World Bank Group's IFC to help Seychelles introduce leasing services
File photo: Central Bank of Seychelles, home to the Treasury of the island nation. (Seychelles News Agency)
(Seychelles News Agency) - Seychelles is getting assistance from the International Finance Corporation (IFC) to implement leasing facilities and help small businesses gain access to equipment to help their businesses grow in the 90,000 population Indian Ocean island nation.
In a press statement issued Tuesday April 29, IFC said it has signed a cooperation agreement with the Central Bank of Seychelles.
“Leasing is particularly useful as a financial instrument for small businesses in Africa because they often lack the credit history or sufficient collateral to access traditional forms of financing,” said Caroline Abel, Governor of the Central Bank in the statement. “Leasing also reduces the initial capital requirements for acquiring equipment.”
A member of the World Bank group, the IFC is an international financial institution which offers services to encourage private sector development in developing countries and help eradicate poverty.
According to the press statement from the IFC, leasing is an attractive option for small enterprises that want to grow their businesses and heighten productivity.
The cooperation agreement signed makes provision for the IFC’s Africa Leasing Facility to help Seychelles Central Bank with the regulatory framework for leasing activities in the Indian Ocean island nation, provide capacity-building for stakeholders as well with the awareness campaign that will be carried out.
“Countries like Seychelles looking to strengthen their economies stand to benefit greatly when equipment is more accessible to its small business owners, especially in the agribusiness, mining and power sectors. With the necessary financial tools available to them, entrepreneurs in Seychelles have the capacity to play an important role in the country's future development,” said IFC’s Country Manager for Madagascar, Mauritius and Seychelles, Kailash Sharma Ramnauth.
Raising capital, a small island state dilemma
It’s a dilemma that has faced many small businesses in Seychelles, as a small island developing state with a limited market and financial lending institutions. Should they apply for interest-heavy loans for equipment that may become obsolete as soon as it has been paid off, or try to raise enough capital to buy the equipment outright?
For many entrepreneurs, neither of these options are within reach, and they often lack the credit history or collateral required by financial institutions to be approved for equipment loans.
Leasing often proves to be an attractive option for the acquisition of high-value assets such as equipment for farming, construction, catering and other types of machinery. As the business owner retains legal ownership of the leased asset during the lease term, additional collateral is not usually required.
Legislation which would allow financial institutions to provide leasing options in addition to more conventional loans was approved by the Seychelles National Assembly in October 29 last year.