managing risk.pdf

84 Chapter 6 - Microleasing: Overcoming Equipment-Financing BarriersAmérica Leasing, S.A., and the IFC in PeruAmérica Leasing, S.A. is a specialized leasing company supervised by the Peruvian Superintendent of Banksand Insurance companies. 8 It began operations in 1995 and currently offers financial leases to microbusinessesand to small and medium-size enterprises.América Leasing is the largest company in Peru that specializes in leasing and that is not part of abanking group. As of December 2006, the company held a 6.5 percent share of the Peruvian leasingmarket (measured by portfolio amount) and a 14.1 percent market share (measured by number of contracts). Itis primarily involved in the transportation, industrial, and commercial segments of the leasing market, whichtogether represent 60 percent of the company’s leasing portfolio.América Leasing’s low average lease amount reflects the size of its target segments—small and mediumsizeenterprises. As of December 2006, 91 percent of the company’s portfolio was in business with less thanUS$21 million in annual sales. The average size of its contracts was US$67,700, compared to US$149,800 forthe overall leasing market. The diversified leasing portfolio reached US$127.5 million, with 1,877 active clientsin transportation (26 percent), trade (18 percent), industry (16 percent), and equipment (14 percent).In support of América Leasing’s expansion plans, the IFC provided a US$10 million loan and a technicalassistance program in 2007. The project helps the company fund its portfolio growth, diversify its financingsources, and strengthen its presence in the small and medium-size enterprise segment.Recommendations for a New Microleasing ProgramMFIs planning to offer long-term lending for equipment should consider leasing as an alternative. They willneed to evaluate the financial aspects and the legal and taxation framework to assess all of the costs associatedwith a lease, both for the institution and for their clients. Surveys with experienced clients can help to determinewhether there is enough interest to justify the development and piloting of a microleasing product.Government authorities should adopt a clear legal definition of financial leasing and treat leasing and lendingequally under the tax codes. A standard definition of financial leasing should replace the broad array ofdefinitions currently found in the various tax laws in Latin America, because a tax system that distinguishesbetween the two arrangements distorts the market.As the experiences of the three Latin American MFIs demonstrate, the challenges to launching a leasingproduct are significant. The rewards for clients, however, can outweigh the initial costs of design and setup.Effective risk mitigation strategies limit the MFI’s exposure and provide incentives for prompt repaymentby clients holding leases. Given the proper market and legal and regulatory conditions, MFIs shouldconsider adding leasing to the list of financial products they offer to existing and future clients.8. See América Leasing, S.A., http://www.alsa.com.pe/index.html.