The law, passed by Serbia’s parliament on May 27, authorizes the creation of new independent leasing companies with minimum capital of Euro $100,000. It also sets clear and transparent standards for their supply of equipment to local companies on contract.
The move is expected to fill an important financing gap for Serbia’s SMEs, who often need new equipment for their operations but cannot obtain the term loans from local banks required to make the purchase. Since Serbia’s leasing companies will retain legal ownership of the assets they lease, they will be able to overcome this obstacle by qualifying SMEs based more on their generated cash flow, rather than credit history, collateral, or capital base typically required by banks. The result is expected to be a shot in the arm for the local small business sector, the key source of job creation in developing and transition economies.
SEED (Southeast Europe Enterprise Development) is a multi-donor initiative with the objective of strengthening SMEs in Albania, Bosnia and Herzegovina, FYR Macedonia, and Serbia and Montenegro. Last year it used $21,000 to provide an expert consultant and methodology for interaction with Serbia’s inter-governmental Committee for Leasing.
At present, five banks have already set up leasing companies: Raiffeisen Leading, Hypo-Leasing, Ljubljanska Bank Leasing, Volksbank-VB, Styria Bank-S Leasing.
Following the successful adoption of the leading law, SEED organized targeted workshops and seminars for financial institutions and SMEs. These will be followed by a larget national awareness programme targeting other financial institutions and SMEs.
The new law should offer investment opportunities for IFC to exppand the activity of new leasing companies, in paralle SEED will be approaching potential partners and looking at new ways to facilitate establishment of leasing companies in Serbia. In support of this iniatiative, SEED and IFC alsso played a major role in improving the tax environment for financial leasing transactions. Serbia’s sales tax law was amended last July and now Serbia has a regulatory framework that meets worldwide standards for leasing.
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. From its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countires. IFC’s committed portfolio at the end of FY01 was $14.3 billion.