EPI Report: Developing Leasing in Georgia

This report explores and analyzes the activities performed following capacity building trainings of the Georgian leasing industry for relevant government officials. These capacity building exercises focused on applying the recently adopted Georgian leasing laws to achieve sustainable capital formation and facilitate access to financing while promoting Georgian foreign investment. These activities highlighted knowledge acquisition and applied skills development for private sector corporations and government officials.

The consultant provides the following recommendations in this report:

  • EPI should provide a continuous support to the Georgian leasing companies, which will facilitate growth of the Georgian Leasing Association (GLA). The GLA will then undertake a self-regulatory process to prevent systemic and regulatory risk derived from potential practices by non-reliable players and ensure compliance to the best practices of the leasing industry.
  • EPI must encourage the creation of new Georgian leasing companies and their integration into the current system.
  • Furthermore, leasing companies must align their risk management policies and procedures with international best practices to ensure a continuous flow of funding and investments from international markets. EPI should support the industry’s progress towards the best practices and ensure that the leasing portfolios are well structured and sound.
  • In addition, EPI must host continuous educational workshops for all banks operating in Georgia to discuss leasing and their revenue generating capacity for the Georgian economy. These trainings should be made available to other potential institutional investors such as insurance companies and pension fund managers among others.
  • The consultant highly recommends that EPI should facilitate the creation of a funding institution for the leasing companies. EPI’s next steps should be to define the institutional syndication structures of leases, vet their legal and economic feasibility, and support a funding institution’s fundraising efforts.
  • EPI should support a continuous dialogue between the stakeholders to effectively evaluate the long-term impacts of the new legislative reforms on economic development. These impacts may include: a. the marginal effect of leasing growth on tax revenue collection due to the growth in economic activity through the acquisition of additional capital goods (generating VAT revenues); b. the increase of revenues for small and medium sized business (taxable through income tax); c. the number of businesses receiving financing would increase availability of financing sources for SMEs; d. the equipment types (whether these are motor vehicle, technology equipment, agricultural machinery or other types); and e. an estimation of jobs created due to increased financing to the leasing industry, which normally is measured not only by the jobs created by the lessee, but also for the effect that the acquisition of capital goods produces in driving work to suppliers, transportation entrepreneurs, customs agents, and sales persons among others.