Rural Leasing

This note suggests that leasing can be a viable tool for financing rural assets and deepening the rural financial sector. It describes the benefits of developing leasing markets for farmers and rural businesses, such as easy accessibility, long duration, flexibility, no processing time and tax benefits.Success in rural leasing depends on local presence and access to competitive local currency term funds. An enabling environment for leasing would include:

• Clear definitions of leasing concepts, rights and responsibilities;
• Clarity in assigning liability for third-party losses;
• Priority of lessors claims over leased assets;
• Clear rules for repossession of leased assets.

Leasing can face some challenges in rural areas such as costs of monitoring, recovery and maintaining equipment, and the availability of insurance services. The following firm- and sector-level interventions can help leasing companies expand operations and enhance the development of rural leasing:

• Subsidizing start-up costs;
• Providing credit enhancements;
• Lending technical support to nascent leasing operations;
• Strengthening leasing industry linkages.