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IFC Paves Way for New Investment Product to Enhance Access to Finance for SMEs in Bangladesh


In Dhaka
Shazia Ahmed

Phone: + 880 171 4110580

E-mail:
sahmed15@ifc.org


Dhaka, Bangladesh, January 10, 2008—IFC, a member of the World Bank Group, in collaboration with Bangladesh Leasing and Finance Companies Association, is facilitating the adoption of operating leases to benefit small and medium enterprises in Bangladesh.  

The new operating lease can be used to rent equipment, vehicles, and technology required for everyday business. It is an SME-friendly product, as it requires no collateral, involves no asset risk, can be tailored to a specific usage period, and can be less expensive than traditional leasing.  Such a product is essential for an emerging market like Bangladesh because of its large segment of small and medium enterprises and the scarcity of collateral to secure financing.  An operating lease not only enables leaseholders to acquire equipment without collateral, it also reduces their operating risk because they are not required to own the equipment outright.  


Bangladesh's estimated 6 million micro, small, and medium enterprises, with less than 100 employees, have a significant role in generating growth and jobs. “This is a sector that has its own distinct financial needs and requires specialized focus,” asserts Sudhir Amembal, Chairman and CEO of Amembal & Associates, whose services have been commissioned by IFC Advisory Services for South Asia – the SouthAsia Enterprise Development Facility – and BLFCA to introduce operating leases in the country.  As a government advisor, Amembal has spearheaded lease consultancy engagements for at least a dozen other emerging lease economies, including Albania, Bosnia and Herzegovina, China, Croatia, Estonia, Indonesia, and Korea.  He will be reviewing the overall leasing industry in Bangladesh and devising strategic recommendations to facilitate the growth of the industry, while applying international best practices and global knowledge.  


In a drive to introduce operating leases to Bangladesh, IFC-SEDF and BLFCA will perform a diagnostic to assess how conducive the environment is for finance companies to introduce the product and develop secondary markets to cater for asset mitigation. Upon completion of the diagnostic, workshops and discussion sessions on leasing will be conducted for BLFCA’s members. Policymakers, including representatives from Bangladesh Bank and the National Board of Revenue, as well as external auditors and managing directors and CEOs of the member financial institutions of the BLFCA, are expected to attend the discussion sessions. Two leading finance companies will be advised on how to launch and manage operating leases.


“Finance is the lifeline of business,” said Roger D. Handberg, IFC-SEDF Program Manager. “The operating lease is an important product for enhancing SME access to finance.”  Through initiatives such as these, IFC aims to increase the market’s ability to address issues related to SME financing.  

About IFC

IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through loan participations and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries. For more information, visit www.ifc.org.

About the IFC SouthAsia Enterprise Development Facility

IFC-SEDF is a multidonor funded facility managed and operated by IFC.  One of 11 such programs managed by IFC worldwide, the facility is set up to promote the growth of SMEs in the region.  IFC-SEDF is jointly funded by IFC, the governments of the Netherlands and Norway, the European Commission, DFID (UK), CIDA (Canada), and the Asian Development Bank. It provides increased access to finance and quality business development services to projects in Bangladesh, Bhutan, northeast India, Maldives, Nepal, and Sri Lanka. IFC-SEDF also works to create a business-enabling environment and supports value addition to firms through sector development, advisory services, capacity-building programs, training, and research.