Leasing for Micro and Small Entrepreneurs in Chile: An Answer to Mid & Long-Term Funding Needs

This paper studies lease financing as an option for micro-entrepreneurs in Chile. It analyzes the operations of Inversiones para el Desarrollo S.A. (INDES) for a possible dissemination of information and the incorporation of this type of service in other microfinance institutions (MFIs).

The paper provides a detailed analysis of the external and internal factors that contributed to the development and/or performance of INDES. These include:

• External:
  • Economic environment;
  • Micro and small enterprise sector;
  • Government policies in support of micro and small enterprises;
  • Legal and regulatory framework.
• Internal:
  • Property and governance;
  • Organizational structure;
  • Human resources;
  • Financial structure.

Finally, the paper discusses the advantages of the leasing service provided by INDES:

• For the micro-entrepreneurs:
  • Leasing allows clients to increase their total ready availability of capital derived from external sources, freeing-up their own sources of capital for productive assets;
  • The lessee has the possibility to get discounts for the full payment in cash.
• For INDES:
  • Leasing operations are more secure because they are guaranteed by the very object of the leasing;
  • As the legal proprietor of the goods, the lessor is in a position of increased security.