seco-ifc tanzania leasing program financial leasing … · proposals for a finance leasing law, ......

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READERS WELCOME NOTE Dear Readers, We wish you a very happy new year 2007. Welcome to the sixth edition of the International Finance Corporation’s electronic newsletter whose objective is to update you on leasing issues, and activities in Tanzania. We welcome your comments and suggestions related to the issues raised in this newsletter. SECO-IFC TANZANIA LEASING PROGRAM FINANCIAL LEASING NEWSLETTER ISSUE # 06 (OCTOBER 2006– MARCH, 2007) TRAINING OF MEMBERS OF THE TANGANYIKA LAW SOCIETY The International Finance Corporation conducted a two days customized training session on financial leasing for over 100 members of the Dar Es Salaam Chapter of the Tanganyika Law Society; which is the National Bar Association of Tanzania. The training modules included an introduction to leasing; legal and regulatory aspects of leasing; funding of leasing operations; and taxation issues in leasing. The Program will continue to provide support to the Law Society and to Magistrates and Judges in the months to come. INSIDE THIS NEWS LETTER Reader’s Welcome Note News in Pictures Government’s Commitment and Timetable For Leasing Reform and Finance Leasing Law Training of members of the Tanganyika Law Society (TLS) Leasing Investor’s Conference Collaboration with Faculty of Commerce & Management of the University of Dar Es Salaam Banking Sector Technical Team Session on Proposed Finance Leasing Law Leasing Operational Manual to Banks & Prospective Leasing Companies Consultative Session with Bank of Tanzania’s Directorate of Banking Supervision on Proposals for Regulation of Leasing Companies. Tanzania Leasing Association Founder Members Meeting 2006 Market Report & Leasing Handbook Business Development Support for Banks And Prospective Leasing Companies Leasing News From The Market i. Growing Market interest in leasing ii. Financial Support for micro leasing April - June 2007 Activities About The Project And Donors Contacts IFC Advisory Services GOVERNMENT’S COMMITMENT AND TIME TABLE FOR LEASING REFORM AND LEGISLATION (“FINANCE LEASING LAW”) The Government of the United Republic of Tanzania is committed to implementing reform for leasing development, in order to facilitate access of leasing services for Small & Medium Enterprises in the country. This was stated by His Excellency President Jakaya Mrisho Kikwete at a meeting with the Tanzania Bankers Association in April this year, as well as by other senior government officials. In a statement to the media and at a Leasing Investor’s Conference in March, the Commissioner for Policy Analysis at the Ministry of Finance, Mr. Mugisha Kamugisha, also confirmed the government’s commitment to leasing reform. Mr. Kamugisha stated that a Bill for a Finance Leasing Law would be tabled in this year’s (2007) April Parliamentary Session and could be enacted by October, 2007 following parliamentary processes. He stated that taxation reform is currently under consideration by the Ministry. Mr. Kamugisha told participants that the government aims to create a stable legislative and tax regime to attract leasing investment. 40262 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized

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Page 1: SECO-IFC TANZANIA LEASING PROGRAM FINANCIAL LEASING … · proposals for a finance leasing law, ... meeting of the Tanzania Leasing Association ... including for small agricultural

Pg 1OCTOBER 2006 – MARCH, 2007

READERS WELCOME NOTE

Dear Readers,

We wish you a very happy new year 2007.

Welcome to the sixth edition of the International Finance Corporation’s electronic newsletter whose objective is to update you on leasing issues, and activities in Tanzania.

We welcome your comments and suggestions related to the issues raised in this newsletter.

SECO-IFC TANZANIA LEASING PROGRAM

FINANCIAL LEASING NEWSLETTER ISSUE # 06 (OCTOBER 2006– MARCH, 2007)

TRAINING OF MEMBERS OF THE TANGANYIKA LAW SOCIETY

The International Finance Corporation conducted a two days customized training session on financial leasing for over 100 members of the Dar Es Salaam Chapter of the Tanganyika Law Society; which is the National Bar Association of Tanzania.

The t ra in ing modules inc luded an introduction to leasing; legal and regulatory aspects of leasing; funding of leasing operations; and taxation issues in leasing.

The Program will continue to provide suppor t to the Law Soc ie ty and to Magistrates and Judges in the months to come.

INSIDE THIS NEWS LETTER

• Reader’s Welcome Note• News in Pictures• Government’s Commitment

and Timetable For Leasing Reform and Finance Leasing Law

• Training of members of the Tanganyika Law Society (TLS)

• Leasing Investor’s Conference

• Collaboration with Faculty of Commerce & Management of the University of Dar Es Salaam

• Banking Sector Technical Team Session on Proposed Finance Leasing Law

• Leasing Operational Manual to Banks & Prospective Leasing Companies

• Consultative Session with Bank of Tanzania’s Directorate of Banking Supervision on Proposals for Regulation of Leasing Companies.

• Tanzania Leasing Association Founder Members Meeting

• 2006 Market Report & Leasing Handbook

• Business Development Support for Banks And Prospective Leasing Companies

• Leasing News From The Market

i. Growing Market interest in leasing

ii. Financial Support for micro leasing

• April - June 2007 Activities• About The Project And

Donors• Contacts• IFC Advisory Services

GOVERNMENT’S COMMITMENT AND TIME TABLE FOR LEASING REFORM AND LEGISLATION (“FINANCE LEASING LAW”)The Government of the United Republic of Tanzania is committed to implementing reform for leasing development, in order to facilitate access of leasing services for Small & Medium Enterprises in the country.

This was stated by His Excel lency President Jakaya Mrisho Kikwete at a meeting with the Tanzania Bankers Association in April this year, as well as by other senior government officials.

In a statement to the media and at a Leas ing Investor ’ s C o n f e r e n c e i n M a r c h , t h e Commissioner for Policy Analysis a t the M in i s t r y o f F i nance , Mr. Mugisha Kamugisha, also conf i rmed the government’s commitment to leasing reform. Mr. Kamugisha stated that a Bill for a Finance Leasing Law would be tabled in this year’s (2007) April Parliamentary Session and could be enacted by October,

2007 following parliamentary processes. He stated that taxation reform is currently under consideration by the Ministry. Mr. Kamugisha told part ic ipants that the government a ims to create a stable legislative and tax regime to attract leasing investment.

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Page 2: SECO-IFC TANZANIA LEASING PROGRAM FINANCIAL LEASING … · proposals for a finance leasing law, ... meeting of the Tanzania Leasing Association ... including for small agricultural

SECO-IFC TANZANIA LEASING PROGRAM

FINANCIAL LEASING NEWSLETTERPg 2OCTOBER 2006 – MARCH, 2007

LEASING INVESTOR’S CONFERENCE

On March 21st, 2007, IFC’s Advisory Services for Africa conducted a one day Leasing Investor’s Conference that drew over 100 participants from the public, financial, investment and private sectors in Tanzania. The objective of the Conference was to st imulate domest ic and international investment for leasing. Key speakers were domestic and international institutional investors, including the Belgium Investment Fund (BIO), IFC Investment, the Southern Africa Enterprise Development Fund (SAEDF), Parastatal Pensions Fund, Unit Trust of Tanzania, Mutual Alliance, and Barclays Bank from South Africa. The Dar Es Salaam Stock Exchange also made a presentation on possibilities of raising domestic capital for leasing through the stock market.

At the conference, the Deputy General Manager for IFC Advisory Services in Africa -, Ms. Rachel Freeman, told participants that leasing as a financial product is particularly attractive to Small and Medium Enterprises and presents an attractive market opportunity for potential and existing investors in the financial sector. Ms. Freeman highlighted the activities of the Leasing Program to-date.

On the other hand, the IFC Senior Investment Officer for Eastern Africa, Mr. Imtiaz Khan informed participants on various possibilities by which IFC investment could partner with local companies and banks to promote leasing investment as well as general financial sector development in Tanzania.

Participants at the Conference expressed concern over the pace of leasing reform and that appropriate legal, regulatory and taxation framework is required in order to roll out leasing services. Concerns over central bank regulation for independent leasing companies were also discussed.

COLLABORATION WITH FACULTY OF COMMERCE & MANAGEMENT OF THE UNIVERSITY OF DAR ES SALAAM

The Leasing Program will partner with the Faculty of Commerce’s, Entrepreneurship Centre to roll out training of Small and Medium Enterprises for sustainable leasing development through delivery of short term courses to SMEs. Under the terms of the collaboration, the Leasing Program will also provide assistance for development of long term leasing courses that are to be incorporated in the Bachelor of Commerce Degree Course.

The Leasing Program believes that this is a sustainable way to develop longer term understanding of leasing amongst SMEs as well as commerce and management students. On the other hand, the Entrepreneurship Centre has experience in delivery of training courses for SME clients and would be a champion for development of long term courses for other business schools to replicate, if desired.

BANKING SECTOR TECHNICAL TEAM SESSION ON PROPOSED FINANCIAL LEASING LAW

The Program facil itated an interactive discussion on proposals for a finance leasing law, as well as proposed amendments to ex i s t ing laws, to members of the Banking Sector’s Technical Team. The Team comprises of representatives from the Attorney General’s Chamber of the Ministry of Justice and Constitutional Affairs, the Banking sector, the Bank of Tanzania, and the National Board of Auditors and Accountants (NBAA), among others. At the session, matters of mutual concern and interest regarding the Program’s legislative proposals were discussed.

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SECO-IFC TANZANIA LEASING PROGRAM

FINANCIAL LEASING NEWSLETTERPg 3

OCTOBER 2006 – MARCH, 2007

LEASING OPERATIONAL MANUAL SENT TO BANKS AND PROSPECTIVE LEASING COMPANIES AND LEASING HANDBOOK: A PRACTITIONER’S GUIDE DISSEMINATED TO STAKEHOLDERS

An IFC prepared Leasing Operational Manual that details leasing systems, policies and procedures was sent to interested banks and prospective leasing companies in Tanzania. The Manual is intended as a guide to assist entities that intend to establish leasing operations. The manual needs to be carefully considered and adapted and does not replace the need for Technical Assistance to develop these systems.

On the other hand, the Program has published and circulated over 1000 copies of its Leasing Hand book, which is intended as a guide to leasing practitioners. The Handbook has been distributed to professional and industry associations, commercial banks, government departments, universities and business schools, among others. Again, the Handbook does not constitute legal opinion of the IFC and the advice of appropriate counsel and professional advisors should be sought in specific instances.

CONSULTATIVE SESSION WITH THE BANK OF TANZANIA’S DIRECTORATE OF BANKING SUPERVISION ON REGULATIONS FOR LEASING COMPANIES

The Program and its international leasing consultant and practitioner, Dr. Rafael Castillo - Triana of the Alta Group Inc., met the Bank of Tanzania’s Directorate of Banking Supervision for a consultative and interactive discussion on appropriate regulation for leasing companies, particularly non - deposit taking leasing companies based on IFC’s experiences in advanced and developing leasing markets. IFC is of the opinion that sustainable leasing development in Tanzania will require the supervision of non-deposit taking leasing companies by the Central Bank, as well as minimum capital adequacy requirements. This is a matter of on going discussion between the IFC and the Bank of Tanzania and other stakeholders.

TANZANIA LEASING ASSOCIATION FOUNDER MEMBERS MEETING TO DEFINE THE WAY FORWARD

The Program and its international consultants hosted a meeting of the Tanzania Leasing Association (“TLA”), whereby the founder members of TLA met to discuss and define a strategy for the Association and leasing going forward, as well as to learn from experiences of Leasing Association’s elsewhere. Currently the Association is undergoing formal registration and approval from relevant regulatory and supervisory bodies.

2006 MARKET SURVEY REPORT

The Program Team conducts a market survey each year to analyze the leasing market. The Team shall shortly release its 2006 annual leasing market report that details leasing growth from the previous period, as well as issues in the market.

BUSINESS DEVELOPMENT SUPPORT FOR BANKS AND PROSPECTIVE LEASING COMPANIES

The Program is pleased to be able to roll out its high level Technical Assistance support for leasing business development for the market from May – December, 2007. The Assistance entails practical operational support to enable interested banks and leasing companies start leasing operations. The Assistance will include staffing, setting up a leasing department, credit risk management, creating databases of SME clients, asset management, supplier relations, management information systems, documentation, and pricing, among others things. The Assistance is two fold, consisting of either high level technical assistance workshops or attachments of IFC consultants with participating banks and companies or both.

The Assistance will be informed by identified needs of the companies, and shall be on a cost sharing basis between the companies and IFC.

In order to roll out the support, the Program’s experienced practitioner, Mr. Riadh Naouar, held a scoping mission for interested banks and prospective leasing companies to assess the business development needs of these entities. The two missions took place between February 21st, and 23rd 2007 and another from April 17th to 20th 2007.

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SECO-IFC TANZANIA LEASING PROGRAM

FINANCIAL LEASING NEWSLETTERPg 4OCTOBER 2006 – MARCH, 2007

LEASING NEWS FROM THE MARKET

i. Growing Market Interest in Leasing

The Program is pleased to report growing market and investment interest in leasing. The , Program has consulted a number of s takeholders , including internat ional institutional investors, captive leasing companies, as well as independent leasing companies interested in the Tanzanian market.

ii. Support for micro leasing

The International Finance Corporation (IFC) through EXIM Bank Tanzania Ltd. has provided a 1 million United States Dollar credit line to SELFINA SERO Lease & Finance Company Ltd, a woman owned micro leasing company in Tanzania. The credit line is provided to SERO to expand its micro lending and leasing activities in the country, including for small agricultural equipment leasing. SERO has branches in Dar Es Salaam, Mwanza and Mbeya regions, and expects to open other branches in Arusha and Iringa regions. The Company expects to write at least 30,000 new micro leases with the IFC line of credit.

The Leasing Program works with SERO Lease and Finance Limited offering technical assistance support, training and business development support, including for new lines of credit.

iii. APRIL - JUNE 2007 ACTIVITIES

The Team will continue to provide capacity building and training to professional associations, including the National Board of Auditors and Accountants, the Tanganyika Law Society, Judges and Magistrates, and associations of professional engineers and contractors, among other parties.

It will implement its high level and practical business oriented support for the market, continue public information efforts, provide support the Tanzania Leasing Association, and assistance to the Bank of Tanzania for regulations, as required.

IFC ADVISORY SERVICES

The Tanzania Leasing Program has been popularly known as “TANZALEP” or by its full aforementioned name. We wish to inform our readers that IFC has recently undertaken a branding initiative, and from now on the Program will be called the SECO - IFC Tanzania Leasing Program, implemented by IFC Advisory Services.

ABOUT THE PROGRAM AND DONORS

The P rogram was officially launched on the 24th May, 2005. The program is being implemented by IFC Advisory Services , made possible with the generous support of the State Secretariat for Economic Affairs SECO (www. seco-cooperation.ch). Each year, Switzerland spends approximately $ 1.3 bi l l ion on development aid in developing countries.

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SECO-IFC TANZANIA LEASING PROGRAM

FINANCIAL LEASING NEWSLETTERPg 5

OCTOBER 2006 – MARCH, 2007

ABOUT IFC

The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental

Sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit www.ifc.org.

CONTACTS

IFC Advisory ServicesWorld Bank Country Office50 Mirambo Street, Garden Avenue, 4th Floor

P. O. Box 2054

Dar es Salaam, Tanzania

Tel: + 255 22 2163200 (Ext.3256) & 2163256

Fax: 255 22 2163328 & 2163295

Website: www.ifc.org/africa

Rachel FreemanDeputy General Manager - PEP Africa

International Finance Corporation

Tel: +27 11 731 3037

Fax: + 27 (11) 731-3202

[email protected]

Taba A. CookeyProgram Manager - Leasing

International Finance Corporation - PEP Africa

1, Central Link St, South Legon, Accra

P.O. Box CT 2638, Cantonments,

Accra, Ghana

Tel: +233 21 513152-7

Fax: +233 21 509069

[email protected]

Moyo Violet NdondeOperations officer

[email protected]

Joass LyatuuAssociate Operations Officer

[email protected]

Elizabeth MassanjaPR / Program Assistant

[email protected]