Ethiopian Government Licenses First Foreign Leasing Company
By Staff Reporter
August 8, 2019 (Ezega.com) -- The government of Ethiopia has licensed the first foreign leasing company called Ethio Lease to provide equipment leasing and financial solutions to different businesses in the country.
Ethio Lease is a subsidiary of Africa Asset Finance Company (AAFC), a US-headquartered equipment finance company that owns and operates a group of companies that provides asset backed lending and leasing services through Africa.
Talking about the significance of the launch of Ethio Lease, board chairman of the Ethio Lease Girma Wake said "leasing high equipment could have potentially transformative impact on Ethiopia because it allows companies to free up their liquidity and generate revenue without having to heavily invest in equipment. A leasing agreement would also allow companies to pay for equipment as it generates revenues for them.
With investment capital of $14 million, Ethio Lease will be providing leasing services to farmers to get tractors, combines and other agricultural materials. Ethio Lease will also be engaged in health sector by leasing MRI and scanning machines and other equipment.
Girma Wake is a former airline industry executive and CEO of Ethiopian Airlines from 2004 to 2011. Girma returned to the airline in 2018 by joining its board of directors. He served as the chairman of the Board of Directors of Rwandair until 2017.
In 1998, Ethiopia enacted a law allowing foreign companies to engage in leasing equipment and the law was revised in 2013, but no foreign firm has opened for business for no obvious reasons since then.
In agriculture, manufacturing, road building sectors, there have not been enough capital equipment to sustain the type of development the country needs. The equipment that Ethio Lease would import would help the nation attain the development goals it aspires, said Girma during oficial launch of the etho lease in Addis Ababa city on Thursday.
Ethio Lease would also engage in leasing equipment to hospitality and communication businesses to the extent of building data centers to lease to the telecom companies, Girma said.
The development bank of Ethiopia have been leasing equipment for priority projects and five regions were also also engaged in leasing services to cater to the needs of regional governments.
With nine shareholders, two of whom Ethiopians, Ethio Lease will not be engaged in leasing equipment that could be made by local companies, it was learnt
Ethio Lease offers long-term leases known as capital leases, which provide companies and individuals with lease contracts that cover the significant portion of the economic life of the purchased equipment. Depending on the equipment, Ethio Lease will ensure that companies which will lease equipment adhere to proper operations, maintenance, health and safety and adequate storage requirements throughout the lease period.
Ethio Lease will acquire the equipment in foreign currency and provide companies the equipment they need for their business operations using local currency.
"We will simply charge companies a monthly lease fee, which will be combined with fees for insurance and maintenance agreement of the leased equipment throughout the lease period, providing the lessee with the option to buy the equipment from the company for the residual value, at the end of the lease period." Girum Tsegaye CEO of Ethio Lease has said.
According to the CEO, the lessee will not be required to present anything as a collateral, but Ethio Lease will own and oversee the maintenance including proper use of leased equipment.