International Conference onFinancial Leasing in Yemen [Archives:2005/839/Business & Economy]
By Fahmia AL-Fotih
For the Yemen Times
It is a popular instrument in Muslim countries as it is a rent-based financial facility. Actually, some of the transactions carried out today by some Yemeni businessmen, especially those practicing Islamic banking principles, are very similar in their substance to financial leasing operations.
In a number of countries, leasing plays a vital and increasing role providing finance for small and medium enterprises (SMEs), as it holds attractive features such as the fact that collateral is not required by banks to extend a loan, as the bank holds the title to the equipment, making enforcement more secure. As a result, many small and medium enterprises are now able to obtain financing for their business activities.
Introducing financial leasing in Yemen will have a wider impact than just a financial sector development and easy access to finance for SMEs. It will also contribute to invigorating the Yemeni economy as a result of the financing of capital investments. Thereby creating more business and jobs, increasing the tax base and accelerating economic growth.
However, there are various constraints to the introduction and development of leasing in Yemen. The weak legislative and regulatory framework for such type of transaction, may limit potential investors in the leasing market. Moreover, potential uneven fiscal treatment which would make leasing less competitive than other forms of financing such as traditional bank loans, Murabaha, Mudaraba, etc.
Not only the lack of experience and skills by potential leasers or providers of leasing, but also the lack of awareness by potential clients of this product, since leasing is particularly non-existent in Yemen, and is a relatively new financing instrument in many countries and particularly those in the region.
On the legal aspects, the Central Bank of Yemen prepared a draft law for financial leasing which was presented to the Cabinet and is now in its final stages of being passed. This is one of the requirements of the Financial Sector Adjustment Credit, which was extended by the World Bank to Yemen in 1997. The CBY has relied on its preparation on a draft prepared by the International Finance Corporation IFC back in 1997, and a number of the laws of neighboring countries.
To introduce leasing term as well as it being the beginning of the spread of awareness, and the importance of this type of activity, under the auspices of Prime Minister Abdul Qader Bajammal, the Central Bank of Yemen CBY along with the International Finance Corporation IFC, World Bank Group, held on 25 April at an international conference on “Leasing for Small and Medium Enterprises Development” that took place at the Police Officers club.
Through the five sessions of conference a number of topics were presented.
The First session was about general presentation of leasing in which Mr. Fritz Peter presented a paper “Leasing Global Prospects (History of European & U.S. markets & prospects). Talking about definition and characteristics of leasing Mrs. Houria Sammari, MENA leasing program manager and IFC team presented “Key benefits of financial leasing for leasers, lessees, country development leasing in the MENA Region”
The second session was about Experiences of regional leasing companies in which Mr. Abderrazak Trabelsi, general manager of Arab leasing corporation, Agiers, introduced a paper entitled “Experience of recently established leasing company in Algeria.
While Mr. Shaheen Amin, chief executive officer of Saudi ORIX leasing, Riyadh displayed his paper “Experience of an international leasing company in Saudi Arabia, Oman and Egypt-ORIX leasing”
In the third session the topic was about legal and regulatory framework. Ms. Kamila Makhmudova, leasing legislative expert at IFC, and Mr. Khalid Abdullah, IFC legal counsel in Yemen, both presented a paper “Legal aspects of leasing-International best practices”.
Mr. M. Seif Kaid, legal advisor at CBY, and Mr. E.H. Mohammed Said, legal advisor at International Bank of Yemen, presented respectively two papers, which were “Leasing legislative framework in Yemen” and “Leasing legal aspects”
The topic of the fourth session was tax and accounting treatment. Mr. Umedjan Umarov, leasing and accounting expert at IFC, and Mr. Mohammed Zahdi, accounting expert at KPMG, Sana'a, presented a paper about “Tax aspect of leasing” and “International best practices and Yemen applications.
Another two papers were introduced, entitled “Accounting aspects of leasing” and “International best practices and Yemen application”
The issue of the fifth session was about “next steps for leasing development in Yemen”.
Ms. Jasmina Vignjevic, business development officer, south Eastern Europe leasing program manager IFC, presented a paper “Presentation of IFC leasing work (technical assistance) in other regions.
Finally the last paper was about “What are the next steps towards proper leasing development in Yemen.
The participants came up with a number of recommendations most of which were:
1-Hastly issuing the law related to financial leasing and giving it to the parliament to approve it according to the constitution.
2-The Commercial and Islamic Banks should start establishing leasing institutions and involving this type of activities in their financial activities.
3-Private sectors should practice leasing and benefit with the technical support of IFC.
4-Universities should incorporate the financial leasing within the curricula of the special faculties.
5-Insitiutions should hold training courses, workshops and seminars about the financial leasing.
6-IFC should start implementing the program of participating in developing the small and medium enterprises in Yemen, as well as to take part in encouraging and supporting the private sectors. Giving loans and facilities for the successful investment projects that enhance in economic and social development with creating job opportunities and decreasing poverty.
7-The speeches delivered in the conference were considered one of the conference papers.
Abdul Qader Bajammal, Mr. Saad Sabrah, representative IFC-Yemen, Mr. Mohammed Ali, president of Banking Association of Yemen, Mr. Abdualrahman AL-Samawi, governor of CBY along with a number of financial experts and specialists from Yemen and abroad attended the conference.
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[archive-e:839-v:13-y:2005-d:2005-05-05-p:b&e]
