factoring promotion conference tanzania 2016.pdf

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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

0

10.000

20.000

in b

illio

n U

SD

LCs World Factoring Volume Open Account

13,073

2,818

3,044

1978 1986 1993 2000 2006 2014

2,772

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

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

FCI+: History of the Factoring Association

Smlartes: FCI+, ICC and SWIFT

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 platform for cross border open account t.f.

edifactoring.com (web based)Standardized global platform

GLOBAL

STANDARD

COMMUNICATION

PLATFORM

FCI members can resolve disputes via arbitration

through ICC

Banks can resolve disputes via arbitration through ICC

ARBITRATION

Major Trends & Statistics

Global Factoring Volume 1994 - 2014

-

500

1.000

1.500

2.000

2.500

1994 1999 2004 2009 2014

(IN EURO BILLIONS)

International Domestic

FCI Global Factoring Statistics

2014 by Region

Europe62%

Asia26%

Americas9%

Africa1%

Australasia

2%

Europe Asia Amsericas

Africa Australasia

All figures given in Euro Billions

2013 2014Group rate % change

Europe 1,354 1,463 +8%

Asia 599 615 +3%

Americas 192 207 +8%

Africa 23 21 -9%

Australasia

40 42 5%

Total 2,208 2,348 +6%

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 CAGR

Cross border factoring 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%

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

Europe Factoring Statistics

0

200

400

600

800

1.000

1.200

1.400

1.600

United Kingdom France Germany Italy Spain Other Total Europe

in e

uro

bill

ion

s

2010

2011

2012

2013

2014

YOY 13,8% 13,0% 10,9% 2,8% -3,1% 5,3% 8,0%

5-Y CAGR

12,4% 12,1% 14,6 % 8,1% 1,6% 11,9% 10,8%

* Data from FCI World Factoring Statistics 2014

0100

200

300

400

500

600

700

China Japan Taiwan Australia Hong Kong Other Total Asia

in e

uro

bill

ion

s

2010

2011

2012

2013

2014

YOY 7,4% -33,9% -22,4% 5,2% -4,5% 22,2% 2,6%

5-Y CAGR

21,3% -12,3% -3,3% -1,2% 16,4% 26,7% 10,4%


Asia Factoring Statistics

050

100

150

200

250

USA Brazil Mexico Chile Colombia Other Total Americas

in e

uro

bill

ion

s

2010

2011

2012

2013

2014

YOY 16,6% 0,7% -9,2% -2,5% 27,0% 19,8% 7,9%

5-Y CAGR

2,0% 1,4% 15,2% 11,4% 34,0% 32,6% 7,8%


Americas Factoring Statistics

Biggest Gainers in 2014

0

2

4

6

8

10

Costa Rica Singapore Israel Lithuania Malta Morocco Argentina United ArabEmirates

Mauritius Turkey

in e

uro

bill

ion

s

2013

2014

1932% 280% 183% 101% 66% 52% 52% 43% 42% 29%0%

20%

40%

60%

80%

100%

+ % Change

2014 FCI+ Combined Two-Factor Volume

Increased 15% over 2013 (in Millions Euros)

46.000

48.000

50.000

52.000

54.000

56.000

58.000

60.000

2013 2014

FCI 2-Factor

FCI 2-Factor

Chinas export volume grew by 8% but import increased by 94%

Singapores export grew by 150%

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%

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

17.5

19.1

19.5

17.0

17.8 17.9

19.419,2

2007 2008 2009 2010 2011 2012 2013 2014

( 2013: 485,000 payments )

Credit Approval Rate Top FCI+ Import

Countries 2014

Country %

U.S.A 56%

France 40%

Germany 43%

China 79%

Taiwan 47%

Italy 38%

U.K. 46%

56%

40%

43%

79%

11%

38%

46%

FCI average: 40%

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 12.0 0.12%

2008 16.2 0.13%

2009 31.3 0.32%

2010 6.1 0.04%

2011 5.5 0.03%

2012 12.1 0.05%

2013 8.9 0.03%

2014 3.9 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 AmericaBuenos Aires

AsiaSingapore

EMEABrussels

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

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+ Foundation Course for

Non-members

FCI+ Education Catalogue

In-house, tailor-made training programmespecific to your companys learning

needs

Duration 2 to 4 days

FCI+ Education Programme for

New Members - Tailor-made Training

Mentoring

Webinar Getting started in FCI

FCI+ Quick Start Guide

Union Between FCI & IFG

ss

1st

FCI Annual

Meeting,

Stockholm,

Sweden June 1968

1st

IFG Annual

Meeting, Zurich,

Switzerland

September 1964

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

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.

The Role of Afreximbank in the Development of Factoring in Africa

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

Member country with office

Member country

Head office

38 Participating States across

Africa

Cairo

Abidjan

Harar

e

Nairobi

Abuja

Afreximbank has an authorized sharecapital of US$5 billion. Shareholdersinclude African Governments,financial institutions and privateinvestors and non-African investors.There are 38 member countries spreadacross Africa.

Credit Ratings

Afreximbank carries two InvestmentGrade Credit Ratings, namely

BBB by Fitch and

Baa2 by Moodys

Angola Guinea Republic of

Congo

Benin Ivory Coast Rwanda

Botswana Kenya Senegal

Burkina Faso Lesotho Seychelles

Cameroon Liberia Sierra Leone

Cape Verde Malawi Sudan

Chad Mali Tanzania

DRC Mauritania Tunisia

Egypt Mauritius Uganda

Ethiopia Mozambique Zambia

Gabon Namibia Zimbabwe

Gambia Niger Guinea Bissau

Ghana Nigeria

2 . Factoring in Afreximbank

Afreximbank is promoting Factoring as an alternative tradefinance instrument to enable African businesses, tradecompetitively.

It is also to support the participation of Small and MediumEnterprises (SMEs) as indirect exporters in supply chains.

Afreximbank is introducing Factoring to African banks andnon-bank financial institutions, and nurturing them in theprocess.

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

Afreximbank is a strong supporter and facilitator ofactivities of the Africa Chapter of the FCI-IFG Union.

To attain this goal,

The role of Afreximbank in the development ofFactoring 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.

(60)

2. Education Activities/ Raising of Awareness.

(60)

In December 2010, the Bank

hosted a workshop in Cairo, Egypt

on the theme: factoring

operations for Beginners.

1 In December 2011, Afreximbank

hosted a workshop in Accra,

Ghana on the theme: Achieving

Success Through Factoring

2

Afreximbank helda Factoring workshop inDouala, Cameroon onNovember 22, 2013 on thetheme: Factoring as anAlternative Trade FinanceInstrument in a competitiveWorld.

3

2. Education Activities/ Raising of Awareness (Contd)

A Factoring workshop targeting Regulators & Law Makers was held inLagos Nigeria on June 13, 2014 on the theme: Promotion and developmentof factoring in Africa: Towards a Facilitative Legal and RegulatoryEnvironment. The Event attracted more than 60 law makers, members ofparliament, Officials from Central Banks, and others regulators from Westand Central Africa .Mr David B. Tatge , a member of Epstein Becker Green Law Firm led theWorkshop. Erik Timmermans the then Secretary General of IFG and PeterBrinsley supported.

4


A Factoring workshop targeting Regulators & Law Makers washeld in Lusaka Zambia on November 7, 2014 on the theme:Promotion and development of factoring in Africa: Towards aFacilitative Legal and Regulatory Environment. The Eventattracted 54 law makers, members of parliament, Officials fromCentral Banks, and other regulators from North, East andSouthern AfricaMr. Nick Hough founder of, Corporate Cash flow Solutions(CCS) South Africa led the Workshop. Mr Peter Brinsleysupported. The then Governor of the Bank of Zambia, Dr. M.Gondwe, opened the seminar.

5


IFG in collaboration with the Egyptian FinancialServices Institute (FSI), the Egyptian FactoringAssociation (EFA) and Afreximbank organized theFirst Symposium and Academy on Factoring inAfrica in Cairo, on 11-12 March 2015. 70 participantsfrom Egypt, Botswana, Kenya, Zambia, Zimbabwe,Nigeria, Morocco, and Mauritius attended.

6

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 socio-

economic 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.

7


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 developmentsin Factoring in Africa, the challenges and the prospects. Thispaper was authored by Dr Benedict Oramah, Executive VicePresident at Afreximbank.

2- Evolution of Factoring in Egypt and implications forFactoring Development in Africa This paper highlights theevolution of Factoring in Egypt and draws implications forAfrica. This paper was co-authored by Dr Benedict Oramahand Mr Richman Dzene Manager, Research and KnowledgeManagement at Afreximbank.

3- An insight into recent legal and regulatory reforms ofFactoring in Africa discusses recent legal reforms in Africa inrelation to Factoring. Mr Enga Kameni the author, is Managerat the Legal department of Afreximbank.

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.


(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 )

(67)

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.

(68)

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.

3. Partnerships.

1. Collaboration with AfDB

2. Collaboration with FCI-IFG Union

Partnerships.

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.

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

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.

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


Cim Finance Ltd

Commercial Factoring Ltd

Maroc Factoring

Hedgeworth Factors Ltd

Global Interface Trust

Locafrique S.A

Tunisie Factoring SA

Micro Finance Zambia Ltd

FBC Bank Ltd

Harare Receivables Exchange

Nigerian Export-Import bank (NEXIM)

Gulf Bank

Cofina (CTI)

AFREXIMBANK

Cairo Factors

Egypt Factors

Coface Services

Blend Financials

Mareco Ltd

Umati Capital Ltd

E-nnovative Capital

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

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

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:

Order placed with supplier 30% deposit

Goods shipped from China 70%

balance

Arrive in Dhaka port and stocked

Stock sold invoice raised

CIL repaid

Funds in Use

Lead time Transit time Stocking period Sales period

19575 135450

Pre shipment financePre shipment loan Receivable Finance

Post shipment finance Clean Import Loan

Buyer

Performance(i.e., sale of property

or services rendered)

Obligation

To Pay Money

Seller

Collect/Enforce

Modify

Sell

Pledge

Credit Inability to Pay

Contract Defenses &

Disputes

Setoff Mutual Debits/

Credits

Rights of Creditor Risks of Creditor

Retailer places an order with

supplier.

Factor collects funds from retailer.

Factor pays supplier difference.

Supplier invoices retailer and assigns

invoice to Factor and pays supplier

with reserve

Supplier ships products to

retailer.

Factor evaluates credit worthiness

of retailers.

Factor approvesthe order.

1 2 3 4 5

Suppliers are referred to as clients Retailers/debtors are referred to as customers

Serving Suppliers that Sell to Wholesalers & Retailers Globally

90

Apparel

Textiles

Furniture / home furnishings

Carpet

Footwear

Hardware supplies

Consumer electronics

Computer hardware

Consumer goods

Sporting goods

Toys

Housewares

Service industries

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

Ban on Assignment

Charges over A/RAssignable

Sale or return-Consignment

Evidence of installation

Progress payment

Collectable

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 IntegrityCredit-

worthiness

Legal and Compliance

Financial Crime (Anti-Money Laundering / terrorist financing)

Operations

Fraud

Seller Insolvency

Buyer insolvency

Political/Country/Transfer

Regulatory

Reputation

Data Protection

Client Assessment &Technical Input

Approval of credit limit

(by Risk Management)

Renewal / Cancellation

(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)

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 - Credit Approvals- Accounts Receivable Aging - Customer deductions/disputes

What Are the Benefits to the Client?

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

What Are the Benefits to the Factor?

THANK YOU

(Mio Euro)

Global Factoring Volume 1992 2014

Domestic International

Factoring Compared to Other Financial Products

(Mio EUR) 2008 2009 2010 2011 2012 CAGR

International Factoring Volume 176.168 165.459 245.370 264.108 354.843 19.1%

Global Factoring Volume 1.325.111 1.283.559 1.645.524 2.015.007 2.134.247 12.7%

Credit Insurance 987.075 945.324 1.034.091 1.275.602 1.377.650 8.7%

LC Transactions 2.735.092 2.635.125 2.700.700 2.806.965 2.863.104 1.2%

Total Global Exportation 11.597.377 8.705.400 11.430.175 14.108.509 14.461.222 5.6%

Turkey is 2. in the World"

0

2.000

4.000

6.000

8.000

10.000

12.000

China Turkey Taiwan Singapore HongKong

USA Spain Italy Greece KoreaRep.

(Mio EUR)

Country Ranking of Export Factoring

2013 2014

Market Share 38% 12% 8% 8% 5% 5% 4% 3% 3% 2%

Growth 7% 6% -1% 151% -27% 754% 13% 20% -13% 293%

Penetration of factoring per country

3,6%

7,9%

11,3%

15,3%

9,6% 10,2% 9,6%

5,9% 6,1%

4,5%

0,7%

GDP 2014 (USD Mio)

77.365 22.630 530 2.945 1.407 2.148 2.847 3.860 806 10.380 17.419

World Europe Taiwan UK Spain Italy France Germany Turkey China USA

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

1988

First Factoring

Transaction

1990

First Factoring

Company Established

1994

First Factoring

Legislation

1995

Factoring Association

Established

2006

BRSA

Administration

2010

BRSA Licences

Granted

2012

Factoring, Leasing,

Consumer Finansing

Law Approved

2013

Financial Instutions

Association Established

The history of Turkish factoring industry

Factoring in Turkey 2015

76 Companies 366 Branches

5.000 Personnels

Factoring in Turkey 2015

~ 100,000Clients

~ 500,000Debtors

~ USD 10 BillionsFinancing

Amount

Turkey is growing faster than the world ...

(Millio

n U

SD

)

(Mio USD)

Growth 1% 8% 2%

Share 18% 82% 100%

2013 2014

Total factoring volume is 50 billion USD in 2014

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 121

Total Volume (2013) USD 49 billion

Average growth rate (90-2013)

38%

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)

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

Challenges for growing ...

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 allleasing, 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 collectionservices 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-govermentalorganizations 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 Turkisheconomy

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

EXPORTER

IMPORTER

IMPORTER

IMPORTER

6. Payment under Approval

(90 days from the due date)

EXPORTER

IMPORT

FACTOR

IMPORTER

EXPORT

FACTOR

1. Exporter ships goods 2. M

akes P

aym

ent

3. Transfers Payment

4. Liq

uid

ate

s f

undin

g

Fa

cto

rin

g A

gre

em

en

t

Inter Factor Agreement

5. P

rotra

cte

d D

efa

ult o

r

insolv

ency

Notification of Assignment

Deal Flow

Documentation Flow

PUA Flow

LEGEND

TWO FACTOR SYSTEM

Govern FCI structure

Rules of FCI membershipFCI Constitution

Agreement executed between FCI members

In accordance with FCI legal framework Inter Factor Agreement (IFA)

Regulates various aspects of International Factoring

Defines roles and responsibilities of Import and Export Factor

General Rules for International Factoring (GRIF)

Implementation of edifactoring.com Communication System in April 2002 made it necessary to introduce basic rules for EDI environment

These rules have global applicabilityEdifactoring.com rules

Procedures to be followed in the case two correspondents resort to arbitrationFCI Rules of 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

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

Seller

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 creditBuyer

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

Export Factor

Import Factor is able to generate business through Correspondent Factoring

Import Factor can increase portfolio of buyersImport Factor

Moderator

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

Brief History

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 Market

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

The Customers

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

Legal Structure

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

Lessons Learnt

ADAPTATION TO THE MARKET IS KEY

Key Focus to Success

CONTENTS

1. About E-nnovative Capital (E-Cap)

2. About Prime Revenue

3. The Buyer-Supplier Conundrum

4. OpenSci Suite solutions

5. Case Study - ArcelorMittal South Africa

Background

The Approach

Results

Lessons Learnt

Risk Advisory

Risk Training

Risk Technology

Risk Placement Services

Supply Chain Financing

Working Capital Optimization

Receivables Financing

Marketplace Lending

Financial Technology

Corporate Finance

Project Finance

Working Capital

Green Finance

SME Support

Risk ManagementSupply Chain Finance

+Financial Advisory

Centerprise Group

Transactions in 50+ countries

Available in 20 currencies

No limitations in terms of jurisdictions, currencies, suppliers,

invoices

CUSTOMERS INVOICE VALUE SOLD BY SUPPLIERS PER DAY

Europe 2012 2012

E-caps PARTNERSHIP WITH PRIMEREVENUE

167

Atlanta (HQ)

Paris

London

Frankfurt

Prague

Melbourne

Hong Kong

Lebanon

Monterrey

Cape Town

Nairobi

Operation CentersOffices Deployment Partners

167

PrimeRevenues Global Global Footprint

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

SME SUPPLIER

Non Bank

Funder

1,2,3...

Bank

1,2,3...

LARGE BUYER

SME BUYER

SME BUYER

SME BUYER

SME BUYER

SME BUYER

SME BUYER

SME BUYER

SME BUYER

SME BUYER

LARGE SUPPLIER

Goods and Services

Receivable

Sale

of

Receiv

abl

es Cash

Payable

s

Paym

ent

Ob

ligatio

n

Goods and

Services

Paym

ent

Ob

ligatio

n

Only good names pre-

qualified by Funder

SMEs chosen based on priority Sectors as agreed with Funders and will differ from country to

country based on their economic

development strategy

OpenSci

Reverse

Factoring

(Payables

Financing)

SCiMap

SCiEnable

SCiSupplier

Receivables

FinancingSCiCustomer

The only Buyer-centric solution that creates buyer

buy-in

Win-Win-Win for buyers, Suppliers, Funders

Reverse Factoring Solution

Either:

i) Supplier logs in and views approved invoices via web and selects invoices

to be financed OR

ii) Supplier gives standing instructions to

Auto-trade approved invoices at the

agreed discount rate

Buyer electronically transmits approved supplier invoices to the platform.

At invoice maturity date, Buyer pays Funderfor funded invoices and supplier for balance

2

5

3

Funder accept Supplier offer and pays them next day

4

Multiple Funders

1

R100R100Kes50,000

Kes 47,000

Commercial agreement reached with Supplierse.g. Supplier agrees to additional 2% discount for prompt settlement

Supplier

Buyer

Kes 47,000

4 Customer pays seller

1 Seller uploads invoice

data to SciCustomer and

offers to sell the

invoices to participating

funder(s). This is a true

sales transaction/non-

recourse.

2 Funder views offers on

SciCustomer, and purchases

invoices.

5

Seller pays

maturing

invoices to the

funder, and

reconciles the

transaction

3 Funder processes

invoices purchased

and pays the seller.

Customer

Features

Undisclosed Non-recourse Cash with no new debt Reduced risk

Overview - Undisclosed NRRF

1 Seller uploads invoice

data to SciCustomer and

offers to sell the

invoices to participating

funder(s). This is a true

sales transactions.

2 Funder views offers

on

SciCustomer, and

purchases invoices.

5

Funder

repays the

balance of

the advance

amount

3 Funder processes

invoices purchased

and pays the seller.

Customer

4

Customer

pays Funder

Overview - Disclosed NRRF

Features

Disclosed Non-recourse Cash with no new debt Reduced risk

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 annuallyPropell 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 costsMitigate against buyer insolvency risk

AncelorMittal, on the other hand gained: -Through access to a source of off-

balance 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.

Difference between just having A PROGRAM and implementing A SUCCESSFUL SUPPLY CHAIN FINANCE PROGRAM

ANALYSIS, PROGRAM DESIGN

AND IMPLEMENTATION

SPECIALIZATION AND

TRAINING

ONBOARDINGTOOLS AND

SUPPORT

MULTI-FUNDER, MULTI-CCY PLATFORM

191

WOLD-CLASS, AWARD-WINNING

TECHNOLOGY

1st

50 Banks and funders29 of them exclusively

use

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)

Umati Capital

Founding team

19

1Insufficient 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.

Access to credit

The problem

Innovative use of technology

The solutionImplementing data-driven lending supported by

proprietary applications used by traders, cooperatives

and processors linked to formal agricultural value

chains.

2F

Farmer

C

Trader or

Cooperative

P

Processor*

Supply Chain Financing Supply Chain Financing

R

Retailer

Invoice Discounting

Umati Capital

The Value Proposition

3The agriculture credit gap (US$) in Kenya alone represents a significant

addressable market in need of new solutions

Umati Capital

$1.8 Billion opportunity

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

4Umati Capital

$1.8 Billion value chain credit needs

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

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

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

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

opportunity

F

Farmer

C P

Trader or

Cooperative

Processor

5Umati 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

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

Data

FinancingPayments

Technology

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

6

Mobile apps are used by trader & cooperative field staff to issue

electronic receipts to farmers for accepted produce

8

Umati Capital

Value chain technology product

9Web apps are used by traders, cooperatives & processors to monitor collections,

analyse quality & prepare supplier payments

Umati Capital

Value chain technology product

13

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

Umati Capital - Case Study

90% Efficiency gains

May 2014

Umati Capital & Airtel Kenya

enter into strategic alliance

agreement

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

September 2014

Umati Capital closes first

institutional equity investor -

Accion International

October 2014

Umati Capital secures

second institutional debt

investor - Advance Global

Capital (UK)

November 2014

Umati Capital enters into

partnership to finance

TechnoServe linked farmers

across Kenya

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

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

Umati Capital

Traction thus far

July 2014

Umati Capital secures first

institutional debt investor - Apex

Peak (Singapore)

May 2015

IBM engages Umati Capital

to help build its technology

infrastructure

15

Moderator

AGENDA

Factoring Areas of Risk

Seller Risk / KYC

Risk Mitigation

Debtor Risk Coverage

Debtor Risk Control

Risk Monitoring

Detect, value andbalance risks

Seller risk

Proceduralrisk

Debtorrisk

FACTORING AREAS OF BUSINESS RISKS

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


Seller Risk / KYC

Risk Mitigation


Debtor Risk Control

Risk Monitoring

CLIENT RISK SELLER SELECTION

Financial risk

Client risk

Portfolio risk Product risk

Prospect assessmentCheck the Viability of the Seller:

a)The Company

b)The Management

c)The Financial Situation

d)The Products or Services of the Seller

e)The Delivery process / procedures

f)The Debtor & Receivables portfolio

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


Seller Risk / KYC

Risk Mitigation


Debtor Risk Control

Risk Monitoring

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


Seller Risk / KYC

Risk Mitigation


Debtor Risk Control

Risk Monitoring

RISK MITIGATION => FIELD AUDITING

Purpose

Control & trust

Risk assessment

Personal contact

Additional (personal) information

React on changes

Local competence

Build up effective barriers

Why

Update the internal rating

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 ANYBODYIN THE FACTORING BUSINESS

CURIOSITYIf you have the slightest worry about a seller, donot ask him to come and see you.

GO AND SEE HIM

COMMON SENSEIf there is something that does not make sense toyou;

ASK THE CLIENT FOR EXPLANATION

AGENDA


Seller Risk / KYC

Risk Mitigation


Debtor Risk Control

Risk Monitoring

CREDIT LIMIT DECISION PROCESS

Debtor assessment &Technical input

(by Limit processing department)

Approval ofcredit limit

(by Risk management andCredit insurance)

Renewal /Cancellation

(by Risk management andCredit 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)

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

DEBTOR RISK COVERAGE WITHOUT CI

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

INDIRECT RISK COVERAGE (RE-INSURED)

COMPARISON CI / FACTORING

Credit insurance

between 70 - 80 %

proof of insolvency or protracted default 180 days

20-30 times of payed premium

between 0,1 - 0,4% of turnover

Risk coverage

Guarantee payment

Insurance max.

Costs

Factoring

100%

90 days after due date of invoice

unlimited

between 0,5 - 1,5% of turnover

AGENDA


Seller Risk / KYC

Risk Mitigation


Debtor Risk Control

Risk Monitoring

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.)

CANCELLATION OF DEBTOR CREDIT LIMIT

Debtor is also a seller

Increased risk profile

High solvency requirements

Reverse Factoring

100% debtor concentration


Accumulation of credit limit amounts

Undisclosed Factoring / NNF

No direct contact to debtor

Risk of fraud


SPECIAL RISKS

THE END

Thank You for Your Attention!

Roberto Weckop

FCI Marketing Committee/

Deutsche Factoring Bank GmbH

Email: [email protected]

MIDDLE EAST AFRICA EUROPE

India(4),SGP,HK Dubai Kenya, Nigeria* London

India, Indonesia, Singapore, Hong Kong, Australia,

Bangladesh, Pakistan,

Malaysia, Sri Lanka, China

UAE , Kuwait, Oman, Bahrain, Qatar,

Saudi ArabiaArab Multilaterals (Global mandate)

15 countries with 4 hubsNIGERIA West Africa

KENYA East AfricaSouth Africa Southern Africa

Egypt North Africa

United KingdomWestern Europe

CEE Region, Russia,

100+ 110+ 106+ 50+

Structured Trade & Commodity Finance,

Revolvers,Working Capital & Credit Insurance Backed solutions

Debt Capital Markets

Working Capital, LC/TRStructured Trade & Commodity Finance

Project FinanceNon Recourse FinancingOff-balance sheet Limits

Islamic Finance

Working CapitalProject Finance,

Trade FinanceDebt Capital MarketsStructured Trade & Commodity Finance

Structured Trade & Commodity Finance,

Credit Insurance backed Solutions


GEOGRAPHIES

OFFICES

COUNTRY COVERAGE

LENDERS

FINANCING TYPE

APAC

*Opening Shortly

Corporate Debt

For Corporates

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

Conventional Debt

Non-Conventional Debt

Structured Trade & Commodity Finance

Equity ** Ancillary Services

Capacity Building

Structured Trade Finance

Insurance Advisory

Strategic Solutions & Mgmt. Consultancy

Bank Risk Confirmation

Portfolio Credit Default Insurance

Credit Rating Advisory*

Credit Reference / Appraisals

Lines of Credit (selectively)

For Banks & FIs

For Corporates and For Lenders

Commodity Finance

Credit Default Insurance

VC / Private Equity

SME IPO/ IPO/ Pre -IPO

FCCB / QIPs

Factoring

Factoring Advisory

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


IFFSPL

Facilitating trade

through factoring

and related

financial services

in trade Finance.

India Factoring and Finance Solutions Pvt. Ltd (IFFSPL)

BLEND has catalyzed the setting up of factoring company in India to facilitate trade promotion by bringing togetherFIM Bank, Malta, Banca IFIS, Italy and PNB, India

One of the Largest

Factoring Company in India with

Factoring assets of ~USD 200 Mn

To Promote Factoring Business in India

Brings Global Expertise of Factoring

Innovates New Factoring & Leasing Products

Focused on developing Markets

Aiming at expanding its foot print in India.

Provides technical support and assistance

Banca IFIS, Italy

FIM Bank, Malta

* Exited the JV recently

Forayed into New Business of Factoring

Acted as a Strategic Investor

Gave its Brand to the JV company

Provided Lines of Credit

Punjab National Bank, India*

Promoted & Spearheaded setting up JV

Played a role of a Marketing Partner

Catalyzed New Product Development

Blend Financial Services Limited

With the experience and expertise gained in Indiaand Africa, Blend can play pivotal role indevelopment of factoring in Developing andEmerging Markets.

Proven Track record

Technical Knowhow &

product capability

Understanding of Corporate

Financial needs

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

Wide structuring ability for each transaction. Have developed unique industry specific product.

15 years of extensive experience in factoring has provided in depth understanding of all challenges of the business, business process & product

Resource management

ability to assist raising

funds through innovative structures

Knowledge of challenges of product and

business and its mitigate

Key Elements - Successful Factoring Setup

AT THE START

Through understanding of economic condition/environment of the country

a. Regulatory environment, development of financial system, legal system support.

Understanding of existing factoring setup/environment

a. Analysis of existing factors and their business b. 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

Elements of successful startup

a. Local business specs

b. Legal requirements for the business

c. Human Resource Management

d. Financing/Fund Raising options

e. Suitable IT platform/solution

What we offer (FACTPaas)

Outsourcing

Consulting

Technology

FACTPaas (Factoring Process As A Service)

Consulting Factoring Start Ups

Blend would establish Factoring Business Platform on turnkey basis

Training of staff

Implementation of pre sanction process

Credit & risk management process.

Operations (Collection & Debt Management)

Sales & Marketing

Setting up the business process

Establishment of policy guidelines and standardoperating procdures

IT Factoring Management System

Finance

Simulations & Trial Runs

System control audits

Handover and assisting in resource mobilisation structures

Periodic Audits and system enhacements

How does it work?

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

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 operating procedure for each

department is documented along

with standard template and

reports for smooth business

functioning

Best in class software with ~50 reports, MIS and

Risk Management is negotiated with

the Vendor lowering the overall

cost

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

Feasibility Study /

Business PlanManuals

Standard

Operations

Procedures

Advise on

SoftwareTraining

SOPs and Process Flow

Describes and structure the different phases ofprocess of selling services, assisting marketingactivity and its decision making process.

Sales

Provides guidance on the risk appetite and risk policies.Credit & Risk

Contains the various processes of Finance andeligibility and authorization matrix.

Functions, duties and responsibilities of the financedepartment within the company.

Finance

Details the various processes of operations withorganization.

Functions, duties and responsibilities of thedepartment within the company along with workflow for operations activity

Operations

Operations

ProspectAppraisals/Sanction

Client sign on

Payments Collection MISRisk

Management

Sales

Front office Back office

Time to market reduced drasticallyCost effective since minimum capex required

Experienced factoring team backing the operationsClient manages only the front end

Allows the factor to grow as per the business needAllows to scale up business at faster pace

Expert team for Risk ManagementBusiness driven by MIS and analytics

Outsourcing Capex to Opex

Process client on boarding

Survey Financial Spread

Risk Rating AppraisalProspect

Skill set required are different

Outsourced to get access to experts in factoring appraisal

and deal structuring.

Debtor underwriting; ledgering and

operations risk assessment and

KYC

Spreading the financial

statements for better

understanding of growth

trends and financial

stability of the business of client/seller

Rating the client/seller and

debtor/buyer on risk

parameters

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

Client/Prospect

Visits

Preliminary Analysis

Indication of Terms

Field Survey

Internal Risk Rating

Credit Assessment

Approval

Verifications

- Debtor/Vendor Verification- Client plant visit - Credit history verification- Reference checks Bank & Trade - Adherence to risk parameters as per

the policies - Product parameters

- Performance risk- Debtor/vendor track record

- Recommendation on overall performance and credit risk

- Recommendation on term & condition- Recommendation on contract- Documentation requirement Transaction &

Legal

A well defined and co ordinatedprocess facilitates informed decisionand enable risk mitigation

Operations Back Office Support

Client sign on PaymentsCollection/

Allocation MIS

Risk Management

Client and debtor on boarding and file and database

management

Limit setup

FIU Management

Trade Document checking and

handling

Counterparty setup and liaison

Fund/limit availability

Approvals

Fund release

Advise and reports to clients

Customer queries

Payment follow up

Dunning

Fraud monitoring

Payment allocation/

appropriation

Non Factored cash

Reassignments

Reports

Standard and customized

report

Insurance reports

Portfolio reports

Overdue reports

Cash forecast

Funding forecast

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

o Access to expert team delivering services across the value chain.o Supported by analytics providing periodic reporting and analysis of entire operations.o Resources export in various products.o Improved lead time providing seamless services to the client.o 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)

Factoring Management

System

Bank

Regulatory systems

Other External Systems/

Organization

Accounting System

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

Debtor Setup

Processing of Documents

Disbursement

Payout

Receipt & Appropriation

Client Contact

Debt Management

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

- Facility note- Facility Setup- Amendments if any

- Debtor Setup- Debtor limit - Debtor contact

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

- Fund availability- Limit availability- Exchange rates- Authorization

- Client -Entry - Authorization- Advise

- Correspondent

- Cheques handling- Receipt- Appropriation- Non Factored cash- Cheque returns

Dispute resolution

Dunning

Adjustments & Reassignments

NPA

Disaster recovery

Controls

Document checklist

- Overdue/Dunning- NPA Management- Legal recourse

Technology

256

Products Supported

l Factoring Bill Discount l Reverse Factoring l Order Finance l Import Factoring l Debt Management

Configuration l Multi Branch Setup lMulti Currency lMulti Fee Structure

Portfolio Management

l Powerful Engine l Parameterized view

Limits l Credit, Funding, Insurance and Facility Limits at counter party levell 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.

MessagingSupport

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 technologyexpertise 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 a