Since 2002 SELFINA has had strong presence in 5 regions (12 districts) in Tanzania. 27,000 Women financed, 150,000 jobs created, 250,000 people impacted, $17M revolved.
What is Micro-Leasing
Micro-leasing is a contractual agreement between two parties, which allows one party (the lessee) to use an asset owned by the other (the lessor) in exchange for specified periodic payments. The lessee, who in this case runs a micro-business, uses the asset and pays rent to the lessor, who makes lease payments by generating sufficient cash flow. This feature of micro-leasing enables borrowers without a credit history or any collateral to access the use of capital equipment and other items.
How does SELFINA use micro-leasing?
SELFINA helps women build and grow value-creating, sustainable businesses by enabling them to acquire equipment for their businesses on lase, as well as small working capital loans through a sale and leaseback facility. Through leasing, SELFINA brings financial relief to small businesses that would not have sufficient collateral for standard loans from formal financial institutions and helps avoid tying up working capital in fixed assets. Specifically, SELFINA’s business consists of:
(a) Financial lease (approx. 40% of total): a customer pays months instalments (typically 10 months) to gradually acquire the asset.
(b) Sales and leaseback (approx. 60% of total): a recurring customer, who has obtained equipment through a prior lease with SELINA, has the option to sell the equipment back to SELFINA. These customers usually need working capital for their businesses, such as raw materials or money to hire employees. They then pay SELFINA a monthly instalment to acquire the asset back, while concurrently using it in the course of their business.
In order to receive such a micro-lease, or simply a loan, women are requested to submit their loan requests which include: letter from the local Government and guarantors including the husband: where applicable proforma invoice of the equipment/asset to be leased or certified list of collateral and photographs of the collateral to be used for sale and leaseback. Typically, this takes four days to be processed. Women are provided funds to start businesses which include:
- Opening schools
- Food vending/catering
- Livestock keeping – poultry, dairy, cattle
- Milling and packaging corn flour
- Buying and selling of cereals
What are the advantages of micro-leasing?
Leasing is different from, and more advantages for women than, traditional micro-credit because leases are linked to specific assets and therefore are not as vulnerable to expropriation by partners or spouses. It allows women to acquire productive assets – such as sewing machines, livestock and ovens – gradually over time and use the assets to grow their businesses and earn revenue. When leases are complete, the assets become property of the women and can then be used as collateral for subsequent loans. On the other hand, cash loans can be used for consumption or general spending and do not lead directly to wealth creation. The likelihood of money being used for non-business purposes like the paying of school fees, funeral rites, the entertaining of guests, or even financing the drinking habits of spouses, is great and real. Furthermore, leasing has lower delinquency rates compared to traditional lending. Owing to the fact that SELFINA maintains ownership of the leased asset for the entire duration of the lease contract, it can threaten to or actually repossess the asset. In addition, SELFINA can rely on the cash flow generated by the customers from their businesses to service lease repayments instead of collateral or credit histories, which the poor usually lack.