Leasing in the Middle East and Africa

Leasing in the Middle East and Africa

By Hans Geijsen, Invigors EMEA LLP

While leasing can trace its origins to the Middle East, in Mesopotamia and Persia, it is nonetheless very difficult to perceive strong and significant activity in equipment leasing in the Middle East and North Africa (MENA) region. This is despite the well-established concept of Ijarah governing leasing contracts, with its foundation in Shari’a law.

We review a number of barriers which appear to have held back the development of an active market for leasing in the region below.

  • Firstly, there is the uncertainty created by the acute geopolitical situation in various countries across the region. In the Middle East, the recent directional change in the hitherto stable Iran Agreement; the deepening Israel-Palestine conflict; the Yemeni war; disputes amongst Gulf countries; and issues with the Saudi ARAMCO IPO have all combined to create an environment of great uncertainty across the region. Business leaders therefore understandably have difficulty in determining the future trends for their companies and strategic planning becomes more of a tactical exercise. Both factors are acting as a brake on investment and leading to a reluctance to take financial risks.
  • Secondly, the region suffers from a lack of transparency and a degree of mutual distrust. Very few companies and players are convinced of the importance and value of sharing information, or are willing to make their financial statement public, share their business strategies with customers, funding sources and, even less with competitors. Consequently, business has missed out on the opportunity to create and benefit from an infrastructure of mutually-shared business intelligence and Big Data which is enjoyed and drives growth in developed western markets. With such constraints, funders find it very difficult to appraise risk, or to take any decisions based on hard, quantitative evidence.
  • Thirdly, oil remains the main source of revenues for the majority of MENA countries and this has prevented governments and businesses from planning their capital expenditures around the development of alternative income sources and diversifying their economies. This is changing in certain countries, such as the UAE and to some extent in Saudi Arabia, but this dependency remains a drag on economic diversification and continues to generate geopolitical tensions.

There is little data available on the leasing marketing in the MENA region such as that provided by the leasing associations of Europe and North America, and the Alta LAR 100 for South America. Leasing companies do not publish their new business volumes, portfolio size or contract numbers. However, from our research, we estimate that the size of the leasing market, in terms of new business volumes, is around US$20bn but has remained static and shown little growth in recent years.

Across the MENA region there is still a strong cultural preference for equipment ownership, rather than paying for usage. Where equipment is financed, finance leases or ‘loans’ rather than operating leases are predominant, even for trucks and cars. The newer finance products such as Managed Services or pay-per-use contracts which are prevalent in developed markets are virtually unknown.

Unlike other regions, there is a different distribution of business in terms of asset classes as many leasing companies hold a large part of their portfolio in real estate. Also, commercial vehicles – particularly trucks – form a major proportion of portfolios, while ‘softer assets’ such as IT, software, office and medical equipment are very difficult to finance through leasing, especially operating leases, as few lessors are willing to take any residual risk.

Differing legal terms and conditions applying to business between different jurisdictions in countries across the region complicates leasing on a pan-regional basis. In some countries, new regulatory frameworks are being developed which will require organisations to be licensed to offer certain financial products like leasing. We have already indicated the lack of reliable credit information although this is something that is being addressed by banks, leasing companies and credit bureaux in some countries.

From a lessor’s perspective, the market across the MENA region is highly fragmented with many small local players of which few operate in more than one country. This mitigates against manufacturers and suppliers trying to set up vendor finance programmes in the region as local agreements must be negotiated with specific terms and conditions each time with different funders at an individual country level. Once the agreements are in place, the customer support can be a further issue. Many finance companies face problems with lack of funding and high levels of arrears on their portfolios. They also may not have the asset knowledge required to provide the services required to manufacturers and suppliers.

Despite this picture of a cautious market, leasing companies in the region remain optimistic. In the latest MENA business confidence survey conducted by Invigors, three quarters of leasing companies surveyed anticipate growth in their business for the remainder of 2018 thereby continuing the positive trend seen at the beginning of the year. However, there were general expectations that bad debt would increase, while only a minority anticipated an improvement in margins.

One characteristic of the leasing market that Invigors has observed is the tendency for leasing companies to target the same part of the market with the same type of customers. Whilst competition is healthy, this “follow the leader”, opportunistic, tactical rather than strategic approach results in margin compression and leaves some potentially profitable sectors underserved.

Given the successful leadership and standard sharing role that organisations like Leaseurope, ELFA and other national leasing associations have played elsewhere, there is clearly the opportunity to create a similar representative organisation in the MENA region. If a leasing organisation were established by the market participants and managed by their elected representatives, then some structure, self-regulation and an independent platform could be introduced into the market which would help build confidence amongst customers, manufacturers and regulators.

In no way should this impede or prevent market competition, but a leasing organisation could help create a common understanding and facilitate the establishment of general rules such as treating customers fairly; establishing codes of practice of generally accepted business guidelines; and, enabling the development of fraud prevention mechanisms. It could also collate and publish market data such as business volumes and default/arrears trends as well as acting as a single unifying voice to regulators and government.

Due to the increased internationalisation of the markets and the entrance of more global players in the MENA region, the need for a formal association of market players is becoming more pressing. As elsewhere, such bodies can instil confidence in external players and potential funders which will base their decision-making on the impartial advice and objective market data that a fully supported leasing association can provide. An organisation where all or at least the majority of players are gathered and sharing the same knowledge and information is a powerful advocate for investment.

The MENA leasing association could also represent its members in official meetings with the external governmental agencies such as the Ministry of Finance, Central Bank and other important entities.

The performance of individual members benefits because of the efficiency and effectiveness of being part of an organisation on whose market intelligence, reporting and opinions it can rely. A common platform for the collection and dissemination of information enables individual company decisions to no longer need to be based purely on “best guess” or “gut feel” but grounded on objective, reliable market intelligence. This allows members to improve the professionalism and management of their businesses and strengthen competitive capabilities.

A leasing association does not remove the need for each member company to have its own vision and strategy. However, the information, market intelligence and guidance on legal structures and best practice that are critical to success in other developed markets can be accessed by all to the benefit of every member, its customers and the industry overall.



In addition to Europe, Invigors operates across the MENA region including United Arab Emirates, Kingdom of Saudi Arabia, Sultanate of Oman, Lebanon, Egypt, Jordan, Morocco, Tunisia, Kuwait, Kingdom of Bahrain, Palestine Territories and Qatar.

Invigors EMEA has conducted a regular, bi-annual Business Confidence Survey since mid-2017 for all professionals directly and indirectly involved in the equipment leasing industry across the MENA region.



Hans Geijsen MBA, Senior Consultant

Invigors EMEA LLP

Antrobus House

18 College Street


Hants GU31 4AD, UK

Tel: +31 6 83 55 29 86