Lease Financing in Ethiopia: An Assessment of Five Regulated Lease Financing Companies
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Date
2016-04
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Addis Ababa University
Abstract
The focus of this research is to assess the current state of lease financing in Ethiopia and
investigate the challenges or impediments of the sector as well as its review of legal and
regulatory framework. Leasing is an alternative to traditional forms of financing
particularly for SMEs, although it’s yet underdeveloped in Ethiopia and currently at its
infant stage. The research approach adopted in this study was a mix of quantitative and
qualitative method. Both primary and secondary data were used as evidence for the
study. In identifying the respondents from the study population a mix of both random and
purposive sampling were adopted. All the five regulated lease finance companies as well
as supervisory bodies were included in the sample. The study found out that the major
challenges of the lease finance sector in Ethiopia include: lack of availability of low cost
and sustainable funding; lack of clarity on interpretation of tax incentives provided by
law; lack of leasing expertise in the market; existence of inadequate supply chain
linkages as well as procurement hurdles; existence of limited domestic suppliers; and
absence of specialized leasing training center in the country. Despite these challenges,
the study identified that leasing has high market potential for growth in Ethiopia due to
government’s attention to support the manufacturing sector and SMEs financing through
equipment leasing. This is evidenced by both the survey analysis and interview result. The
conclusions are based on 42 leasing stakeholders’ questionnaire – response and the
outcome of the in-depth interviews of the executives of leasing companies, officials of
MOT and EIC as well as selected leasing experts. The study recommends changes to
legal and regulatory framework to create an enabling environment for leasing
development and ensure clarity of leasing laws and regulations as well as challenges of
the leasing sector be resolved by the concerted efforts of key stakeholders in a way that
spur the development of leasing in the country.
Keywords: Leasing, lease finance, equipment leasing, capital goods finance.
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Keywords
Leasing; lease finance; equipment leasing; capital goods finance.