CEO and managing director of Global Lease Company for Financial Leasing, Hatem Samir, said Emirates NBD agreed Tuesday to grant the company a loan worth EGP 50m.
Once the company secures the loan, its total investment obtained from debt will be EGP 750m. The decision to take on the loan is in an effort to increase Global Lease’s liquidity, according to Samir.
In November 2015, Global Lease signed a loan worth EGP 200m with Banque Misr in order to finance leasing contracts the company entered into with its clients.
Global Lease considers the field of financial leasing in the Egyptian market to have plenty of opportunities due to the simplicity of financing procedures. Samir expects the relative ease of these financing mechanisms to encourage new companies to enter into the field of financial leasing.
Financial leasing combines a leasing party with a lessee, where the former purchases a capital asset, such as lands, real estate, equipment or vehicles, in order to rent them to the latter.
The contract stipulates that the lessee make payments during the leasing term, and when the term ends, the lessee has the right to either return the asset to the leasing party or to keep it. In most cases, the payment portions cover the full value of the asset, and the lessee repays a symbolic value to purchase the asset.
Global Lease is currently focusing on financing clients in several sectors, such as real estate, industry and services, Samir said.
The company’s strategy is based on allocating about 60% of total leasing portfolios to large-sized companies, while the remaining amount will be allocated to small and medium-sized enterprises (SME), Samir explained.
Global Lease receives support from KfW Development Bank in the field of financing SMEs, whereby it then disburses funding through one of its bond funds.
Global Lease began its activities in May 2015 with an authorised capital of EGP 500m, an issued capital of EGP 100m, and a paid-in capital of EGP 50m.
The ownership structure of Global Lease is partitioned with 68% held by Wadi Degla Holding Company, 30% held by bond funds, and 2% held by other shareholders.
Global Lease could come under the new legislation proposed by the Egyptian Financial Supervisory Authority (EFSA) which has formed a committee to develop the financial leasing law. The committee will considering approving the practice of operational leasing.
According to contractual protocol, the difference between operational and financial leasing is that operational leasing contracts specify a period of time for the lessee to keep the asset, and when that time is over, the leasing party obtains the asset again with the aim of selling it to any other party.
The committee is also considering allowing individuals to operate as leasing parties in order to support small and micro projects.
The committee is holding discussions to authorise financial leasing companies to provide consumer financing. This activity is considered a form of financing obtained by individuals for purposes other than conducting commercial activities.