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Uganda: Banks Want WB, Govt to Enact Law On Leasing
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The Monitor (Kampala)
24 July 2008
Posted to the web 23 July 2008
Tom Magumba
Kampala
With more Ugandans acquiring business facilities through leasing, players in the banking industry have underscored the need for a law to protect their businesses.
Interviews with industry players indicate that they are currently engaged in talks with the government, World Bank and the private sector to legitimise financial leasing.
They say that once the law is enacted it would build confidence among banks and other financial institutions to give loans without fear.
Financial leasing is a system which allows people to access financial services from banks through hiring equipment.
Mr Moses Kibirige the president of the Uganda Leasing Association said the government has provided funding to pursue this very challenging process that could take up to three years.
"We shall draft a law in view of developing leasing and making it a competitive product in our market" he said in an interview last week.
He said most financial institutions are not aware of the danger posed by leasing but there are already signs that enforcing and recovering assets is a hard task.
Financial institutions have been challenged in the courts of law but it has been difficult to win cases because there is no stipulated law on which to anchor a legitimate argument.
The development comes at a time when neighbouring Tanzania has just enacted the leasing law and players are optimistic that all countries in the region will have it to harmonize their businesses.
Mr Kibirige said government had borrowed from World Bank $70 million (over 115 billion) for private sector development but a large sum of this would be invested in strengthening financial leasing, creating awareness and lending out.
"We are working jointly with the law reform commission to draft the law" he said adding that the entire process would take two years if expedited.
The move could raise stakes in the country's banking industry currently very competitive.
The International Finance Corporation (IFC), a private sector arm of the World Bank Group establishes a clear set of rights and responsibilities for the parties of a lease and a new registry system for leased assets.
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In addition, it introduces speedy leased asset repossession procedures and sets out basic tax and accounting structures that create a level playing field between leasing and other types of financing, such as bank loans.
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