Guinea: Advice on Leasing Law
Guinea has substantial natural resource endowments. Following a surge in construction activities, leasing became a necessary financial instrument to be able to have access to the otherwise expensive machinery and equipments. This project, which was approved in January 2007, aimed at contributing to the strengthening of financial sector and growth of the SME sector by facilitating the drafting of a new law that addresses leasing issues. The project built upon a survey of potential leasing demand carried out by another donor-funded program.
There was a momentum to launch leasing in the country. For instance, the leading insurance company in Guinea, UGAR, confirmed many times the decision by its Board to launch a leasing company supported by other financial and technical partners. These partners, (two regional banks; Ecobank and Uibg) and technical partners confirmed their interest.
A template leasing law had been developed by Unidroit and endorsed by the IFC in July 2006, and this template was used and tailored to the Guinea situation. The template was also available in French.
Confronted with poverty but a very rich natural base, the Republic of Guinea was experiencing an economic and infrastructural renewal. In connection with significant investments in infrastructure, mining and agribusiness, large civil works contracts offer significant potential for domestic SMEs to obtain necessary financing for equipment to undertake these contracts. Financial leasing services which should be ideally suited for such financing were of limited scope and capacity. One of the reasons for this was the absence of supportive and specific laws and regulations.
The Banking Law of 1994 did not cover leasing activities. Activities of specialized financial institutions were covered by articles 2 and 6 of the banking law, but no article specifically dealt with leasing activities. A draft law, dated 15 September 2003 referred to leasing activities in its article 4 and mentioned that a specific by-law should regulate these activities. Hence the project sought to fill the legislative gap that existed.
The project was scoped to: examine the current regulatory, legal, and fiscal framework pertaining to financial leasing and provide specific recommendations for making this framework more conducive to financial leasing; and, to undertake an international benchmarking of existing laws regulation leasing, especially in the West Africa region.
The following project activities were undertaken:
- Providing a definition for leasing that conforms with international accounting standards;
- Identify other laws/ regulations that need to be amended for the establishment of leasing companies;
- Advice on drafting of the leasing law and related regulations;
- Support the BCRG in the building of political consensus on the law; and,
- Explain the law to the financial sector.
The Guinea Leasing Law. This is in French: “Elaboration de la Loi sur le Credit-Bail”. This Law may be seen as a useful template for other countries considering a specific leasing law in that it was also based on the Unidroit template approved by IFC and therefore includes most of the issues to be expected in such legislation. For this reason it should contain principles applicable, with some tailoring, to many jurisdictions and not only those in the francophone areas.