PRIVATE ENTERPRISE PARTNERSHIP FOR AFRICA (PEP AFRICA) Legal, Tax, Regulatory and Market Review of the leasing sector in Liberia by THCLR GHANA LIMITED In Association with J. Mills Lamptey & Co, Chartered Accountants, Ghana And Michael & Michael, Barristers & Solicitors, Sierra Leone (P.O. Box CT 1389 Accra –Ghana. Tel. 233-21 519586. email:
[email protected]; www.thclr.com) May 2009 IFC Liberia Leasing Survey EXECUTIVE SUMMARY IFC commissioned this survey in Liberia to access the business case for leasing in the country. The study focused on the market, legislative, accounting and tax environment for leasing. The market review used the following three approaches to determine the potential size of leasing. Equipment imports Net Loans GDP Equipment Import Approach Leasing experience from some developed and emerging market suggests that 20-30% of equipment imports is financed through leases, and for developing countries, 10-20% is financed through leasing. Ghana, Kazakstan and Russia however recorded less than 10%. Since Liberia is a developing country undergoing a post-conflict transformation, we used a leasing potential of 1.0% of equipment imports for Liberia and obtained a potential market size of leasing for the first five years to be $65.5 million. Net Loan Approach It is estimated that in developed economies, approximately 15-20% of the bank loans can be attributed to leasing while in developing economies, the ratio is between 5% and 8%. From our empirical studies in Liberia, we obtained a rate of 6.1% of equipment loans to total net loans. Since Liberia has no leasing market, we based our estimate for the potential for leasing on the 6.1% and obtained a potential market size for leasing in the first five years to be $ 87.8 million.