Leasing in the Middle East and North African Countries

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A report from World Bank mentions that leasing industry has long existed in MENA region & is currently active in 70% of the countries. However, presently leasing industry is under developed by international comparison and there is lot of potential for future growth. This potential can be realized if MENA policy makers address the existing regulatory & institutional constraints. Most MENA countries have a leasing industry. Leasing in both of its forms, conventional & Islamic is present in 13 out of 18 MENA countries. In Iraq, Syria, Libya, Yemen & west bank and Gaza leasing is still in very early stage of development. Regarding leasing volumes, the top four leasing markets are UAE, Iran, Kuwait and KSA. The dominant types of lessors in MENA are banks & bank related lessors. About 70% of lessors operating in MENA identify themselves as financial lessors. Real-estate leasing exists in UAE & 80% leases are directed towards real-estate. This may be seen as positive but this liberty has led financial leasing to replace mortgages in some cases. Comparing UAE with KSA; Ksa Ranking stands at late Nascent stage group where leasing operates in a relatively limited scale but with high growth and profit potential & with some leasing related legislation requiring improvements. It is also characterized by low competition and limited number of lessors offering no product differentiation. Kuwait and UAE fall into late emerging group which is more vibrant, larger number of lessors offering differentiated complex products, more capacity to expand overseas. “Ijarah” is the Arabic word for lease / rent and In current usage Ijarah occurs in 02 types; a) operational lease b) financial lease (Ijarah-wal-iqtina). To my understanding both conventional leasing & Ijarah serve the same purpose and involve similar transaction structures. The key differences include ownership responsibilities, interest related characteristics, allowable assets,and...
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