diagnostic short term finance constraints in turkey · 2016-03-03 · total world factoring total...
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Short term finance constraints in
Turkey Diagnostic
Short term finance instruments and methods
Banks have long provided trade finance and working capital services
processing information, managing documents, providing financing, and
facilitating payments related to trade transactions through various
products:
Traditional short term
finance instruments
• Commercial Letters of Credit
• Standby Letters of Credit
• Bank guarantees
• Collections
Short term financing
methods
• Trade loan (import and export)
• L/C financing (A loan covering post delivery cycle)
• Purchase order financing
Other working capital
solution
• Factoring
• Invoice discounting
• Forfaiting
Open account
• Purchase Order Commitment to Pay
• Pre-Shipment Finance
• Warehouse Finance
• Post-Shipment Finance
• Payables Finance
• Receivables Purchase
THE ICC TRADE REGISTER
THE ICC TRADE REGISTER
Short term finance is the critical lubricant for trade and the real
economy (80%+ of trade flows require financing at least at one point
along the chain):
Short term finance overview
2008–2011 Trade Finance market revenues by
product (in USD billion)
NII
Trade services
Structured Trade
Adv. Elec. & Other
Standbys and Guarantees
FX
Trade Flows
USD 16 trillion 12 trillion 15 trillion 18 trillion
6 8 9
10
8.8
9.2 8.2
11.8 5.2
5.8 6.4
7.9
2
2 2
1
1
1 1
1
2
2 2
2
2008 2009 2010 2011
27
25
28
34
Still the geographical split of world merchandise
exports is uneven
World trade is an upward trend and Turkey needs to
leverage on it
a Figures for 2012 and 2013 are pro jections.
Source: WTO Secretariat.
50
100
150
200
250
300
350
400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
P
2013
P
Export volume
Forecast
Trend (1990-2008)
Source: WTO
• World trade is on the recovery and export countries are leading the
way, in particular the ones in Asia (China, South Korea, Bangladesh,
Hong Kong, Singapore, India)
• World merchandise exports are estimated at about USD 26.5 trillion (or
USD18.5 trillion for manufacturing)
• Global trade is expected to reach USD 48.5 trillion by 2025
a Figures for 2012 and 2013 are projections.
Source: WTO Secretariat.
-15
-10
-5
0
5
10
15
2005 2006 2007 2008 2009 2010 2011 2012P 2013P
Exports
GDP
Average export growth 1991-2011 = 5.4%
Average GDP growth 1991-2011 = 2.8%
Growth in volume of world merchandise
trade and GDP (2005-13, Annual % change)
Volume of world merchandise exports
1990-2013 (Index, 1990=100)
Trade will continue to grow!
Global trade is expected to reach USD 48.5 trillion by 2025
Payment systems in international trade, 2001–2010 (indexed)
0
20
40
60
80
100
120
140
160
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Letters of Credit Open Account
Source: ICC Survey 2013
A two-speed trading system? Developing countries % of global imports
Mixed messages
Source: ICC Survey 2013
South-South trade 1990 = about 10% of global trade
2020 = > 30% of global trade
2022 = 50% of developing country exports
Mixed messages
Source: ICC Survey 2013
Export growth in developing regions
Mixed messages
Source: ICC Survey 2013
Issue of documentary credits (Swift MT 700)
Mixed messages
Source: ICC Survey 2013
Average value of L/C issued
Mixed messages
Source: ICC Survey 2013
A return to normal trading conditions?
Trade measures
Documents refused on
1st presentation Court injunctions Fraud allegations
Trade finance gaps
Still, a major gap persists in trade finance
• ADB study identifying the trade finance gap in Asia (and globally)
• Proposing a method for calculating impacts on production and jobs
Trade finance gaps
Total gap: 55–68 percent of formal SMEs (13.8–20.4 million) in
developing economies are unserved or underserved
Total value gap in credit financing of formal SMEs is $1.5–1.8 trillion,
including high-income OECD countries
Source: ICC Survey 2013
Total world factoring
Total international cross-border factoring
4-Year Growth = 18.5%
4-Year Growth = 29%
Increase in OA and away from L/Cs for many countries • In many countries, invoice discounting is the way to get working capital
(against L/Cs and loans)
• Shift from from overdraft/unsecured credit facilities to receivables-based
factoring/invoice discounting
Factoring
Source: ICC Survey 2013
ST Export Credit Insurance
• Turnover of insured ST exports increased by 2.3% in 2012 to over 1.5T
• Demand for risk mitigation products is still high
• Total short-term claims paid by Berne Union members increased more
than expected in 2012 Claims paid by Berne Union members to exporters to indemnify them for
defaults on trade receivables rose by 58% to USD 2.1 billion in 2012.
This remained below the peak level of claims paid during the financial
crisis, when claims paid rose 114% year on year, but indicates continuing
volatile market conditions for credit insurers.
Credit insurance
Source: ICC Survey 2013
MLT Export Credit Insurance
• Medium and long-term Cover by Berne Union ECAs
• New business remained high at USD 181 billion of insured
transactions.
Credit insurance
Source: ICC Survey 2013
MDB’s trade facilitation programs
MDBs
Compounding effects of regulations
Source:World Bank, Ecobank Research
Intra-regional trade (USD billion)
Intra-regional trade & opportunities
• Africa’s share of world trade is just
3.1%, a proportion that has been
stable for years
• Intra-regional trade totalled
US$133bn in 2011, just 11.8% of
Africa’s trade with world
• Although it has grown from just
4% in 1960, it is still below peak of
15% in 1997
Source: ITC (2011)
Top 20 African traders
Source: Ecobank Research; Afreximbank
• Few countries have well developed intra-regional
trade links
In USD
billion,
2011
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