Leasing in Development: Guidelines for Emerging Economies
This guideline notes up front that there are many countries whose leasing sectors have not contributed to development as much as others elsewhere. This manual aims to help minimise this gap by sharing experiences on leasing development based upon IFC’s leasing technical assistance activities.
Leasing is described in the paper as a medium-term financial instrument for the procurement of machinery, equipment, vehicles, and/or properties. Leasing provides financial assets – equipment, vehicles – rather than direct capital. For the duration of the lease, the lessee makes periodic payments to the lessor at an agreed rate of interest. At the end of lease period, the equipment is either transferred to the ownership of the business, returned to the lessor, discarded, or sold to a third party. Under financial leasing, the lessee typically acquires or retains the asset.
The guideline aims to be a useful reference throughout the world to stakeholders, lessors, lessees/SMEs, governments, regulators, investors, legal/accounting, banks, international financial institutions and donors. In doing so it highlights which elements to look for locally, why experiences may be different between countries and what may be appropriate courses of action.
The guideline also aims to identify the key policy issues on leasing development – it should help leasing development practitioners identify key local characteristics, assess their potential impact, and, therefore, make the decision required on which route to take.
The guideline begins with a look at the importance of leasing and IFC’s role. It covers:
- What Is Leasing?
- Why Develop Leasing?
- IFC’s Role in Leasing
It then moves on to look at the legislation, regulation and supervision required, broken down into the following topic headings:
- Regulation, Supervision and Applications to Lessors
The final section covers the accounting and taxation of leases:
- Accounting for Leases as a Lessee
- Accounting for Leases as a Lessor
- Tax Treatment of Leases