AMMAN - Finance leasing extended for real estate purposes amounted to JD102 million or 64 per cent of the total leasing volume in Jordan which reached JD160 million in 2006, an official of the International Finance Corporation (IFC) said Monday.
Speaking at conference entitled, "Developing the Leasing Market in Jordan", IFC Project Officer Bilal Sugheyer indicated that the leasing of industrial equipment and vehicles has declined from 19 per cent and 27 per cent respectively in 2005 to 15 per cent in 2006.
Sugheyer described the JD160 million finance leasing in 2006 as a major gain especially when taking into consideration the whole market has accumulated an overall JD230 million in leasing volume over three years.
"Although real estate accounted for the largest portion of finance leasing, financing of personal property transactions was more than 66 per cent of the deals whereas 28 per cent went for offices and hotels," he said. "The remaining 6 per cent benefited industrial purposes."
In another indication showing the progress of finance leasing in the Kingdom, the IFC mentioned that new firms have been licenced in the market bringing the number to 23, up from 18 at the end of 2005.
"Despite the increase, only 11 companies and banks are actually operating at present in finance leasing operations," Sugheyer remarked, noting that the remaining are registered but practicing other activities or providing other financial services.
He stressed there is still substantial potential to raise the use of finance leasing as a tool to finance productive assets in Jordan but these capabilities are somewhat remote because of a number of restrictions and barriers.
Taher Assaf, general manager of Arab National Leasing Company, spoke at the conference and exposed challenges which face Jordanian lessors.
He listed the lessor's repossession of assets in case the lessee does not fulfil the obligations agreed upon and, secondly, documenting the finance leasing contracts.
"The speed at which a lessor gets back the leased asset, in case a lessee fails to honour commitments, is a basic condition to develop this type of financing in any economy without exception," Assaf said. "Legal articles which guarantee this right exist in the present law and in the new one which is nearing completion, but the problem lies in implementation."
Other challenges listed by Assaf included: Conflict between the ownership of autos and the party using the vehicles especially taxis, rental cars, trucks and buses (public transport and schools), cost of registration, bureaucracy and lack of knowledge among government clerks, exclusion from doing business in free zones.
Leasing experts from Europe, Latin America and the United States discussed international experiences in developing markets and the necessary measures for strengthening business enabling environments.
Speakers underlined leasing as an important source of financing for small-and medium-size enterprises and emphasised the need for raising awareness about it as well as educating stakeholders on the particulars of this business tool.
By Samir Ghawi
© Jordan Times 2008
