What role has leasing historically played?

ABROUS: Leasing is the forgotten segment of the domestic financing services industry. It represents less than 1% of the total banking system, while in Tunisia or Morocco this represents up to 20%. The segment is still emerging, with only two private players leading the market, and four subsidiaries of public banks. Awareness about leasing among small and medium-sized enterprises (SMEs) is very low, although it offers competitive advantages, allowing firms to grow their business more than they could with traditional financing solutions.

This hinders general economic growth, especially when the government is pushing for the emergence of a subcontracting industrial ecosystem while simultaneously stepping away from hydrocarbon-only exports. With lower oil prices, the economy needs dynamic SMEs, and leasing is the perfect way to boost this trend.

What are the advantages of lease purchase agreements in comparison to other financing means?

ABROUS: It is easier to borrow from a leasing company than a bank. Businesses do not always have huge financing needs: many clients of leasing institutions are small entities with capital of €1000 or less. This lack of critical mass is unappealing for conventional banks, which, at a time of draining liquidities, primarily focus on low-risk projects. Another obstacle is that a large share of SME financing comes from the informal sector.

Leasing companies offer a huge comparative advantage in terms of their speed in dealing with requests. With a bank, this can take up to six months, while most dynamic leasing companies are able to give an answer to the client in four days. Sharia compliance has also been a major reason for its emergence in the country.

Which sectors have the greatest potential as a source of income for leasing companies?

ABROUS: The health sector is currently doing very well in Algeria. Doctors, pharmacists, private clinics and medical professionals are all looking to acquire new equipment through financing. The real estate segment is also solid, as it enjoys a low risk factor: the value of immovable property in Algeria has been increasing by an average of 20% every year. Health and real estate will be key supporters of general economic growth. The automotive segment, which used to be an important source of income for leasing firms before the import-quota-induced slowdown, should also return to growth in 2018, thanks to major manufacturers such as Renault, Hyundai and Volkswagen entering the country.

Largely driven by a will to diversify, SMEs seek to export and import products using financing from leasing companies, on the condition that they can rely on a complete offer of tailor-made services, including insurance, transit and Customs process clearance.

How could the stock market come to play a bigger role in the economy in general?

ABROUS: The stock exchange emerged to meet demand from the business community, and thus it should be driven by the private sector. One could boost the market by attracting investment funds. These offer two main advantages: they inject liquidity into the economy and they bring management processes that improve general transparency of the financing system. The domestic development of these funds is a prerequisite for the emergence of a dynamic stock market.

We must also open up the stock exchange to foreign investments, which are more likely to boost trade than public companies. This could also happen through a secondary market to enhance levels of capitalisation. In almost every other country, when someone has liquid assets, their bank offers to place it either on the stock market or in sovereign bonds. That trend needs to develop in the business culture here. Furthermore, opening a few well-performing public companies to private investors would provide a positive example for others to follow and potentially create a virtuous circle.