Asset financing at the BOP: lessons from micro-leasing

  • Manuel HÖRL, Credit Suisse
  • Anitha R MONGI, Bumaco Insurance Company, Tanzania
  • Victoria KISYOMBE, Sero Lease and Finance Ltd. (Selfina), Tanzania
  • Ariane APPEL, Swisscontact


Manuel HÖRL shortly explained Credit Suisse's Financial Inclusion Initiative (formerly Microfinance Capacity Building Initiative), which leverages the bank's skills and expertise to support MFIs in serving the bottom of the pyramid. Micro-leasing was a key target area within the agricultural component of the initiative where they partnered with Swisscontact, first during a pilot in Kenya and then in a wider scope. This session would serve as a platform to share lessons learned from this cooperation, which was finalised in 2017.

After a short video introducing the micro-leasing approach, Ariane APPEL explained Swisscontact's role in supporting local actors to develop new products and services in order to prove the business case and then attract investors, additional partners and transfer lessons learned. They engaged with micro-leasing to overcome a lack in asset-backed finance products tailored to smallholder farmers and entrepreneurs and which address their lack of collateral and credit history. Their lease-to-buy concept for productive assets includes insurance of both lessee, as well as asset to mitigate risk and training for the lessee to accrue maximum income from the asset. The product is cashflow-based, with ownership being transferred at the end of the transaction period.

Appel then provided some history, from the first development of concept with K-REP and Credit Suisse in Kenya resulting in a pilot between 2006 and 2008, and the later roll-out across Kenya and introduction to markets in Tanzania, Uganda, Rwanda and several Latin American countries. Activities in Kenya were consolidated into a full-fledged leasing organisation, Juhudi Kilimo Ltd.

A key challenge was the mismatch between funding capacities (for example of SACCOs) and rural outreach (of many MFIs) and the identification of like-minded partners. Furthermore, suitable asset suppliers were not always available, in particular locally, and often required substantial technical assistance. At the same time, lessees had to cope with a high and varied range of risks, such as harvest failure or livestock mortality due to drought or disease. This required a diversification across sectors to protect the lessor from excessive risk, for example dairy, poultry, beekeeping, irrigation and transport. She also mentioned that policies for the sector were often not in place. Finally, the extent of training required for the different actors brought high costs. As such, Appel called for the integration of micro-leasing into skills development and into SME projects to share experiences and tools.

Victoria KISYOMBE, from Selfina, described the focus of her organisation on micro-leasing for rural women as their competitive edge, as few other organisations in Tanzania operate in this space. In Tanzania, women often do not own land (due to cultural setbacks), while land is the main means of loan collateral. However, she stressed the importance of rural women's resourcefulness for their family and community when that is leveraged through micro-leasing.

She described Selfina's broad range of leasing products, ranging from agricultural equipment to processing, cold storage and transport, as well as its sale and leaseback option. She gave specific attention to training and capacity building activities on business management, entrepreneurship and risk management. A number of testimonials from the 27,000 female entrepreneurs serviced up to now were shared, with business in oil pressing, rice production, rice milling, hatching, services as well as an elementary school. Selfina also tracks the use of profits, showing how women invest in their future through education of their children, home improvements, savings and business investments. It also monitors impacts in terms of employment, with more than half of the entrepreneurs hiring employees. In total, 150,000 jobs were created. The organisation's success has not gone unnoticed, evidenced by the recent Economic Empowerment Award by Vital Voices.

Challenges to further development of Selfina are in particular, access to sufficient financial resources to fund its growth, with demand for asset-backed leasing far exceeding their ability to pre-finance assets. Furthermore, it has proven essential to reduce risk through adding insurance products. A further challenge is building sustainable partnerships with asset providers, funders and other stakeholders.

Anitha R MONGI introduced Bumaco Insurance, one of Tanzania's six providers of microinsurance, which has a strong focus on rural areas and the bottom-of-the-pyramid. They have a wide network of branches and intermediaries to penetrate into all regions. They work with a variety of micro-leasing partners in Tanzania, including Selfina, offering credit, asset, personal accident, workmen compensation and fire and theft insurance. The insurance component integrated into micro-leasing products helps both the lessee and the lessor to mitigate risk and continue to invest in the development of the business. According to Mongi, the unique selling points of Bumaco Insurance are the different premium options as well as strong protection of the lessee.

Mongi also pointed out several challenges, including the low awareness and understanding of insurance. Many entrepreneurs do not understand the concept, do not understand its benefits, or even when they have it, some do not trigger their policies in case of an event they can claim against. This calls for continued awareness-raising and is closely related to the low penetration of insurance, in particular in rural areas. Mongi lastly added that legislation in Tanzania is more geared towards regular insurance markets, which complicates processes and adds costs.


During the discussion, the panellists first touched upon the issue of scope, cost and size of the products offered. Kisyombe mentioned that her organisation has put caps in place in terms of asset size to enable them to serve a larger number of clients. Women with higher capital needs are referred to local banks, which have shown an increasing appetite to finance their businesses. In terms of costs components, she mentioned the cost of the asset, inflation, operational margins and profit margins. Financing costs plays a large role in the rates that her organisation needs to charge. She stresses the need to make clients understand different payment options and what it means in terms of their cashflow.

The discussion then turned to cost differences with credit products. Appel indicated that this is not a comparable product as the women do not have collateral to back their loans. Kisyombe stressed the added services such as maintenance and insurance, but also the power of ownership, with immediate use of the asset jumpstarting business.

In terms of defaults and repossession, Kisyombe also mentioned the need for training. For example, they work with roleplay to show women what repossession means for them and for their reputation, and they also call on women to remain in conversation with officers. Furthermore, Selfina asks the lessee to propose guarantors to further reduce the risk of default.

This brought the discussion to the existence of second-hand markets. Appel indicated that identifying second-hand markets is a challenge in many contexts. However, this is only relevant in case of repossession. There are very few cases where productive assets are sold by the entrepreneurs.