In emerging economies, SME sector development is often hindered by the lack of access to long-term finance required for capital investment. The development of leasing as a complementary tool to bank loans provides an alternative solution that can significantly expand access to capital for these businesses. Among its many benefits:

• Leasing can function in places where capital markets are less developed.
• Security arrangements are simpler—security is provided by the leased asset itself.
• Little cash is required, allowing the lessee to conserve cash or use it as working capital.
• Tax incentives often make it possible for SMEs to reduce income before taxes.

Leasing promotes investment in capital equipment, increases competition in the financial sector, and facilitates the transfer of new technology. IFC has been very active in leasing, both as an investor and as a technical assistance implementer. In the last 30 years, IFC has committed over $850 million in 177 leasing projects. In 25 countries, IFC invested in the first leasing companies established.

We also provide important technical assistance to help establish the appropriate business environment, legislation, and awareness for successful leasing operations. Currently, IFC manages over $7 million in leasing-related technical assistance, primarily in frontier countries.

Leasing Manual 2005: Leasing in Development, Guidelines for Emerging Economies. Examining the approach of current and past projects, this manual also aims to identify the key policy issues on leasing development. Within these policy issues, there will be certain standards that are non-negotiable—tenets that form the foundation of credibility, integrity, and success around the world. There will be other elements on these issues that are based on general principles that can be applied only in specific ways depending on local conditions. This manual should help leasing development practitioners identify key local characteristics, assess their potential impact, and, therefore, make the decisions required on which route to take.