Mohamed Omran, chairperson of the Financial Regulatory Authority (FRA), stated that the value of finance lease contracts rose to EGP 22bn during the first 10 months (10M) of 2017, compared to EGP 16.7bn in the corresponding period of 2016.
“This means that the increase rate registered about 31%, despite a decrease in the number of contracts by the end of October 2017, which fell to 1,496 contracts, compared to about 1,964 contracts in the corresponding period in 2016,” an FRA report revealed.
According to this report, the decrease rate in contracts amounted to 24%.
In this regard, Said Al-Fekky, branch manager at Osool Securities and market expert, highlighted that the announced rates are considered a great success for untraditional financing sources.
“According to these financing systems, the tenant asks the leaser to finance the purchase of the capital asset, allowing the tenant to use it for a period of no less than 75% of the life span of the capital asset,” Al-Fekky illustrated.
Furthermore, he asserted that financial leasing grants the leaser the right to possess assets during the contract period, while the tenant is given the right to choose whether to possess the assets after the end of the contract or not.
“Moreover, the investment environment has been dynamic lately, especially in the area of small and medium enterprises in the real estate and automotive sectors, after a long period of recession,” Al-Fekky said.
In this respect, the FRA report revealed that real estate and land contracts came at the top in terms of financial leasing contracts, in terms of type of activity.
“The value of real estate and land contracts amounted to EGP 15.5bn, representing about 71% of the total contracts, followed by transportation vehicles whose contracts value reached about EGP 1.44bn, acquiring about 6.6%,” the report stated.
Hereby, Esmat Yassin, chief executive officer at the economic training council sector at the African Group, asserted that the real estate sector is on top of the developing sectors in Egypt, supported by the financial leasing system, particularly after the minister of finance issued the executive regulations of Law No. 108 of 2016.
“Finance lease plays an effective role in terms of investment funding as it eases the purchase of the required machines and equipment for industrial activity,” she added.
Furthermore, Yassin revealed that financial leasing can help investors utilise the residential or industrial property to test the success of their activity before buying the land or real estate needed to establish the project.
“Thus, I think financial leasing systems are an utmost necessity in Egypt to push the development process and eliminate obstacles for investors,” she highlighted.