“I like working with Bai-Tushum because it offers different services. For me, to lease a truck instead of buying one was the best solution at the moment, as it substantially reduced the risks associated with a purchase and registration of the vehicle,” says Gulanhaus Amatov.
Bai-Tushum, one of the leading microfinance institutions in the Kyrgyz Republic, started its leasing operations in December 2007. Despite some issues in the Tax Code related to leasing, Bai-Tushum was eager to test out its new product, and worked closely with the IFC Azerbaijan-Central Asia Leasing Facility Project (ACALF) to identify a pilot leasing transaction for the company.
With support from the project, Bai-Tushum offered its first lease transaction to Gulanhaus Amatov, an entrepreneur who transported goods between Osh and China. Gulanhaus had already repaid his first loan from Bai-Tushum to purchase a new truck. After he learned about leasing and how it differed from a bank loan, the entrepreneur decided to take a lease on his second truck instead of a loan.
For Bai-Tushum, this first leasing project raised many questions in accounting and recording of the transaction. Issues related to VAT, especially, created the most problems for the company. It made leasing more expensive for the client than a bank loan. To attract a client to the new product, the company was compelled to reduce its margin on leasing. Bai-Tushum’s management concluded in early 2008 that leasing wouldn’t become popular under such conditions.
In 2008, the ACALF project helped the Kyrgyz government to amend the Tax Code, which substantially strengthened the leasing-enabling environment in the republic. “The new law is a significant step forward. We can now offer our clients leasing products in addition to bank loans, providing entrepreneurs with choices that best fit their business needs,” said Gulnara Shamshieva, General Manager of Bai-Tushum.
As of December 2008, there were 45 leasing transactions recorded in Bai-Tushum’s leasing portfolio, totaling $315,000. “It became possible with IFC’s assistance in providing training and helping set leasing policies and procedures,” said Shamshieva. Bai-Tushum is the first microfinance institution providing leasing services in the Kyrgyz Republic.