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Leasing finance determined to create millionaires
2007-08-12 10:31:51
By Nasser Kigwangallah
Sewing machines, some 100 years ago, were familiar sights in tailoring shops across Tanzania and in many parts of Developing countries.
However, what makes Qualicloth in the back streets of Kinondoni, in Dar es Salaam region special is that it is a business booming as a result of a little used financial product.
Qualicloth is owned by Renalda Lema. Six years ago she put down a 35 per cent deposit on a Sh 4 million reconditioned embroidery machine and then borrowed the balance.
But, instead of borrowing the money outright she resorted to hire the machine from a company until she was able to pay for it, a process known as leasing.
Elaborating, Renalda admits that her workforce has increased from two to 23 people, being able to handle batik and woven cloth orders worth more than three million shillings a month from around the world. Leasing is not a new financial product.
There are only a few companies that offer the service in Tanzania.
Selfina in Mikocheni, Dar es Salaam being one of them, specialises in giving loans to women, having leased equipment to 3000 women entrepreneurs since 2002.
The firm gives loans ranging between Sh. 75,000 and Sh. 15 million for equipment ranging from simple sewing machines to trucks, from photo-copiers to maize milling machines.
Women wanting to be considered for the leasing scheme need to attend workshops, a 20 per cent deposit and two guarantors.
The impediments in the regulatory and tax areas are now in the process of being tackled thanks to a technical assistance project supported by Swiss Cooperation.
Its Dar es Salaam office is spending US$ 925,000 up to 2007 as part of an effort to make more leasing products available to small as well as larger businesses.
Bank lending interest rates of up to 23 per cent mean that the money that leasing companies borrow to buy equipment for their customers is prohibitively expensive, an obvious brake on the market.
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