With the kind

cooperation of:

With the kind

sponsoring of:

AGENDA
What is FCI+: History, Membership and Union
Provider of Global Statistics on Factoring
Building Bridges in New Markets
Developing New Platforms for Growth: Expanding our
horizons
Union between FCI & IFG
Education & Communication

The Evolution of Factoring

Comparison: LCs and Open Account Trade

20.000
*Factoring figures reported by FCI
**LC figures based on a reported -2.6% drop in 2014 volume as reported
by SWIFT

in billion USD

13,073
10.000

2,818

2,772

3,044
0 1978

1986

LCs

1993

World Factoring Volume

2000

2006

Open Account

2014

FCI+: History of the Factoring Association

FCI+ established as non-profit association in Amsterdam in

1968

Formed by 6 Companies in Scandinavia, UK, & US

January 1st 2016 Union between FCI & IFG finalized

Today FCI has over 400 Members in +90 Countries

Smlartes: FCI+, ICC and SWIFT

GLOBAL
STANDARD

COMMUNICATION
PLATFORM

ARBITRATION

Standard rules for

Documentary Trade e.g. UCP
600 for L/Cs & UCPDC for
Documentary collections

Standard rules for Open

Account trade called General
Rules for International
Factoring (GRIF)

Standardized global platform

Standardized platform for

cross border open account t.f.
edifactoring.com (web
based)

Banks can resolve disputes

via arbitration through ICC

FCI members can resolve

disputes via arbitration
through ICC

Major Trends & Statistics

Global Factoring Volume 1994 - 2014

(IN EURO BILLIONS)

2.500
2.000

1.500
1.000
500
1994

1999

2004
International

Domestic

2009

2014

FCI Global Factoring Statistics

2014 by Region
All figures given in Euro Billions
Americas
9%

Australasi
Africa
a
1%
2%

2013

2014

Group rate
% change

1,354

1,463

+8%

Asia

599

615

+3%

Americas

192

207

+8%

Africa

23

21

-9%

Australasi
a

40

42

5%

2,208

2,348

+6%

Europe
Asia
26%

Europe
62%

Europe

Asia

Africa

Australasia

Amsericas

Total

Comparison to other forms of Trade Finance

Factoring, LC & Credit Insurance Comparisons with World Exports 2009-2014 (USD Millions)

2009

2010

2011

2012

2013

2014

236,607

326,724

355,379

467,860

555,879

588,185

20.0%

World factoring

1,835,489

2,190,002

2,611,371

2,814,004

3,078,643

2,817,263

8.9%

Credit insurance

1,122,608

1,257,794

1,495,227

1,538,609

1,630,925

1,709,579

8.8%

Letters or credit (LC)

2,635,125

2,700,700

2,806,965

2,854,918

3,125,957

3,044,682

2.9%

Total world exports

12,177,642

14,850,565

17,816,372

17 930 469

18,378,730

18,935,210

10.8%

Cross border factoring

CAGR

Sources:

Factoring figures reported by FCI. World Factoring includes both domestic and cross border factoring volume

Short and medium term sovereign credit insurance figures reported by the Berne Union (2014 estimated)

The LC figures from ICC/SWIFT study. Swift does not release LC issuance data, but in December 2010 its board agreed to carry out a trade snapshot,
releasing the number of MT700 commercial standby and guarantee messages, including average invoice size. All figures are estimates based on
actual data. Except the 2010 figures which are based on the number of MT700 messages issued in the year and the average invoice size for the
month of December only. 2009 figures are calculated based on the % change in the number of MT700 messages created year on year. 2014 figures
based on a reported -2.6% drop in trade volume over 2013 as reported by SWIFT.

The world merchandise export figures from the WTO

in euro billions

Europe Factoring Statistics

1.600
1.400
1.200
1.000

2010
2011

800

2012
2013

600

2014
400
200
0
United Kingdom
YOY
5-Y
CAGR

France

Germany

Italy

Spain

Other

Total Europe

13,8%

13,0%

10,9%

2,8%

-3,1%

5,3%

8,0%

12,4%

12,1%

14,6 %

8,1%

1,6%

11,9%

10,8%

* Data from FCI World Factoring Statistics 2014

in euro billions

Asia Factoring Statistics

700
600
500
2010

400

2011
2012

300

2013
2014

200
100
0
YOY
5-Y
CAGR

China

Japan

Taiwan

Australia

Hong Kong

Other

Total Asia

7,4%

-33,9%

-22,4%

5,2%

-4,5%

22,2%

2,6%

21,3%

-12,3%

-3,3%

-1,2%

16,4%

26,7%

10,4%

* Data from FCI World Factoring Statistics 2014

in euro billions

Americas Factoring Statistics

250

200

2010

150

2011
2012
2013

100

2014
50

0
YOY
5-Y
CAGR

USA

Brazil

Mexico

Chile

Colombia

Other

Total Americas

16,6%

0,7%

-9,2%

-2,5%

27,0%

19,8%

7,9%

2,0%

1,4%

15,2%

11,4%

34,0%

32,6%

7,8%

* Data from FCI World Factoring Statistics 2014

in euro billions

Biggest Gainers in 2014

10

6
2013
2014

0
Costa Rica

0%

1932%

Singapore

280%

Israel

183%

Lithuania
101%

Malta
66%

Morocco
52%

Argentina

United Arab
Emirates
52%

43%

Mauritius

Turkey
42%

29%

20%
40%
60%
80%
100%

+ % Change

2014 FCI+ Combined Two-Factor Volume

Increased 15% over 2013 (in Millions Euros)
FCI 2-Factor

Chinas export volume grew by 8%

but import increased by 94%

60.000
58.000

Singapores export grew by 150%

56.000
54.000
FCI 2-Factor

52.000
50.000

Taiwans EF was flat but IF

business doubled
HKs EF volume down 27% but IF
business grew by 56%
USAs IF business down 7% but EF
volume up 1570%

48.000
46.000

2013

2014

YTD September 2015 volume up

13%

EXPORT 2014 Countries

CODE

NAME

NET AMOUNT

CN

CHINA

10,901.50

TR

TURKEY

3,588.79

TW

TAIWAN

2,419.70

SG

SINGAPORE

2,185.32

HK

HONG KONG

1,424.15

US

UNITED STATES

1,359.25

ES

SPAIN

1,227.58

GR

GREECE

959.99

IT

ITALY

959.16

KR

KOREA REPUBLIC

667.86
89%

25,693.30

IMPORT 2014 Countries

CODE

NAME

NET AMOUNT

US

UNITED STATES

9,155.11

CN

CHINA

3,796.75

FR

FRANCE

3,053.73

DE

GERMANY

2,821.88

TW

TAIWAN

2,606.24

IT

ITALY

1,393.77

HK

HONG KONG

1,080.15

GB

UNITED KINGDOM

781.36

ES

SPAIN

742.37

SG

SINGAPORE

616.50
90%

26,047.87

FCI+: Late Payments By Importers

Year

# Days

2007

17.5

2008

19.1

2009

19.5

2010

17.0

2011

17.8

2012

17.9

2013

19.4

2014

19.2

19.5

19.4

19.1

17.8

19,2

17.9

17.5
17.0

2007 2008 2009 2010 2011 2012 2013 2014

( 2013: 485,000 payments )

Credit Approval Rate Top FCI+ Import

Countries 2014
FCI average: 40%

Country

%
79%

U.S.A

56%

France

40%

Germany

43%

China

79%

Taiwan

47%

Italy

38%

U.K.

46%

56%

46%

43%
40%

38%

11%

Disputes (as % of total number of invoices)

Year

% of # invoices

2007

9.0% of 580,000

2008

9.4% of 565,000

2009

9.3% of 447,000

2010

7.7% of 522,000

2011

7.5% of 545,000

2012

8.0% of 531,000

2013

7.5% of 556,000

2014

6.4% of 592,657

2007 2008 2009 2010 2011 2012 2013 2014

Payments Under Approval (PUA)

(in millions and as % of turnover)

Year

Amount %

2007
2008
2009
2010
2011
2012
2013
2014

12.0
16.2
31.3
6.1
5.5
12.1
8.9
3.9

0.12%
0.13%
0.32%
0.04%
0.03%
0.05%
0.03%
0.01%
2007 2008 2009 2010 2011 2012 2013 2014

Building bridges in new markets

FCI+ PARTNERSHIPS: DEVELOPMENT BANKS, ICC, AND THE WTO

FCI+ Promotion Conference

Jakarta, Indonesia March2015

FCI Promotion Conference:

Dhaka, Bangladesh April 2015

FCI+ Promotion Conference

Marrakesh, Morocco May 2015

FCI Promotion Conference

Mexico City December 2015

Future Promotion Conferences

Creation of the Regional Chapters

Latin America
Buenos Aires

Asia
Singapore

EMEA
Brussels

FCI+ Education

FCI+ Education Programme Achievements

Between 2008 and 2015
4136 students enrolled and awarded in FCI courses
1067 delegates attended 27 FCI seminars
From 83 countries worldwide

FCI+ Education Programme

Three Main Pillars

FCI+ Foundation Course for

Non-members

FCI+ Foundation Course for

Non-members
Who is it for?
For new entrants to the industry
For staff at all levels within with less than 12 months factoring experience
Assessment
An on-line multiple choice examination
The successful student will receive the FCI Bronze Certificate

Study Material
The content has been created by the FCI Education Committee, industry professionals with
in depth knowledge and experience
Study Time and Examination
The Course is designed to be completed within a period of 3 months
Language
The Course is available in English only
Assistance
During the Course FCI Education Director is available for assistance

FCI+ Education Catalogue

FCI+ Education Programme for

New Members - Tailor-made Training

In-house, tailor-made training programme

specific to your companys learning
needs

Duration 2 to 4 days

Mentoring

Webinar Getting started in FCI

FCI+ Quick Start Guide

Union Between FCI & IFG

1st IFG Annual

Meeting, Zurich,
Switzerland
September 1964

ss

1st FCI Annual

Meeting,
Stockholm,
Sweden June 1968

FCI + IFG Union Signing Ceremony

Brussels 26 October 2015

Promotion: How to learn more about FCI

FCI+ Website: www.fci.nl

FCI+ Annual Review

Overview of the factoring
industry
Introduction to FCI
Articles on Supply Chain
Finance
Global statistics on factoring
List of FCI Members in 90
Countries

FCI Horizons: News for the Open Account

Receivables Finance Industry

THANK YOU

The Role of Afreximbank in the Development

of Factoring in Africa
By Chairperson, Africa Chapter IFG, Mrs. Kanayo Awani
and
Director Trade Finance and Branches
(AFREXIMBANK)

Presentation at Factoring Promotion Conference,

Dar Es Salaam, Tanzania,
1st February 2016.

1. Afreximbank An Introduction

 Afreximbank is a Pan-African Multilateral Financial Institution

created in 1993 under the auspices of AfDB to promote and finance:
(i)

Intra-African trade; and

(ii) Extra African trade

Its broad instruments of intervention are:

(i)

Credit (Trade and Project Financing);

(ii) Risk Bearing (Guarantees and Credit Insurance); and

(iii) Trade Information and Advisory Services
The Bank is yet to introduce credit insurance services

A Pan-African Presence

Afreximbank has an authorized share

capital of US$5 billion. Shareholders
include
African
Governments,
financial institutions and private
investors and non-African investors.
There are 38 member countries spread
across Africa.
Credit Ratings
Afreximbank carries two Investment
Grade Credit Ratings, namely

BBB by Fitch and

Baa2 by Moodys
Page 53

38 Participating States across

Africa

Cairo

Abidjan

Abuja
Nairobi

Head office
Member country with office
Member country
Harar
e

Angola

Guinea

Benin
Botswana
Burkina Faso
Cameroon
Cape Verde
Chad
DRC
Egypt
Ethiopia
Gabon
Gambia

Ivory Coast
Kenya
Lesotho
Liberia
Malawi
Mali
Mauritania
Mauritius
Mozambique
Namibia
Niger

Ghana

Nigeria

Republic of
Congo
Rwanda
Senegal
Seychelles
Sierra Leone
Sudan
Tanzania
Tunisia
Uganda
Zambia
Zimbabwe
Guinea Bissau

2 . Factoring in Afreximbank

 Afreximbank is promoting Factoring as an alternative trade

finance instrument to enable African businesses, trade

competitively.

It is also to support the participation of Small and Medium

Enterprises (SMEs) as indirect exporters in supply chains.

Afreximbank is introducing Factoring to African banks and

non-bank financial institutions, and nurturing them in the
process.

To attain this goal,

Afreximbank joined the International Factors Group
(IFG) in September 2007 as a Shareholder , and is
playing an active role in the IFG, now FCI-IFG
Union,

Afreximbank is a strong supporter and facilitator of

activities of the Africa Chapter of the FCI-IFG Union.

The role of Afreximbank in the development of

Factoring in Africa :

1.

Provision of Lines of Credit for Factors,

2.

Educational Activities,

3.

Fostering the creation of facilitative infrastructure.

1. Provision of Line of Credit to Factors

Afreximbank is offering Lines of credit to Factors, providing liquidity to
them and payment risk protection.

To date, Afreximbank has approved an aggregate amount of US$ 73 Million

for Factors located in:
(i)

Mauritania (US$ 23 Million)

(ii) Senegal (US$ 35 Million)

(iii) Mauritius (US$ 5 Million)
(iv) South Africa (US$10 Million)

US$48 Million has been disbursed.

Factoring lines totalling US79 Million for institutions in Burkina Faso,
Kenya, Egypt, Botswana, Cameroon, Mauritius, South Africa and
Zimbabwe are currently being assessed .

2. Educational activities/ Raising Awareness

1.

Raising Awareness / Education

To deal with the lack or very limited knowledge of the product across
the continent:

The Bank has been facilitating the sharing of experiences

between local members in Africa and

engaging in public

relations activities designed to raise local awareness of the

benefits of factoring

The Bank has also been implementing educational activities to

develop skills in Factoring and build capacities across the
continent.

2. Education Activities/ Raising of Awareness.

In December 2010, the Bank

hosted a workshop in Cairo, Egypt

In December 2011, Afreximbank

hosted a workshop in Accra,

on the theme: factoring

operations for Beginners.

Ghana on the theme: Achieving

Success Through Factoring

Afreximbank held
a Factoring workshop in
Douala,
Cameroon
on
November 22, 2013 on the
theme:
Factoring
as
an
Alternative
Trade
Finance
Instrument in a competitive
World.

(60)

(60)

2. Education Activities/ Raising of Awareness (Contd)

A Factoring workshop targeting Regulators & Law Makers was held in

Lagos Nigeria on June 13, 2014 on the theme: Promotion and development
of factoring in Africa: Towards a Facilitative Legal and Regulatory
Environment. The Event attracted more than 60 law makers, members of
parliament, Officials from Central Banks, and others regulators from West
and Central Africa .
Mr David B. Tatge , a member of Epstein Becker Green Law Firm led the
Workshop. Erik Timmermans the then Secretary General of IFG and Peter
Brinsley supported.

2. Education Activities/ Raising of Awareness (Contd)

A Factoring workshop targeting Regulators & Law Makers was

held in Lusaka Zambia on November 7, 2014 on the theme:
Promotion and development of factoring in Africa: Towards a
Facilitative Legal and Regulatory Environment. The Event
attracted 54 law makers, members of parliament, Officials from
Central Banks, and other regulators from North, East and
Southern Africa
Mr. Nick Hough founder of, Corporate Cash flow Solutions
(CCS) South Africa led the Workshop. Mr Peter Brinsley
supported. The then Governor of the Bank of Zambia, Dr. M.
Gondwe, opened the seminar.

2. Education Activities/ Raising of Awareness (Contd)

IFG in collaboration with the Egyptian Financial
Services Institute (FSI), the Egyptian Factoring
Association (EFA) and Afreximbank organized the
First Symposium and Academy on Factoring in
Africa in Cairo, on 11-12 March 2015. 70 participants
from Egypt, Botswana, Kenya, Zambia, Zimbabwe,
Nigeria, Morocco, and Mauritius attended.

2. Education Activities/ Raising of Awareness(Contd)

On November 4, 2014 Afreximbank launched a

new Publication in Lusaka, Zambia.
The publication, Contemporary Issues in African
Trade and Trade Finance (CIAT), is part of the
Banks effort to continue to provide useful
platforms for Africans and non-Africans to
publish articles relevant to the trade and socioeconomic development of Africa.

The maiden issue of the CIAT was dedicated to

Factoring to underpin its emerging importance in
an African Trade environment that is changing
and creating opportunities for participation of
SMEs in the Continents and global supply
chains.

2. Education Activities/ Raising of Awareness (Contd)

CIAT Volume 1, Number 1 carried the following 3 papers:

1- From the periphery to Centre: Africa as the Growth
Market for Factoring . It highlights the major developments
in Factoring in Africa, the challenges and the prospects. This
paper was authored by Dr Benedict Oramah, Executive Vice
President at Afreximbank.
2- Evolution of Factoring in Egypt and implications for
Factoring Development in Africa This paper highlights the
evolution of Factoring in Egypt and draws implications for
Africa. This paper was co-authored by Dr Benedict Oramah
and Mr Richman Dzene Manager, Research and Knowledge
Management at Afreximbank.
3- An insight into recent legal and regulatory reforms of
Factoring in Africa discusses recent legal reforms in Africa in
relation to Factoring. Mr Enga Kameni the author, is Manager
at the Legal department of Afreximbank.

2. Education Activities/ Raising of Awareness (Contd)

(E-Foundation Course)
Afreximbank has purchased 30 IFG E-Learning Foundation Course

slots dedicated to Africa Chapter members.

27 staff from 9 countries have enrolled and 11 have completed while 16

are still going through the course.

(IFG Academy week & COFIT )

6 participants from Africa attended the IFG Academy Week & COFIT

in Malta in June 2015.

FCI and the Africa Chapter are currently developing a customized

COFIT programme for Africa.

3. Facilitating Infrastructure (Technical Assistance)

To alleviate the cost of setting up Factoring business platforms and
challenges around the lack of expertise in back-office and receivables
management:
The Bank is working on a co-Branded Factoring Development

product to be called AfriFactor .

AfriFactor will aim at providing advisory services for establishing

Factoring business, IT and Operations platforms to African

Financial Institutions desiring to commence or enhance their
Factoring businesses.

(67)

3. Facilitating Infrastructure (Legal environment)

Improving weak legal environment compounded by the high cost of
perfecting legal documents:

AFREXIMBANK has engaged two firms for the drafting of a

model Factoring Law that we hope to introduce in countries
where we are beginning to see Factors emerge. The first draft is
expected by end of Q1 2016.

The Bank will be organizing workshops, trainings and advocacy

campaigns targeted at Law Makers & Regulators to educate and
encourage interest in Factoring towards facilitative legal and
regulatory environments in the respective countries.

(68)

3. Partnerships.

Partnerships.

1.

Collaboration with AfDB

2.

Collaboration with FCI-IFG Union

1. Collaboration with the African Development Bank

(AfDB)
Afreximbank is working with the African Development Bank
Thematic Fund for Private Sector Assistance (FAPA) to support
Factoring companies in Africa
Grants under FAPA are used to promote innovative programs
that specifically support small - and micro - scale enterprises,
including the provision of seed money for start-ups, business
incubators, etc.
AfDB has pre-approved a grant that will be applied towards:

Technical capacity building ;

Drafting of a model law;
Advocacy (Training, Workshop, Conferences, etc.)

Final approvals are awaited.

2. Collaboration with FCI-IFG Union

The Africa Chapter has been working with the global associations to

enable African banks and Factors seize the opportunities Factoring offers
while at the same time mitigating the difficulties in the market.

This collaboration will continue with the Union.

The integration of IFGs activities into FCI in 2016 presents opportunities

for Africa Chapter members and their clients.

2. Collaboration with FCI-IFG Union (contd)

The Africa Chapter leverages on the global associations to :
Connect

Service providers with members and align with like-minded

organisations to facilitate broader industry reach. They identify factors

that will be open to entering into Joint Venture Arrangements with Africa
Chapter Members to accelerate start-up operations
Educate and provide training support in order to set standards and best

practice in the industry.

Influence and

Lobby on behalf of the industry promote and defend

the industry working closely with regulators and governments worldwide.

For instance IFG and Afreximbank embarked on a mission to Senegal and

Kenya in 2015 to engage key government officials and regulators.

2. Collaboration with FCI-IFG Union (contd)

Membership fees:

The Africa Chapter has negotiated and obtained a

substantial reduction of and concessions on membership fees for their

members and a smooth integration in the Union.
E-Learning Foundation Course: Afreximbank has purchased 30 IFG E-

Learning Foundation Course slots dedicated to Africa Chapter

members.

2. Collaboration with FCI-IFG Union (contd)

The Bank and the Africa Chapter participate in membership mobilization. 21
Members belong to the Chapter as at date.
Cim Finance Ltd

Gulf Bank

Commercial Factoring Ltd

Cofina (CTI)

Maroc Factoring

AFREXIMBANK

Hedgeworth Factors Ltd

Cairo Factors

Global Interface Trust

Egypt Factors

Locafrique S.A

Coface Services

Tunisie Factoring SA

Blend Financials

Micro Finance Zambia Ltd

Mareco Ltd

FBC Bank Ltd

Umati Capital Ltd

Harare Receivables Exchange

E-nnovative Capital

Nigerian Export-Import bank (NEXIM)

2. Collaboration with FCI-IFG Union (contd)

2. Collaboration with FCI-IFG Union (contd)

The Merger brought 11 additional members bringing the total African Chapter
members to 32 as at date.
These are:

Tamweel Mortgage Finance

QNB Al-Ahli Factoring Company
Ecobank Kenya Ltd
Standard Chartered Bank Kenya Ltd
MCB Factors Ltd
Attijari Factoring
Banque Marocaine pour le Commerce et l'Industrie
Nedbank Ltd
Sasfin Bank Ltd
Union de Factoring (Unifactor)
https://fci.nl/en/members/index

4. Conclusions

4. Conclusions

What we would like you to take away is the impetus The Africa
Chapter and Afreximbank are adding through , raising awareness,

public relations, providing credit facilities, lobbying, various

arrangements for technical assistance, etcetera.
We urge you all especially Factoring companies to join FCI-IFG
Union because of the importance of joining forces in achieving
common results. The current wave of enthusiasm in factoring offers
strong momentum to develop the product and the Africa Chapter,

Afreximbank and the Union are keen to provide support.

THANK YOU FOR YOUR

ATTENTION

Q&A

A factor is a specialized financial company, either independent or a

subsidiary/division of a bank that provides certain services to a business by
leveraging their clients accounts receivable.
A factor provides four basic services:

Lead time

Order placed
with supplier
30% deposit

Transit time

Stocking period

Sales period

45

75

135

Goods shipped
from China 70%
balance

Arrive in
Dhaka port
and stocked

Stock sold
invoice raised
CIL repaid

Pre shipment finance

Pre shipment loan

Post shipment finance

Clean Import Loan

195

Funds in Use

Receivable Finance

Rights of Creditor
Collect/Enforce

Risks of Creditor

Buyer

Credit

Modify
Sell

Performance

Obligation
To Pay Money

Contract

(i.e., sale of property

or services rendered)

Pledge

Inability to Pay

Defenses &
Disputes

Setoff

Seller

Mutual Debits/
Credits

Serving Suppliers that Sell to Wholesalers & Retailers Globally

1
Retailer places
an order with
supplier.

2
Factor evaluates
credit worthiness
of retailers.
Factor approves
the order.

Suppliers are referred to as clients

Retailers/debtors are referred to as customers

3
Supplier ships
products to
retailer.

4
Supplier invoices
retailer and assigns
invoice to Factor
and pays supplier
with reserve

5
Factor collects
funds from retailer.
Factor pays
supplier difference.

 Apparel

Computer hardware

Textiles

Consumer goods

Furniture / home furnishings

Sporting goods

Carpet

Toys

Footwear

Housewares

Hardware supplies

Service industries

Consumer electronics

90

 A Product / Service
Complete at the point of invoice
Which can be paid, even if the seller is no
longer trading
Receivables, which can be valued
Receivables, where the factor is entitled
to receive payment

Assignable

Ban on Assignment

Charges over A/R

Sale or return-Consignment

Collectable

Evidence of installation
Progress payment

What is likelihood of the prospect failing in the near future?

What should you look for? / Key Questions

a)

The Company

b)

The Management

c)

Financial Situation

d)

Products or Services

e)

What is factoring finance needed for?

Competence

Integrity

Creditworthiness

 Legal and Compliance

Financial Crime (Anti-Money Laundering / terrorist financing)
Operations

Fraud
Seller Insolvency
Buyer insolvency
Political/Country/Transfer
Regulatory
Reputation
Data Protection

Renewal /
Cancellation
(by Risk Management)

Client
Assessment &
Technical Input

Approval of
credit limit
(by Risk
Management)

The Reality of Fraud in Business

A study conducted by the Association of Certified Fraud Examiners
(ACFE) in 2014 found that the typical organization loses 5% of its annual
revenue to fraud.
Fraud is now the leading illegal money-spinner in the world, exceeding
drug running AIG SA, (Moneyweb)

What Are the Benefits to the Client?

Improve cash flow
Eliminate credit losses
Reduce operating expenses
Expand working capital financing through advances
Improve management information through online reports, such as:
- Customer payments
- Accounts Receivable Aging

- Credit Approvals
- Customer deductions/disputes

What Are the Benefits to the Factor?

Direct monitoring or the receivables portfolio by the Factor/Bank
Greater collateral control
Assignment of proceeds controlled by Factor/Bank
Wire transfer of good funds to the Factor/Bank

THANK YOU

Global Factoring Volume 1992 2014

(Mio Euro)

Domestic

International

Factoring Compared to Other Financial Products

(Mio EUR)

2008

2009

2010

2011

2012

CAGR

176.168

165.459

245.370

264.108

354.843

19.1%

1.325.111 1.283.559

1.645.524

2.015.007

2.134.247

12.7%

945.324

1.034.091

1.275.602

1.377.650

8.7%

2.735.092 2.635.125

2.700.700

2.806.965

2.863.104

1.2%

11.597.377 8.705.400 11.430.175 14.108.509 14.461.222

5.6%

International Factoring Volume

Global Factoring Volume
Credit Insurance
LC Transactions

Total Global Exportation

987.075

Country Ranking of Export Factoring

(Mio EUR)

2013

2014

12.000

10.000

8.000

6.000

4.000

2.000

0
China

Market Share 38%

Growth
7%

Turkey

12%
6%

Taiwan Singapore

8%
8%
-1% 151%

Hong
Kong

5%
-27%

USA

5%
754%

Spain

4%
13%

Italy

3%
20%

Greece

3%
-13%

Korea
Rep.

2%
293%

Turkey is 2. in the World"

Penetration of factoring per country

15,3%
11,3%
9,6%

10,2%

9,6%

7,9%
5,9%

6,1%
4,5%

3,6%

0,7%
World

Europe

Taiwan

UK

Spain

Italy

France Germany Turkey

China

USA

10.380

17.419

GDP 2014 (USD Mio)

77.365

22.630

530

2.945

1.407

2.148

2.847

3.860

806

Increase in factoring volumes due to . . .

Global economic turmoil and increasing level of commercial risks

Corporate, banking and sovereign bankruptcy risks due to massive

loss of assets
Late payment and default risks

Need for working capital

High level of funding costs and difficulties in obtaining financial tools

High level of operational expenses for A/R management

" Risk averse approach of continents, countries and

companies "

Factoring in Turkey

The history of Turkish factoring industry

First Factoring
Company Established

Factoring Association
Established

1990

1988

1995

1994

First Factoring
Transaction

BRSA Licences
Granted

Financial Instutions
Association Established

2010

2006

First Factoring
Legislation

2013

2012

BRSA
Administration

Factoring, Leasing,
Consumer Finansing
Law Approved

Factoring in Turkey 2015

5.000 Personnels

76 Companies

366 Branches

Factoring in Turkey 2015

Clients

~ 100,000

Debtors

~ 500,000

Financing
Amount

~ USD 10 Billions

(Million USD)

Turkey is growing faster than the world ...

Total factoring volume is 50 billion USD in 2014

(Mio USD)

2013

Growth
Share

1%
18%

2014

8%
82%

2%
100%

Factoring is growing in Turkey rapidly...

The Turkish Factoring Industry has been regulated and supervised by the
since 2006.
Factoring Companies

77

Factors doing Intl

Factoring

18

Members of AFI

Total Volume (2013)

Average growth rate

121

USD 49
billion
38%

(90-2013)
Consumer
Finance
8%

Financial
Leasing
10%

Factoring
81%

Factoring products in Turkey

Full factoring
Recourse factoring
Non-recourse factoring
Invoice discounting (undisclosed factoring)
Direct international factoring
Two-Factor international factoring
Purchase order management
Supply Chain Finance (mostly in domestic market for SMEs)

Challenges for growing ...

Non-Recourse Domestic Factoring (with or without credit insurance protection)

Import Factoring (with or without credit insurance coverage)
New Innovative Products like the Project with the Turkish Eximbank
Worldwide coverage (Access to 238 countries)
Supply Chain Finance
Asset Based Lending

Financial Leasing, Factoring and Financing

Companies Law
Important Points & Conditions of the Law

Factoring companies are categorised as Financial Institutions

Factoring has been defined with all aspects of its services

Principles of corporate governance have been redefined

Minimum paid-in capital should be increased from TRY 7.5 million to TRY 20 million

Association of Financial Institutions (AFI) has been established combining all

leasing, factoring and financing companies

AFI is assigned to establish a Receivables Recording Center

Data centers for banks & financial institutions

Risk Center
Under the management of the Banks Association
Data Center of Banking & non-Banking client information
Credit information, payment performance & use of credit history are available

+
Receivable Recording Center
Under the management of the Association of Financial Institutions
Data center of the receivables including e-invoices assigned to factoring
companies and banks
Payment information (postdated cheques)

=
Critical information for risk management and credit protection
Access to main market information
Intelligence shared among the financial institutions and the banking system
Early warning system

Communication for the Achievement

Industry Goal:
To positively affect Turkeys economy and export volume by providing guarantee and collection
services for open account sales as well as providing working capital mainly for SMEs.

As the representative of the Industry, the Turkish Factoring Association

Goal is:
To manage the relationship between its members and govermental and non-govermental
organizations as well as public in order to accelerate the industry development and to contribute the
legal framework within the scope of international definitions.

To achieve those goals;

Effective COMMUNICATION with all parties is the key to SUCCESS !

What is factoring?
Why factoring?
Which factoring services?
Who are factoring companies?

Importance of Connecting with all Parties

Connecting with Public through Media

Publicity of Factoring with Conferences

National Factoring Conference ;
Presentation of Turkish factoring industry to the real sector and media
Discussing industry development with the stakeholders

Deputy Prime Minister

Economy
Ministry of Finance
Turkish Treasury
BRSA
Corporates
Members
Media

Cooperation with Public Authorities

Legal Symposium with cooperation of Turkey Supreme Court
Legal framework of factoring
New Code of Commerce
New Code of Obligations
Draft Factoring Law

Panel with BRSA and Ministry of Finance

Benefits of factoring for the Turkish
economy
Factoring: financial solution for trade

Cooperation with Public Authorities

Workshop with Financial Crimes Investigation Board
(MASAK)
General Principles
Trainee of the TFAs MASAK Committe members

Workshop with BRSA

Regulation
Internal Audit
Reporting

Workshop with Turk Eximbank

New Products for Exporters

Cooperation with Public - NGov Orgs

Turkish Exporters Assembly (TIM) is the roof organization of around
55,000 export firms. It acts to insure the coordination between public and
private sector organizations, exporters and decision-makers.

Organizing Factoring Seminars for Exporters

Leading the cooperation between Turkish
Eximbank and Factoring Association
Having support of the Central Bank and GOs

The Turkish Foundation for Small and Medium Business (TOSYOV)

Small and Medium Enterprises Development Organization
(KOSGEB)
Chamber of Commerce

International Cooperation...
E-Factoring Workshop of EBRD
in Istanbul
Cooperation with other National FAs
Factoring Conferences in Taiwan
First International Factoring Conference, Istanbul with cooperation of
EBRD and FCI supported by TFA members and BCR Publishing

Connecting with Credit Information Agencies

Two structures where the credit information and use of credit
history are available;

Risk Center by the Banks Association of Turkey (BAT)

All banks and selected financial institutions by BRSA are members of

this Center.

Credit Bureau

Banks and financial institutions could be members of the Bureau

Both are under the control of BRSA

Importance of Education
Factoring Certificate Program with
cooperation of Bilgi University

Academic Instructors
Professionals from the Industry
3.5 months Training
Exams and Certificate

Various Education Programs;

Legal Issues
Legislation
Risk Assessment
International Trade
Financial Products
Financial Maths
Accounting etc.

To move on to the next level ...

One voice in front of executive, legislative and judicial authorities

Ad hence the rules and code of ethics
Synergy with other finance sectors
Cooperation with all stakeholders
Centralization of the database
Global know-how transfer
Information sharing
IT Solutions
Education
Support of the government is necessary
"To take the Receivable Finance to the next level"

Thank You

Moderator

An Organisation for legal integration that fosters economic

development

o
o

o
o

Moderator

IMPORTER
IMPORTER

IMPORTER

EXPORTER

EXPORTER

IMPORTER

1. Exporter ships goods

Factoring Agreement

EXPORT
FACTOR

IMPORT
FACTOR

Inter Factor Agreement

3. Transfers Payment

6. Payment under Approval

(90 days from the due date)

LEGEND

5. Protracted Default or
insolvency

TWO FACTOR SYSTEM

2. Makes Payment

4. Liquidates funding

Notification of Assignment

Deal Flow
Documentation Flow
PUA Flow

FCI Constitution

Govern FCI structure

Rules of FCI membership

Inter Factor Agreement

(IFA)

Agreement executed between FCI members

In accordance with FCI legal framework

General Rules for

International Factoring
(GRIF)

Regulates various aspects of International Factoring

Defines roles and responsibilities of Import and Export Factor

Edifactoring.com rules

Implementation of edifactoring.com Communication System in April 2002 made it

necessary to introduce basic rules for EDI environment
These rules have global applicability

FCI Rules of Arbitration

Procedures to be followed in the case two correspondents resort to arbitration

LIMITED FOOTPRINT
Export factors may not have wide international
presence limiting understanding of buyer
markets

LEGAL ISSUES
Export Factor will face difficulties in collecting
payments from buyers e.g. lack of
understanding of local assignment rules

COLLECTION ISSUE
Export factor will face time zone and language
issues is coordinating with the buyers

COOPERATION BETWEEN FACTORS

Export Factor must be confident of Import
Factors dealing with buyers and Import
Factor is dependant on Export Factor for
business

CREDIT STANDING OF IMPORT FACTOR

Export Factor needs to perform due
diligence and assess financial standing of
Import Factor

ANIT MONEY LAUNDERING RISK

AML risks are high in cross border trade and
close control is required in factoring to prevent
the same

Seller

One export factoring agreement covers credit risk of buyers in several countries
Communication is in local language
Collections and sales ledgering are handled by factors while seller focuses on core activities
Does need to be familiar with trade or law of buyer country
Obtains credit information on buyer

Buyer

Communication is in local language

Pay invoices locally in the most efficient and cheapest way
Can trade on Open Account terms and avoid cost of letter of credit

Export
Factor

Offer seller export factoring without setting up operation in a large number of countries
Import Factor takes credit risk on the buyer
Import Factor performs collections
Import Factor takes legal action on buyers if required

Import
Factor

Import Factor is able to generate business through Correspondent Factoring

Import Factor can increase portfolio of buyers

Moderator

Brief History

Factoring over 10 years

Developed documentation and process
Borrowed from the US, UK and India and adopted to
Kenyan law and business environment
Grew to have the largest book and transact large tickets

The Market

New concept- most of the market didnt understand -:

purchasing of documents,
no need for collateral,
no interest in banking history

A lot of one on one training on customers

understanding the process
understanding the documents and transfer of ownership
understanding the terms
understanding their ongoing obligations
Clients finance departments
were knowledgeable of the concept as finance experts but with no
hands on experience
- concerned about system changes and interruptions

The Customers

Accepting of the concept

Happy with ease and speed of transactions
Concerned about cost implication on them
Moved from traditional banking products to depend
predominantly on factoring

Legal Structure
Developed documentation in conjunction with the
authorities, legal experts and banks
Improved documentation to adapt to client need and
stay true to True Factoring
Operated strictly within the company act as opposed
to the banking act

Lessons Learnt

Customers reactions
Happy to get quick cash
Happy no collateral or banking history requirements
Quick to adopt to documentation and structure

Client reactions
Appreciated less stress from supplier needing early payments
Noticed improved delivery and performance of suppliers
Happy to transact with one non pushy supplier for multiple receivables

Key Focus to Success

ADAPTATION TO THE MARKET IS KEY

CONTENTS
1.
2.
3.
4.
5.

About E-nnovative Capital (E-Cap)

About Prime Revenue
The Buyer-Supplier Conundrum
OpenSci Suite solutions
Case Study - ArcelorMittal South Africa
Background
The Approach
Results
Lessons Learnt

Centerprise Group

Supply Chain Finance

+

Risk Management

Risk Advisory

Supply Chain Financing

Risk Training
Risk Technology
Risk Placement
Services

Working Capital
Optimization

Financial Advisory

Corporate Finance
Project Finance

Receivables Financing

Working Capital

Marketplace Lending

Financial Technology

Green Finance
SME Support

E-caps PARTNERSHIP WITH PRIMEREVENUE

CUSTOMERS

INVOICE VALUE SOLD BY

SUPPLIERS PER DAY

Europe 2012

50+ countries
Available in 20 currencies
No limitations in terms of
Transactions in

jurisdictions, currencies, suppliers,

invoices

Offices

Operation Centers

201
2

Atlanta (HQ)
Paris
London
Frankfurt
Prague
Melbourne
Hong Kong
167
Lebanon
Monterrey
Cape Town
Nairobi

Deployment Partners

167

PrimeRevenues Global Global Footprint

SME
BUYER
SME
BUYER
SME
BUYER

SME
BUYER
SME
BUYER
SME
BUYER

SME
BUYER
SME
BUYER
SME
BUYER

Goods and Services

LARGE
SUPPLIER

Receivable

Cash

Payment
Obligatio
nSale of
Receivabl
es

SMEs chosen based on priority

Sectors as agreed with Funders
and will differ from country to
country based on their economic
development strategy

Only good names prequalified by Funder

Bank
1,2,3...
Non
Bank

Funder
1,2,3...

Payment
Obligatio
n

LARGE
BUYER

Payable
s

Goods and
Services

SME
SUPPLIER
SME
SUPPLIER
SME
SUPPLIER

SME
SUPPLIER
SME
SUPPLIER

SME
SUPPLIER

SME
SUPPLIER
SME
SME
SUPPLIER
SUPPLIER

The only Buyer-centric solution that creates buyer

buy-in
Win-Win-Win for buyers, Suppliers, Funders
Reverse
Factoring

OpenSci

(Payables
Financing)

Receivables
Financing

SCiMap
SCiEnable
SCiSupplier

SCiCustomer

Reverse Factoring Solution

1

Commercial agreement reached with Suppliers

e.g. Supplier agrees to additional 2% discount for prompt settlement

Supplier
Buyer
R100
R100

Kes 47,000

Kes50,000

2 Buyer electronically transmits approved

3 Either:

supplier invoices to the platform.

i)

Supplier logs in and views approved

ii)

invoices via web and selects invoices

to be financed OR
Supplier gives standing instructions to
Auto-trade approved invoices at the
agreed discount rate

4 Funder accept Supplier offer and

5 At invoice maturity date, Buyer pays Funder

pays them next day

for funded invoices and supplier for balance

Kes 47,000

Multiple Funders

Overview - Undisclosed NRRF

Customer

4 Customer pays seller

1 Seller uploads invoice

Seller pays
maturing
invoices to the
funder, and
reconciles the
transaction

data to SciCustomer and

offers to sell the
invoices to participating
funder(s). This is a true
sales transaction/nonrecourse.

Features
Undisclosed
Non-recourse
Cash with no new debt
Reduced risk

3 Funder processes

invoices purchased
and pays the seller.

2 Funder views offers on

SciCustomer, and purchases

invoices.

Overview - Disclosed NRRF

Seller uploads invoice

data to SciCustomer and
offers to sell the
invoices to participating
funder(s). This is a true
sales transactions.

Customer

Features
Disclosed
Non-recourse
Cash with no new debt
Reduced risk

Funder
repays the
balance of
the advance
amount

Customer
pays Funder

Funder processes
invoices purchased
and pays the seller.

2 Funder views offers

on
SciCustomer, and
purchases invoices.

Due to a slowing Chinese economy

there is currently an oversupply of
steel from many large Chinese steel
manufacturers.

Over the last year excess production

from Chinese steel Mills have found
its way to markets around the world.
This has put massive downward
pressure on steel prices, see graph.

Steel manufacturers around the

world were suddenly under huge
pressure as they lost market
share to cheap Chinese imports.
Steel mills were suddenly
running at sub-optimal levels as
a result of reduced sales which
has led to downscaling and
financial losses.

This has not only been detrimental

to steel manufacturers, but also to
thousands of suppliers supplying
goods and services to the steel
manufacturers.

The whole steel supply chain was

suddenly under pressure, as can be
seen from the corresponding drop
in demand for iron ore and other
related commodities.

One of the largest Steel manufacturers in

Africa, ArcelorMittal South Africa, approached
Propell Supply chain finance to implement a
supply chain finance solution.
ArcelorMittal spends in excess of R30b on
more than 2,000 suppliers annually
Propell is the Africa Partner for PrimeRevenue
and uses the latters award winning solution
OpenSci.
Propell approached Barclays Africa who
provided a R1b funding line to inject cash into
an industry that desperately needed a cash
flow injection.
The goal was to inject much needed cash into
the steel sector at a very competitive funding
rate.

A fully automated supply chain finance

program was successfully implemented by
ArcelorMittal and Propell Supply chain finance
within 6 weeks.
Barclays Africas funding line gives suppliers
the ability to : trade their invoices at a very competitive
rate WHEN THEY NEED CASH (pegged on
the AncelorMittal credit Risk)
receive a much needed cash injection on
demand pool of liquidity
Cash flow without any new debt thereby
improved balance sheet metrics.
Reduce financing costs
Mitigate against buyer insolvency risk

AncelorMittal, on the other hand gained: Through access to a source of offbalance sheet working capital line at no
cost.
Conservation of working capital via
extended payment terms
Reduced risk in the supply chain
Reduced cost of goods sold via
negotiated terms

More than R600m of cash was injected into

the steel sector in the first 6 month of the
program.
ArecelorMittals largest suppliers were
familiarized, trained and on-boarded by
Propell in the first three months, with plans
to expand the breadth and scope of the
program further during 2016.
Currently, onwards of 40 of the largest
suppliers are participating in the program
with plans underway to onboard more.

Before the implementation of the supply

chain finance program, some of
ArecelorMittals suppliers were funding
their working capital at interest rates in
excess of 30% a year through other forms
of credit like invoice discounting.
For these suppliers, the supply chain
finance program reduced the funding rate
by more than 20% p.a. In other words the
program has not only injected much
needed cash flow without any new debt,
but also improved their profitability.
In addition to that, all suppliers, large and
small, now have a mechanism to mitigate
their credit risk by selling invoices to
Barclays Africa on a non-recourse basis.
This has helped companies save on
expensive credit insurance premiums.

Buying companies should invite as many funders as

possible to ensure they can cover their whole supply
chain and diversify their funding exposure. In this
case, only Barclays Africa was invited and the program
was created to suite the Banks risk appetite for
ArcelorMittal.
One-on-one conversations with suppliers are critical
to ensure they understand the benefits of a new
product like supply chain finance, the objectives of a
program and the workings of the platform. In this
case, the current suppliers using the platform are the
ones who have been convinced of the benefits. The
onboarding process is therefore slower than
anticipated.

A PROGRAM and implementing

A SUCCESSFUL SUPPLY CHAIN FINANCE PROGRAM

Difference between just having

1st
WOLD-CLASS,
AWARD-WINNING
TECHNOLOGY

MULTI-FUNDER,
MULTI-CCY
PLATFORM

50 Banks and funders

29 of them exclusively
use

ANALYSIS,
PROGRAM DESIGN
AND
IMPLEMENTATION

SPECIALIZATION
AND
TRAINING

ONBOARDING
TOOLS AND
SUPPORT

19
1

19

Umati Capital

Founding team
Ivan Mbowa
a)Responsible for client origination, capital raising, treasury management &
oversight of accounting and operations at Umati Capital
b)Worked with Citigroup for 8 years across a wide variety of countries
including Uganda, South Africa, Nigeria, Ghana and Kenya.
c)Education: BA Economics cum laude and BA International Relations cum
laude (Tufts University, USA)

Munyutu Waigi
a)Responsible for technology & general product development at Umati Capital
b)In conjunction with Swiss digital media giant Ringier, co-founded Kenyas
well-known Internet company, Rupu, which was acknowledged as one of
Africas top tech startups by Forbes Africa, 2012.
c)Education: BSc Information Systems, Honours (Brunel University, UK)

19

Access to credit

The problem
Insufficient and expensive credit across the agricultural
value chain caused by traditional methods of credit
underwriting which rely on collateral, guarantees and
historical bank account activities.
Innovative use of technology

The solution
Implementing data-driven lending supported by
proprietary applications used by traders, cooperatives
and processors linked to formal agricultural value
chains.

Umati Capital

The Value Proposition

Supply Chain Financing

Farmer

Supply Chain Financing

Trader or
Cooperative

Invoice Discounting

Processor*

Retailer

Umati Capital

$1.8 Billion opportunity

The agriculture credit gap (US$) in Kenya alone represents a significant
addressable market in need of new solutions

US$16.6 billion
Agriculture contribution to GDP

US$2.5 billion
Annual contribution by formal value chains comprising of
traders, cooperatives & processors
US$1.8 billion
Immediate addressable market unserved by traditional
financiers
Why this gap exists
a)Agriculture is underserved by traditional financiers
b)Traditional financiers sight high costs of serving this
segment
c)Poor credit underwriting leads to high collateral
requests
3

Umati Capital

$1.8 Billion value chain credit needs

Break down of client segments within the US$1.8 billion agriculture financing
opportunity

F
Farmer
Trader - Individual
aggregators who buy raw
material from multiple
farmers in cash and supply
processors on credit
Credit need - Require faster
payments to pay their
suppliers upon collection

C
Trader or
Cooperative
Cooperative - A group of
farmers who supply
processors under one legal
entity typically organised
as a limited liability
company
Credit need - Require
credit facilities for
members to preserve
loyalty and volumes

P
Processor
Processor - A corporate
entity that adds value to raw
material procured from
traders or cooperatives
before selling on credit to
retailers
Credit need - Require
solution for delays in
receiving retailer payments
which cause delays in making
supplier payments
4

Umati Capital

Solving the value chain problem

Technology
Web & mobile solutions capture supply chain
transaction data. This reduces fraud and increases
accuracy by replacing manual procurement systems
Technology

Data

Payments

Financing

Data
Technology based transaction data provides basis for
credit underwriting. This allows for alternative
methods of determining creditworthiness for clients
who may lack sufficient collateral
Financing
Technology enabled servicing of credit needs
throughout the supply & distribution chain. Financing
is delivered to the end client without paper based
credit requests allowing for a 24hour turnaround
Payments
Virtual (web & mobile) banking solutions enable our
clients to gain faster access to their funds
5

Umati Capital (UCAP)

Bridging the financing gap

Technology
A culmination of relevant
technology (web & mobile)
intimately links all three parties
together. The technology
allows Umati Capital to form a
clear and concise credit profile
of both supplier and buyer

Umati Capital

Value chain technology product

Mobile apps are used by trader & cooperative field staff to issue
electronic receipts to farmers for accepted produce

Umati Capital

Value chain technology product

Web apps are used by traders, cooperatives & processors to monitor collections,
analyse quality & prepare supplier payments

Umati Capital - Case Study

90% Efficiency gains

Client name
Ten Senses Africa Limited
Client value chain
Agriculture - macadamia and cashew nut processing
Client type
Processor
Client description
Fairtrade & organic certified exporter of macadamia with 22 collection routes
responsible for procuring raw nuts from 60,000 farmers
Umati Capital value add
Automated entire supply chain and provided financing
Results
a)Implemented Umati Capital technology and financing solution in February of 2015
b)Increased procurement volume by 56% by April 2015
c)Increased efficiency of collections process by 90% by April 2015
13

Umati Capital

Traction thus far

July 2014
Umati Capital secures first
institutional debt investor - Apex
Peak (Singapore)

May 2014
Umati Capital & Airtel Kenya
enter into strategic alliance
agreement

November 2014
Umati Capital enters into
partnership to finance
TechnoServe linked farmers
across Kenya
January 2015
1. Umati Capital begins pilot with Brookside Dairy
Limited covering North Rift & Western Kenya
2. Umati Capital and Diamond Trust Bank enter
into partnership to pilot a pre-paid MasterCard

September 2014
Umati Capital closes first
institutional equity investor Accion International

June 2014
Financial Sector
Deepening Trust
commences feasibility
study on Umati Capital
August 2014
Umati Capital enters into
discussions with Kenyas
largest breweries (EABL) to
finance its sorghum farmers

October 2014
Umati Capital secures
second institutional debt
investor - Advance Global
Capital (UK)

May 2015
IBM engages Umati Capital
to help build its technology
infrastructure

December 2014
1. Umati Capital receives term sheet
from third institutional debt investor
- Afrexim Bank (Egypt)
2. Umati Capital enters into
partnership with Kenya Dairy
Farmers Federation
15

Moderator

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

FACTORING AREAS OF BUSINESS RISKS

Seller risk

Detect, value and

balance risks
Procedural
risk

Debtor
risk

Prospect/Seller assessment

GENERAL RISKS FOR THE FACTOR

Creditworthiness of seller
Specific industry risks
Validity and enforceability of assignment
(e.g. existing assignments to banks
etc.)
Bad quality of sellers products or
services
Dependency on big debtors
Overdues in receivables ledger of the
prospect
Double invoicing
Multiple assignment
Order finance
Deferred issue of credit notes

RISK LADDER

WHAT IS FRAUD IN FACTORING?

Fraud in Factoring

Is an ever present risk for the receivables finance industry!

It is important to note, that in many cases, this risk could be identified before a
factoring facility is offered to a prospective seller!

Key Vulnerability
Factors finance against
copies of invoices
shipping documents

electronic messages with details of invoices

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

CLIENT RISK SELLER SELECTION

Check the Viability of the
Seller:

Prospect assessment

a)The Company
b)The Management

Client risk

c)The Financial Situation

d)The Products or Services of
the Seller

e)The Delivery process /

procedures
f)The Debtor & Receivables
portfolio

Financial risk

Portfolio risk

Product risk

SELLER RISK KNOW YOUR CLIENT (KYC)

Identify personal details of your sellers shareholders

Existing charges over the assets of the prospective
client
Insolvent companies with which the prospective client
has previously been involved
Associated companies in which the prospective seller
has an interest
Bankruptcy orders
Any special conditions to the creditors
Details of mortgage registered against the property in
which the seller resides
Tax liabilities with the authorities
Bank information from other banks he might deal with

SELLER RISK CHECK PREMISES

Management of the seller you should meet
personally
Managing director / Owner
Accountant / Controller
Tax accountant / Tax advisor
Representative of cooperating bank / broker
Collect personal impressions of:
Machinery, employees, real estate, vehicle fleet,
etc.
Organisation and operating procedures
Production plants, check production process
Stock filled up or low
Necessary investments
Owned or leased operational assets
Be able to compare with other sellers premises
Check staff adequacy (production & admin)

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

FINANCIAL RISK DOCUMENTS

Audited Balance Sheets of last 3 years
- equity ratio
- receivables, liabilities
- turnover, cost of goods
-cash-flow, profitability (EBIT, EBITDA)
Order situation and validation of planning figures/budget
Current monthly statements/year-to-date analysis
Receivables ledger of debtors/creditors incl. ageing balance
Bank account statements
Fulfillment of tax/social insurance liabilities
Trade credit insurance documents
Potential legal costs with respect to lawsuits

PRODUCT RISKS - CHARACTERISTICS

Market development in sellers industry
Manufacturing process
Quality standards
Time frames
Country of origin (traders, re-sellers)
Quality characteristics to be accepted in buyers country
Raw materials
Level of dependency
Alternative sources
Dispute risk
Technological Issues
New vs. established technology
Level of automation
Investments

CONTRACTUAL RISK DOCUMENTS

Price adjustments

Provisional price on the (initial) invoice (sample)

Final price to be confirmed based on specific criteria

Quite common in Commodities trading

Bonus agreements

Discount based on purchased volumes

Participation in promotional campaigns

Usually by credit note issued either once per year (year

end) or periodically (monthly/quarterly)

PROCEDURAL RISK - DOCUMENTATION

Statement of monthly credit notes / cancellations
Up to date contracts with debtors
Credit insurance contract & conditions / bad debts of last 2 years
Example of a commercial transaction: Order, delivery note, invoice,
proof of delivery, advice of settlement, general terms/conditions
Purchase orders
Complete, detailed, clearly defined
Invoice issuance
According to local tax & legal regulations
Shipping documents
Ability to confirm with forwarder that goods are shipped
Quantitative data must match with invoices data.
Invoiced party address / delivery address
Goods may be shipped to a logistics center
Consignment stock

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

RISK MITIGATION => FIELD AUDITING

Purpose

Why

Control & trust

Update the internal rating

Risk assessment
Personal contact
Additional (personal) information
React on changes
Local competence
Build up effective barriers

assessment of unsecured

receivables

actual eligibility of receivables

Adjust factoring agreement

conditions/ pricing/ funding

Anticipate crisis
prevent illegal practices

RISK MITIGATION FIELD AUDITING

Factoring agreement
Is it determined, where the field audit is conducted?
Contractual limitations included?

Entering the office

Inspection of the plant / offices
Auditable documents (to be predefined)
Present persons
Managing director / owner
Accountant / controller
Tax accountant
Representative of bank / broker

POSSIBLE RISK MITIGATION MEASURES

Detect problems on the earliest possible stage and find
solutions
Additional covenants
Increase of securities (e.g. personal guarantee of shareholder /
managing director)
Type of contract (e.g. disclosed, undisclosed, inhouse)
Adaptation of contract terms (e.g. pricing, threshold, funding
amount)
Definition of internal triggers (e.g. number of credit notes / indirect
payments)
Frequency of financial checks
Frequency of field audits
Exclusion of problematic debtors (e.g. counterclaims,
creditworthiness)
Exclusion of countries (e.g. because no risk coverage is possible)

FIELD AUDITING / FINDINGS

TWO IMPORTANT REQUIREMENTS FOR ANYBODY
IN THE FACTORING BUSINESS
CURIOSITY
If you have the slightest worry about a seller, do
not ask him to come and see you.

GO AND SEE HIM

COMMON SENSE
If there is something that does not make sense to
you;

ASK THE CLIENT FOR EXPLANATION

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

CREDIT LIMIT DECISION PROCESS

Renewal /
Cancellation
(by Risk management and
Credit insurance))

Debtor assessment &

Technical input
(by Limit processing department)

Approval of
credit limit
(by Risk management and
Credit insurance)

CHARACTERISTICS OF A CREDIT LIMIT

Revolving credit limit which is the base of the funding of receivables

Basis of Non Recourse Factoring agreement

Protection against bad debts to 100%
In case of debtors inability to pay, Factor is obliged to pay the full
purchase price (90-120 days after due date) to the seller
Credit limit covers existing and valid receivables (shipments, deliveries
made / services performed)
Principle of succession if receivables are partly approved
Conformity with terms of payment
Cancellations are valid upon receipt of such notice (delivery which has
taken place before notice of cancellation is covered)

DEBTOR RISK COVERAGE WITHOUT CI

Direct debtor risk coverage
Assessment of clients debtors before signing a factoring contract
Regular assessment of debtors after signing a factoring contract

Assessment based on different information sources

Credit information agencies (D&B, Creditreform, Brgel, etc.)
Bank information / Reports / Identification numbers (Sirene, VAT etc.)

Balance sheet / monthly Profit & Loss statement

Rating / Grading (by credit insurance or rating agency like Moodys, S&P,
etc.) / Press / Online publications
Receivables ledger of factoring client
Internal information sources (payment history, dunning status, etc.)
Credit limit decision
Credit limit with expiry date or until further notice / Rejection of credit limit

INDIRECT RISK COVERAGE (RE-INSURED)

Via credit insurance
1-contract model (debtor risk coverage by credit insurance contract of
Factor)
2-contract model (1 factoring contract and 1 separated credit insurance
contract of client)
Factor accepts own credit insurance contract of his client

All rights of the credit insurance (CI) are assigned to the Factor (CI has to agree)

Obligations of the CI contract can be fulfilled either by seller or Factor

Factor normally covers the self retention (of 10-20%) in order to provide true sale
Currency risks to be considered

Through 2-Factor agreement via FCI

Risk assessment by Import Factor

100% Risk protection / Payment under approval 90 days after due date

COMPARISON CI / FACTORING
Credit insurance

Factoring

Risk coverage

between 70 - 80 %

100%

Guarantee
payment

proof of insolvency or
protracted default
180 days

90 days after due date

of invoice

unlimited

Insurance max.

20-30 times of payed

premium

Costs

between 0,1 - 0,4% of

turnover

between 0,5 - 1,5% of

turnover

AGENDA
Factoring Areas of Risk
Seller Risk / KYC
Risk Monitoring
Risk Mitigation
Debtor Risk Coverage
Debtor Risk Control

CANCELLATION OF DEBTOR CREDIT LIMIT

1) Earlier cancellation, if for example
Negative payment behaviour
Increasing overdues

Request for installments

Deterioration of grading
Bad financial information

Negative development in certain industries

2) After information of CI
3) Credit Insurance covers debtor risks, but if bad debt ratios exceed
70-80% of paid premium
Increase of insurance premium, if claims are exceeding defined ratios
Downgrade of debtors and cancellation of credit limits
Tightening of insurance terms (i.e.higher first loss, franchise etc.)

SPECIAL RISKS
Debtor is also a seller
Increased risk profile
High solvency requirements

Reverse Factoring
100% debtor concentration
High solvency requirements

Accumulation of credit limit amounts

Undisclosed Factoring / NNF
No direct contact to debtor

Risk of fraud
High solvency requirements

THE END

Thank You for Your Attention!

Roberto Weckop
FCI Marketing Committee/
Deutsche Factoring Bank GmbH

Email: roberto.weckop@deutsche-factoring.de

GEOGRAPHIES
APAC

MIDDLE EAST

AFRICA

EUROPE

OFFICES

India(4),SGP,HK

Dubai

Kenya, Nigeria*

London

COUNTRY
COVERAGE

India, Indonesia,
Singapore,
Hong Kong,
Australia,
Bangladesh,
Pakistan,
Malaysia, Sri Lanka,
China

UAE , Kuwait, Oman,

Bahrain, Qatar,
Saudi Arabia
Arab Multilaterals
(Global mandate)

15 countries with 4 hubs

NIGERIA West Africa
KENYA East Africa
South Africa Southern Africa
Egypt North Africa

LENDERS

100+

110+

106+

50+

FINANCING
TYPE

Structured Trade &

Commodity Finance,
Revolvers,
Working Capital &
Credit Insurance
Backed solutions
Debt Capital Markets

Working Capital, LC/TR

Structured Trade &
Commodity Finance
Project Finance
Non Recourse Financing
Off-balance sheet Limits
Islamic Finance

Working Capital
Project Finance,
Trade Finance
Debt Capital Markets
Structured Trade &
Commodity Finance

Structured Trade &

Commodity Finance,
Credit Insurance backed
Solutions
Debt Capital Markets

United Kingdom
Western Europe
CEE Region, Russia,

*Opening Shortly

For Corporates and For Lenders

For Corporates

For Banks & FIs

Capacity Building

Corporate Debt

Structured Trade &

Commodity Finance

Conventional Debt

Structured Trade
Finance

VC / Private Equity

Factoring

SME IPO/ IPO/ Pre IPO

Strategic Solutions &

Mgmt. Consultancy

Commodity Finance

FCCB / QIPs

Credit Rating
Advisory*

Non-Conventional
Debt
Debt Capital Markets

Equity **

Ancillary Services
Bank Risk Confirmation

Credit Default
Insurance
* Credit Rating advisory services through our associate companies
** India Centric Advisory only

Insurance Advisory
Portfolio Credit Default
Insurance
Credit Reference / Appraisals

Factoring Advisory

Lines of Credit (selectively)

Global Structured Trade Finance Power House with Recognised Origination, Structuring and Risk Management
expertise

To Promote Factoring Business in India

India Factoring and Finance Solutions Pvt. Ltd (IFFSPL)
Blend Financial Services Limited

Promoted & Spearheaded setting up JV

Played a role of a Marketing Partner
Catalyzed New Product Development

IFFSPL

Punjab National Bank, India*

One of the
Largest
Factoring
Company in
India with
Factoring assets
of ~USD 200 Mn

Forayed into New Business of Factoring

Acted as a Strategic Investor
Gave its Brand to the JV company
Provided Lines of Credit
FIM Bank, Malta

Focused on developing Markets

Aiming at expanding its foot print in India.
Provides technical support and assistance

Facilitating trade
through factoring
and related
financial services
in trade Finance.

Banca IFIS, Italy

Brings Global Expertise of Factoring

Innovates New Factoring & Leasing Products

BLEND has catalyzed the setting up of factoring company in India to facilitate trade promotion by bringing together
FIM Bank, Malta,
Banca IFIS, Italy
and
PNB, India
* Exited the JV recently

15 years of extensive experience in factoring has provided in depth understanding of all challenges of the
business, business process & product
In depth understanding of
Corporate Financial needs
and issues
Expert team with complete
knowledge of factoring
business/ product and
business processes
Instrumental in setting up
India Factoring
Developed co-branded
factoring Advisory Product
called AFRIFACTOR with
African Exim bank, Cairo
Advised East Africa based
Jamii Bora Bank for
launching its Factoring
Business

Resource
management
ability to
assist raising
funds through
innovative
structures

Understanding
of Corporate
Financial needs

Technical
Knowhow &
product
capability

With the experience and expertise gained in India

and Africa, Blend can play pivotal role in
development of factoring in Developing and
Emerging Markets.

Proven Track
record

Wide structuring ability for each transaction. Have developed unique

industry specific product.

Knowledge of
challenges of
product and
business and
its mitigate

Key Elements - Successful Factoring Setup

AT THE START

Elements of successful startup

Through understanding of economic condition/environment

of the country

a. Local business specs

a.

Regulatory environment, development of financial

system, legal system support.

Understanding of existing factoring setup/environment

a.
b.

Analysis of existing factors and their business

Liaise with the association, if any present in the country

Choosing the right team to prepare the plan which is

profitable for the investors/stakeholders

b. Legal requirements for the business

c.

Human Resource Management

d. Financing/Fund Raising options

e. Suitable IT platform/solution

What we offer (FACTPaas)

FACTPaas (Factoring Process As A Service)

Technology

Consulting

Outsourcing

Consulting Factoring Start Ups

Blend would establish Factoring Business Platform on turnkey basis
Setting up the business process
Establishment of policy guidelines and standard
operating procdures
IT Factoring Management System
Finance

Credit & risk management process.

Operations (Collection & Debt Management)
Sales & Marketing

Training of staff
Implementation of pre sanction process

Periodic Audits and system enhacements

Handover and assisting in resource mobilisation

structures

Simulations & Trial Runs

System control audits

How does it work?

Feasibility Study /
Business Plan

Feasibility study is
undertaken to
understand the
Infrastructure
present in Country
of Project to
undertake
Factoring

Business Plan is
prepared duly
approved by the
Lender Client

Manuals

Business Process is
set up and modules
are identified. Sales,
Credit Risk, Finance &
Operations etc..
Manuals are made to
provide guidance for
each department for
undertaking the
business
Blends Best in Class
appraisal & rating
system is
implemented

Standard
Operations
Procedures

Standard operating
procedure for each
department is
documented along
with standard
template and
reports for smooth
business
functioning

Advise on
Software

Best in class
software with ~50
reports, MIS and
Risk Management
is negotiated with
the Vendor
lowering the overall
cost

Training

Training is provided
to the factoring team
of Bank/lender on
Marketing, Credit
Appraisals, Risk
Management, Frauds
& Prevention and
Exit Strategies
Simulations & Trial
Runs
Handover
Periodic Audits

The assignment is on Turnkey basis and the time lines for setting up the Factoring Platform
at Banks/Lenders offices takes 4 Months time to be fully operational

SOPs and Process Flow

Sales

Credit & Risk

Describes and structure the different phases of

process of selling services, assisting marketing
activity and its decision making process.

Provides guidance on the risk appetite and risk

policies.

Finance

Contains the various processes of Finance and

eligibility and authorization matrix.
Functions, duties and responsibilities of the finance
department within the company.

Operations

Details the various processes of operations with

organization.
Functions, duties and responsibilities of the
department within the company along with work
flow for operations activity

Operations
Sales
Prospect

Front office

Appraisals
/Sanction

Client sign
on

Payments

Collection

MIS

Back office

Outsourcing Capex to Opex

Time to market reduced drastically

Cost effective since minimum capex required
Experienced factoring team backing the operations
Client manages only the front end
Allows the factor to grow as per the business need
Allows to scale up business at faster pace
Expert team for Risk Management
Business driven by MIS and analytics

Risk
Management

Process client on boarding

Skill set required are different

Prospect

Outsourced to get
access to experts in
factoring appraisal
and deal structuring.

Survey

Debtor
underwriting;
ledgering and
operations risk
assessment and
KYC

Financial
Spread
Spreading the
financial
statements for
better
understanding
of growth
trends and
financial
stability of the
business of
client/seller

Risk Rating

Rating the
client/seller and
debtor/buyer
on risk
parameters

Appraisal
Overall
appraisal of the
client on
performance on
both
operational and
financial
parameters to
allowing the
Factor to take
informed
decision

Access to experts in Factoring processes with in depth understanding &

knowledge of risk associated with the business and transaction

Pre Sanction Process

A well defined and co ordinated
process facilitates informed decision
and enable risk mitigation

Client/Prospect
Visits
Preliminary
Analysis

- Performance risk
- Debtor/vendor track record

Indication of
Terms

Field Survey
- Adherence to risk parameters as per
the policies
- Product parameters

Verifications

Debtor/Vendor Verification
Client plant visit
Credit history verification
Reference checks Bank & Trade

Internal Risk
Rating
Credit
Assessment
Approval

- Recommendation on overall performance and

credit risk
- Recommendation on term & condition
- Recommendation on contract
- Documentation requirement Transaction &
Legal

Operations Back Office Support

Client sign on

Payments

Collection/
Allocation

Client and debtor

on boarding and
file and database
management

Fund/limit
availability

Dunning

Limit setup

Approvals

Fraud monitoring

Payment follow
up

MIS

Reports
Standard and
customized
report
Insurance reports

FIU Management
Trade Document
checking and
handling

Fund release
Advise and
reports to clients
Customer queries

Counterparty
setup and liaison
o
o
o
o
o

Payment
allocation/
appropriation

Portfolio reports
Overdue reports

Non Factored
cash

Cash forecast

Reassignments

Funding forecast

Risk
Management

Random verification
of invoices
Reconciliation of
debt with debtors

Growth in no of
invoices
Payment history
invoice replacement,
credit notes, direct
payments etc.
Concentration risk
and portfolio rating

Access to expert team delivering services across the value chain.

Supported by analytics providing periodic reporting and analysis of entire operations.
Resources export in various products.
Improved lead time providing seamless services to the client.
Opex model allowing factor to concentrate in marketing and sales activities to scale up the business .

IT Factoring Management System

IT system enables, integrated management of various assets involved in
the factoring business.

Why it is required?

Factor processes and input massive amount of complex data everyday.

Fast and reliable info necessary for business to identify trends
Proper tools are always required to take informed and effective decision
Increased productivity and optimal resource utilization

It cannot do
Replace human judgment
Provide appropriate solution to the problem
Replace active account management

System Integration
Integration of Factoring Management System with other systems
(inside and Across organization)
Bank

Accounting
System

Factoring
Management
System

Other
External
Systems/
Organization

Regulatory
systems

Operations Process Flow

Details the function, duties and responsibility of Operations
(work flow of operations activity in accordance with the Factoring Management system)

Client Setup

- Overdue/Dunning
- NPA Management
- Legal recourse

Debt Management

Dispute resolution

- Facility note
- Facility Setup
- Amendments if any
Debtor Setup

Dunning
Adjustments & Reassignments

- Collection follow up
- Debtor follow up
- Vendor follow up

- Debtor Setup
- Debtor limit
- Debtor contact

Client Contact

NPA

Processing of
Documents

Disaster recovery

- Required documents
- Document handling
- Document checking
- Checking procedure

Controls

Cheques handling
Receipt
Appropriation
Non Factored cash
Cheque returns

Receipt &
Appropriation

- Client
-Entry
- Authorization
- Advise
- Correspondent

Document checklist

Payout

Disbursement

- Fund availability
- Limit availability
- Exchange rates
- Authorization

Technology
Products
Supported

l Factoring Bill Discount l Reverse Factoring l Order Finance

l Import Factoring l Debt Management

Configuration

Multi Branch Setup l Multi Currency l Multi Fee Structure

Portfolio
Management

Powerful Engine l Parameterized view

Limits

l
l

Credit, Funding, Insurance and Facility Limits at counter party level

Individual client / Debtor limits

Accounting

Full Account support to facilitate automatic / batch interface

Technology

Factorin SaaS (Software-as-a-Service) is designed as a complete solution which

bundles business functionality, a growing library of versatile components,
frameworks and tools and professional solution integration service.

Reports

Statutory, advance and MIS Reports; income statement, insurance turnover,

receivable ledger, daily FIU, statements for client, debtor, counter party (CP),
portfolio analysis, client concentration, audit reports, potential recourse reports,
client geographical analysis, client age analysis, client exposure.

Messaging
Support

EDIFACT message interface.

Minacs is a leading business solutions company that partners with global corporations in the manufacturing, retail, telecom, technology,
media and entertainment, banking, insurance, healthcare and public sectors. Minacs leverage years of process, domain and technology
expertise to deliver superior business value to clients with their seamless Customer Lifecycle, Marketing, Finance and Accounting,
Procurement and IT solutions and services. 20,300 Minacs experts across 3 continents and 36 centers spanning Canada, Germany,
Hungary, India, Jamaica, Philippines, the UK and USA power our solutions through a global delivery model that helps their clients
enhance revenues, profitability and customer service. Minacs is certified for SEIs (Software Engineering Institute) Capability
Maturity
256
Model Integration (CMMi) DEV V1.3 Level 3.

70% saving on effort, increased productivity and reduced cost

Core
Domestic / Export Factoring

Bill Discounting
(Disclosed/Confidential)

Debt Management

Reverse Factoring

Import Factoring

Order Financing or Preshipment Loan

Dealer / Vendor Financing

(SCF)

Forward Contracts

Limits Management

Portal
Request for Payment

Transaction Enquiry

Status / Availability
Enquiry

MIS Reports

Request for Invoice

Booking

Payment Enquiry

Dashboard Reporting

Batch Invoice
Upload

Backof
Office
80%
the Factoring volume in India runs on Factorin

Blend Financial Services Ltd

4th Floor,C Wing, Pramukh Plaza, Cardinal Gracious Road, Chakala, Andheri(East),
Mumbai 400099, India
T +91 (22) 67770022 |M +91 9819711502 | F +91 (22) 67770019
E subhashish@blendfinance.com | W www.blendfinance.com

With the kind

cooperation of:

With the kind

sponsoring of: