Government is unwavering in promoting administrative and legal instruments to ensure its proper functioning.

What does leasing Consist of?

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible charges. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an indefinite period of time (called the term of the lease).

With leasing, a company or individual who has an idea of his project makes a choice of the equipment he wants. A lessor buys the equipment and puts at the disposal of the lessee against a periodic payment. Once the payment is over, the lessee owns the property (equipment as the case may be). The final price would be 2-5 per cent more than the original cost price.

What Legal Instrument in Cameroon?

In a bid to give enterprises access to equipment, real estate, or other key material resources needed to start or run their business activities, the Head of State, Paul Biya, in line with his 2035 emergence vision, promulgated Law No 2010/020 of December 21, 2010 on the organisation of leasing in Cameroon. Experts say the law is a demonstration of the importance government attaches to the financing of businesses whose activities are needed to generate and boost economic growth.

With the law and government’s continual administrative facilities, companies can now obtain property such as vehicles, construction site engines, power generators, production machines, computer equipment, office furniture and business premises under a lease contract to run their business activities smoothly. This lessens the hitherto burden of business people having to absolutely buy equipment or build their offices from their business capitals.

Its Weight in the Economy

Statistics show that small and medium-size enterprises (SMEs) represent 80 per cent of the country’s economy but access barely 20 per cent of bank loans. The advantage of leasing over buying is that there’s usually no large outlay of cash at the beginning of the lease as there is with an outright purchase. In most, if not all leasing contracts, the replacement of obsolete equipment is taken into consideration. Experts say it is also flexible, increases the lessess’s capacity to borrow et al. It is therefore a veritable alternative funding mechanism for the economy and SMEs in particular.

However, in a leasing arrangement, the lessee does not get the ownership of the asset as it has only the right to use. As such, the lessee cannot pledge the asset for securing loan from financial institutions. Also, in case the lessee makes a default in rental payment, the lessor can own the asset and the lessee has no right to prevent him from doing so.

Who is Eligible?

To benefit from the innovative funding tool, the SMEs must be built in line with the April 13, 2010 law of small and medium-size enterprises in the country. Its name must figure on the list of SMEs in the country and must be up-to-date with its fiscal and social responsibilities. Much more, nationals must constitute the majority of its shareholders.

Potential beneficiaries must present projects with unquestionable capacities to generate wealth, create jobs and ensure value addition. Priority is in the wood, agriculture, livestock, mining, industrial, transport and public works sectors.

Success Chances

With a vision of inclusive financing, government has been working tooth and nail to ease the conditions for potential beneficiaries, not only for profitability but durability as well. The maximum interest rate has been fixed at 10 per cent and the duration of the contract could unusually go for seven years. Possibilities of micro-leasing are also available with the financing of small equipment. Sources say it has been agreed that 60 per cent of the project’s cost will be financed by the fund, 15 per cent by the beneficiary SME and 25 per cent by the credit (loan) institution. The 15 per cent contribution from the beneficiary is to ensure his/her perfect collaboration for the success of the operation. Where need be, the principle could be altered.  

Government’s Commitment

On July 3, 2013, the Minister of the Economy, Planning and Regional Development (MINEPAT), chose members of a control and follow up committee to ensure a sound take off of leasing in the country. Chaired by the President of the Chamber of Commerce, Industries, Mines and Crafts, the committee comprises representatives of different public administrations concerned with private sector projects. The committee is charged to produce periodic reports on the evolution of the funding mechanism.

The Merits of Government-CAMLEASE Agreement

Government, represented by the Ministries of Finance and that of the Economy, Planning and Regional Development on November 15, 2012 signed an accord with CAMLEASE for the putting in place of the funding tool in the country. In line with the long-term development objectives contained in the Growth and Employment Strategy Paper, the accord was to take the innovation off the ground and give a push to SMEs to occupy its pride of place position in the country’s development. Besides its hallmark of wealth and job creation, leasing is a perfect public/private partnership to boost the economy.

Godlove BAINKONG