EBRD: Agro Leasing Opportunities
December 2014
Matthieu Le Blan, Head of Office
Ulaanbaatar
Contents
1. What is agro leasing?
2. Market size
3. EBRD experience in agro leasing
4. The role of banks
5. SME leasing policy initiative
6. Building demand for leases
7. Business environment
8. Summary
2
What is agro leasing?
• Financing for farmers to purchase agricultural equipment, allowing the
agricultural sector to pay equipment suppliers over time
• Financing provided by financial institutions in partnership with
equipment distributors
• Payback periods should coincide with farmer cash flow cycles
3
Market size
Total Mongolian Leasing Market
Only 5% of leases are
currently used for
agricultural equipment
Year
Clients
Portfolio
2014
656
$42,000,000
2019
2,000
$100,000,000
4
EBRD experience in AgroLeasing
•John Deere is the world’s leading manufacturer of agricultural, construction and forestry
equipment
•EBRD provided a five-year loan of up to RUB 4.7 billion ($130m), complemented by a
risk-sharing agreement for up to RUB 1.6 billion ($45m), through which EBRD shares part
of the risk from John Deere’s portfolio of local leases
•Both facilities have supported John Deere in developing its leasing operations in Russia,
which allow local companies, including SMEs and farmers, to finance the acquisition of
John Deere equipment
•This new financing program has proved very successful, with John Deere having
extended several hundred leases during the last two years to a wide range of customers in
a market with a strong deficit of modern and efficient agricultural machinery and where
financing is not always readily available to SMEs and individual farmers
5
SME leasing policy initiative
• Funded by the European Union, implemented by the EBRD
• Objective to build leasing market
• Starts in January 2015
• Build demand for leases
• Build capacity of leasing companies
• Improve business environment
6
Building demand for leases
• 12-month public information campaign using television, radio, and
social media
• Objective is to inform SMEs about the benefits of leases to obtain
capital equipment
• Financial education events to address lack of technical knowledge
amongst SMEs
7
XacLeasing
• Launch agricultural leasing product
• 9-month technical assistance assignment
• Design agricultural underwriting policy
• Market entry strategy
• Coaching for staff in launching new product
8
Business environment
• Revise tax code to include best practices for leasing
Example: deducting lease payments from taxable income
• Fine tune financial leasing law to improve risk management
Example: disallowing subleases
• Adoption of operational leasing framework for use of large-scale
capital equipment
Options: separate law versus integrated law
• Include leases under the government’s SME development fund
9
Summary
• Around the world, farmers rely on lease financing to fund equipment
upgrades that drive growth
• Agricultural leases will help modernise farming in Mongolia
• Working alongside banks and the government, the EBRD will continue
to contribute to Mongolia’s economic development
10
Thank you
Matthieu Le Blan, Head of Office