Lease Financing In Ethiopia An Assessment Of Five Regulated Lease Financing Companies

The focus of this research is to assess the current state of lease financing in Ethiopia andrninvestigate the challenges or impediments of the sector as well as its review of legal andrnregulatory framework. Leasing is an alternative to traditional forms of financingrnparticularly for SMEs, although it’s yet underdeveloped in Ethiopia and currently at itsrninfant stage. The research approach adopted in this study was a mix of quantitative andrnqualitative method. Both primary and secondary data were used as evidence for thernstudy. In identifying the respondents from the study population a mix of both random andrnpurposive sampling were adopted. All the five regulated lease finance companies as wellrnas supervisory bodies were included in the sample. The study found out that the majorrnchallenges of the lease finance sector in Ethiopia include: lack of availability of low costrnand sustainable funding; lack of clarity on interpretation of tax incentives provided byrnlaw; lack of leasing expertise in the market; existence of inadequate supply chainrnlinkages as well as procurement hurdles; existence of limited domestic suppliers; andrnabsence of specialized leasing training center in the country. Despite these challenges,rnthe study identified that leasing has high market potential for growth in Ethiopia due torngovernment’s attention to support the manufacturing sector and SMEs financing throughrnequipment leasing. This is evidenced by both the survey analysis and interview result. Thernconclusions are based on 42 leasing stakeholders’ questionnaire – response and thernoutcome of the in-depth interviews of the executives of leasing companies, officials ofrnMOT and EIC as well as selected leasing experts. The study recommends changes tornlegal and regulatory framework to create an enabling environment for leasingrndevelopment and ensure clarity of leasing laws and regulations as well as challenges ofrnthe leasing sector be resolved by the concerted efforts of key stakeholders in a way thatrnspur the development of leasing in the country.rnKeywords: Leasing, lease finance, equipment leasing, capital goods finance.

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