Leasing as a means for scaling up microfinance is a relatively new and untapped topic. A lot of information about regular leasing in developed countries is available. In addition, some projects on leasing in developing countries have been successfully carried out. The International Finance Corporation (IFC), for example, successfully pioneered in entering the South Korean market and from there India, Pakistan, Turkey, and Russia. Surprisingly, information on leasing at the very micro-level of such economies is rare.
In times of commercialization and product diversification among microfinance institutions, insurance and remittance services as well as savings products have gained much attention. Leasing still is underdeveloped in that respect. This paper aims at the analysis of leasing in microfinance institutions and its potential to increase and upgrade the institution itself as well as its customers. As there clearly is a shortage of research and data in that field, the author will present the most recent literature available, including the state of microfinance and leasing in developing countries. Due to the lack of academic and practical information, this paper can not contain a complete analysis of all aspects of microleasing. It rather discusses the main features of microleasing with respect to the success factors of microinsurance, microcredit, microsaving and other products already introduced in microfinance institutions. The author will highlight the major opportunities and threats to the microleasing business that are likely to be faced by its stakeholders. The distinctive features of more advanced countries on the one hand and less developed and informal economies on the other hand will be part of the paper, as well.
Table of Contents
1. INTRODUCTION
2. MAJOR TRENDS AFFECTING MICROFINANCE
2.1. The Millennium Declaration
2.2. The Bottom of the Pyramid (BoP)
2.3. The Role of Innovation at the BoP
3. THE CURRENT STATE OF MICROFINANCE
4. LEASING AND ITS DEVELOPMENT IMPACT
4.1. The History of Leasing
4.2. The Evolution of Leasing in Developed Markets
4.3. Potential for Leasing as a Development Tool
5. MICROLEASING: THE LOGICAL CONSEQUENCE?
5.1. Characteristics of Leasing
5.1.1. Introduction
5.1.2. Types of leasing
5.1.3. Types of risk and risk mitigation strategies
5.1.4. The range of leased items
5.1.5. The client perspective
5.1.6. Provider perspective
5.2. The Leasing Environment
5.2.1. Potential leasing clients
5.2.2. Existing and potential leasing providers
5.2.3. Regulatory and legal situation
5.2.4. Accounting and taxation
5.2.5. Repossession
5.2.6. Rural Leasing and subsidies
5.3. Distinctive Features of Regular, SME and Micro- Leasing & Lending
6. SAMPLE CASES
6.1. Introduction and Relevance to this Paper
6.2. Background
6.3. Value Chain Analysis
6.3.1. Product ranges and target groups
6.3.2. Terms and conditions
6.3.3. Selection, approval and purchasing processes
6.3.4. Repossession, remarketing and residual value management
6.4. Success factors and institutional performance
6.5. Conclusions and Outlook
7. STRATEGIC IMPLICATIONS ON SCALING UP MICROFINANCE
7.1. Why MFIs should scale up
7.2. How MFIs should scale up
7.3. Final remarks
Research Objective and Core Topics
This thesis investigates the role of microleasing as an innovative tool for scaling up microfinance. It explores how leasing, traditionally used in developed economies, can be adapted for micro-entrepreneurs and small businesses in developing regions to improve their productivity and facilitate access to formal financial sectors.
- The intersection of microfinance and asset-based leasing
- Economic development potential for the "Bottom of the Pyramid" (BoP)
- Strategic and operational challenges in implementing microleasing
- Risk management strategies for microfinance institutions (MFIs)
- Comparative case study analysis of INDES Leasing and Grameen Bank
Excerpt from the Book
5.1.1 Introduction
“The lease agreement documents the transaction between the equipment owner (lessor) and the business that wants to lease the equipment (lessee/client). Through leasing, the client acquires the right to use the equipment for a fee over time. The client agrees to make payments to the leasing company over the life of the agreement and can purchase the equipment, return it to the lessor, or negotiate a lease extension, when the original agreement expires.” (Bass/Henderson 2000, p. 2)
In addition, the term “micro” in microleasing itself refers to the asset purchase price of about $50 up to $2,500 which has to be repaid by economically active micro- or small entrepreneurs (Westley 2003, p. 1).
In a typical leasing agreement the lessor retains ownership over the asset for the duration of the contract. The client or lessee, respectively, acquires the right to use and possess the asset in that period. If the contract is cancelled before it is due there might be a penalty imposed on the lessee to cover the outstanding payments. The instalments usually include not only interest and purchase costs but administration fees, property tax, a risk premium, and insurance fees. They could be decreased by the expected residual value at the end of the duration which does not have to be financed, then. The contract usually ends with a purchase option for the lessee, a follow-up contract, or termination.
From the history of leasing as described earlier, it can be derived that leasing is an asset-related loan. The exceptional difference from other means of financing is the residual value management including the adjustment of the instalments in case of a change in the expected re-marketing value of the asset. Furthermore, depending on the kind of leasing contract and legislation, the lessor might be held responsible for maintenance and guarantee services related to the asset. The entire re-marketing process usually is at the lessor’s risk and expense, as well.
Summary of Chapters
1 INTRODUCTION: This chapter introduces microleasing as an untapped topic in microfinance, outlines the lack of available data, and explains the structure of the thesis.
2 MAJOR TRENDS AFFECTING MICROFINANCE: An overview of the Millennium Development Goals, the "Bottom of the Pyramid" economic potential, and the impact of information technology innovation on financial service delivery.
3 THE CURRENT STATE OF MICROFINANCE: Analyzes the diverse network models within the global microfinance industry and the competing philosophies regarding sustainable vs. profitable institutions.
4 LEASING AND ITS DEVELOPMENT IMPACT: Details the historical evolution of leasing and provides a rationale for why it serves as a powerful development tool for inclusive financial growth.
5 MICROLEASING: THE LOGICAL CONSEQUENCE?: Provides an in-depth analysis of microleasing characteristics, risk management, client and provider perspectives, and the regulatory environment for these specific financial products.
6 SAMPLE CASES: Uses the real-life examples of INDES Leasing in Chile and Grameen Bank in Bangladesh to evaluate practical successes, workflows, and challenges in microleasing.
7 STRATEGIC IMPLICATIONS ON SCALING UP MICROFINANCE: Discusses the necessity of scaling up operations for MFIs and provides final insights on how legislative and institutional frameworks can support future growth.
Keywords
Microfinance, Microleasing, Bottom of the Pyramid, Financial Inclusion, Risk Management, Asset-based Financing, Economic Development, SME Development, Grameen Bank, INDES Leasing, Capital Markets, Regulatory Environment, Sustainable Growth, Repossession, ICT.
Frequently Asked Questions
What is the core focus of this research paper?
The paper focuses on microleasing as a means of expanding the services of microfinance institutions to better support the growth and productivity of small-scale entrepreneurs.
What are the central themes discussed in this work?
Central themes include the adaptation of leasing models for the poor, the impact of information technology on business operations, regulatory requirements for leasing in developing markets, and strategies for risk mitigation.
What is the primary objective or research question?
The objective is to explore if microleasing can serve as a viable and effective tool for scaling up microfinance, moving beyond traditional microcredit to provide productive assets for economic growth.
Which scientific methods were applied in this study?
The study utilizes a combination of literature analysis regarding global microfinance trends and a comparative case study approach focusing on INDES Leasing and Grameen Bank to validate theoretical findings.
What topics are covered in the main section of the paper?
The main section covers the definitions and types of leasing, the specific risks faced by providers, the potential benefits for clients, and detailed workflows for approval and disbursement of assets.
Which keywords best characterize the research?
Key terms include Microleasing, Bottom of the Pyramid, Financial Inclusion, and Risk Management in microfinance.
How does INDES Leasing handle the potential default of a client?
INDES emphasizes contract normalization through penalties first, but they are prepared to initiate formal judicial repossession processes if restructuring or negotiation fails.
What role does the "Bottom of the Pyramid" play in the author's argument?
The author argues that the BoP represents an enormous, untapped market with significant purchasing power that is currently trapped by market inefficiencies; microleasing is presented as a mechanism to unlock this potential.
- Citation du texte
- Steffen Kuhl (Auteur), 2007, Microleasing - A means for scaling up microfinance?, Munich, GRIN Verlag, https://www.grin.com/document/77297
