Baltiskii Leasing

completed

The company''s primary business is writing financial leases for its customers, Russian corporates primarily located in the north-west region. Assets leased include light and heavy industrial equipment, office equipment, vehicles, printing equipment, and trade equipment for retail outlets. Over 90% of this equipment is imported from vendors of international repute. Clients identify equipment vendors and define the exact type and specifications of equipment required. Baltiskii''s role is that of a financing intermediary, with clients carrying the risks associated with choice of equipment, delivery, and installation. Property insurance is mandatory in most cases, with Baltiskii retaining close control over choice of insurer and type of policy acquired. The proposed investment will finance individual leases as they are generated. It is expected that the company would pledge assets purchased under each lease to IFC and assign future payment streams from lease agreements to IFC. This arrangement is consistent with existing procedures whereby all of Baltiskii''s leases are pledged to its financing banks. The total amount of the credit line would be limited by the company''s equity and indebtedness. Purpose of projectIFC''s financial sector strategy in Russia is to create new financial intermediaries and strengthen existing financial institutions. Leasing is one of the most effective ways to provide financing to small and medium enterprises (SMEs); this is especially true in Russia, which is characterized by a low capitalized banking sector. This project will strengthen an existing Russian financial institution and help direct much needed longer term finance, through leasing, to local Russian SMEs.Development impactThe project will achieve a high development impact for the following reasons:· IFC''s financing will be used by Russian SMEs to upgrade capital assets and therefore improve their competitiveness;· The term of IFC financing will allow Baltiskii to write longer-term leases, thereby serving to change the generally short-term nature of the leasing market in Russia;· By introducing an Operational & Policy Manual, IFC will upgrade Baltiskii’s internal processes and improve management control over the Company. IFC roleAn important part of the development of this investment has been the involvement of the IFC technical assistance program in Russia (the Private Enterprise Partnership). Since 1997, IFC has been actively involved in the development of the Russian leasing industry. With funding from the Canadian government, IFC’s Leasing Development Group (LDG) has been conducting an extensive technical assistance project. The project currently consists of 11 full-time leasing specialists (lawyers, financial analysts, training and PR specialists). This team provides training, consulting services and informational support to Russian and foreign leasing companies, equipment vendors, existing and potential lessees, government and business development agencies. The LDG has also been actively involved in improving the legislative environment for leasing through direct advisory work with the State Duma of the Russian Federation and with various ministries in the executive branch. The LDG has created a website www.ifc.org/russianleasing which contains a comprehensive description of the project''s activities. The proposed project provides one of the best examples of where IFC can capitalize on its technical assistance efforts to promote investment opportunities. The proposed line of credit would provide Baltiskii with an alternative, more economical, and longer term source of financing, thereby allowing the company to grow and expand its operations.