The Potential of Leasing through Microfinance Institutions in Emerging Markets
This study demonstrates that leasing has the potential and stakeholder support to be a useful product for MFIs that fund microenterprises. The study is based on literature review, structured interviews and questionnaires administered to microfinance and leasing experts and stakeholders.
The study describes efforts of development agencies to encourage leasing in emerging markets through traditional banks and leasing companies. Key advantages of leasing through MFIs include reduced need for collateral, and similarities in processing and customer base between leases and loans. The study states that:
- Leasing is a useful product for MFIs, which are the best channel for leasing to reach small and microenterprises;
- Funders and stakeholders support leasing through MFIs;
- Lack of internal expertise is a significant barrier to leasing in MFIs;
- Expertise issues could be overcome if development agencies engaged with MFIs for leasing development;
- Development agencies could redirect a portion of lease development funding to MFIs for leasing capacity building.
The study outlines a potential project for delivering leasing to microentrepreneurs which links the funding and capacity building expertise of development agencies with the processing capacity and customer base of a large MFI.