in Tanzania and other African countries.
Leasing is especially useful for these smaller firms that often can neither
afford to purchase needed new equipment outright nor obtain bank loans
to finance them. The project will seek to increase Tanzania’s volume of
lease transactions, which currently stands at just $17 million—meeting
just a small fraction of demand in an economy currently growing at about
6.3 percent per year.
The leasing project is the first to be launched under IFC’s Private Enterprise
Partnership for Africa (PEP-Africa) technical assistance initiative with
its donor partners.
“We have put an early priority on developing leasing in Tanzania,” said
Bernard Chidzero, general manager of PEP-Africa. “For despite the
improving economy, its smaller businesses are still hampered by the high
cost of capital, lack of medium-term financing options, and little diversification
of financial products. IFC has advised governments on leasing legislation
in 35 different countries while also investing more than $1 billion in
private leasing companies over the past 30 years, and we are glad to bring
this experience to Tanzania to support the growth of smaller enterprises.”
“The government of the United Republic of Tanzania intends to enact laws
relating to leasing and amend the Hire Purchase Act of 1966 to enable the
Small Industrial Development Organisation and other financial institutions
to lend equipment to small businesses. This project has come at the right
time to assist us in developing leasing,” noted the Hon. Basil P. Mramba,
minister of finance of the United Republic of Tanzania.
“The leasing project is part of Switzerland’s private sector related
activities in Tanzania. This project will provide another avenue for smaller
to finance and enable the development of the private sector,” said
Pio Wennubst, country
Swiss Cooperation Office
The local business community has already shown keen interest in the project.
Many potential investors in new or expanded leasing companies are seeing
signs of strong demand in the marketplace and expressing enthusiasm for
the removal of legal, tax, and administrative barriers that currently block
the industry’s growth. IFC’s leasing project, in cooperation with the
Ministry of Finance, is expected to play a key role in advocating for changes
in the leasing sector.
The mission of IFC (www.ifc.org)
is to promote sustainable private sector investment in developing countries,
helping to reduce poverty and improve people’s lives. IFC finances private
sector investments in the developing world, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY04, IFC has committed more than $44
billion of its own funds and arranged $23 billion in syndications for 3,143
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY04 was $17.9 billion for its own account and $5.5 billion held
for participants in loan syndications.
Seco is the Swiss government’s competence center for sustainable economic
development cooperation and the integration of developing and transition
companies into the global economy. Its primary objective is to fight poverty.
Economic cooperation plays a central role in the promotion of investment
and trade and makes a key contribution toward creating a national environment
that provides favorable framework conditions for economic growth and personal
Seco’s approach is based on the principles
·Help develop a market economy and growth
that is both durable and sustainable in all partner countries.
·Support reforms that promote the increased
integration of partner countries in the world economy.
·Encourage greater respect for the principle
of good governance, both public and corporate, as well as business ethics.
·Help bring about a greater mobilization
of private sector resources both in Switzerland and in the partner countries
in ways that contribute to the development and transition processes.