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Al Mal Newspaper
06/09/2009

“Local factoring “ An Effective support mechanism during the “financial crisis”

A working paper developed by the Banking & Finance Committee of the Egyptian Young Businessmen Association has confirmed that local factoring is one the of the effective economic mechanisms supporting small and medium projects specially within the current financial crisis. Although factoring activity has been recently introduced to Egypt, but it has been existing in other parts of the world since 50 years and it has proven to be a successful finance mechanism amid the global economic challenges.

Ahmed Shaheen, a committee member stated that factoring is one of the important financial mechanisms that has been recently introduced into the Egyptian Market to support small and medium enterprises. It is a process of purchasing commercial papers and clients’ receivables by the factoring company to provide quick liquidity for the company’s growth. Mr. Shaheen indicates that all types of factoring help companies realize positive objectives through focusing on its activities whether these are production or industrial or service activities and taking immediate steps to expand its activity or increase productivity.

Mr. Shaheen indicated that CIB “Egypt” in cooperation with FIM Bank “Europe have established the first Egyptian Factoring Company “Egypt Factors’ last year. It is the first company to launch this service in Egypt and its activities include local factoring, export and import factoring and suppliers’ finance program.

Mr. Shaheen indicated that local factoring is one of the most important means of financing small and medium enterprises as it includes a group of service such as financing credit invoices, collecting commercial debts in addition to providing protection against doubtful debts.

He added that the service of financing invoices may benefit the enterprise owner in achieving quick funding for credit sales, he then indicates that Egypt Factors buys commercial debts and thus provides the required liquidity for the subsequent production phases.

As regards collecting commercial debts, this service saves the enterprise the burden of monitoring and collecting invoices and commercial papers and helps it focus on its economic activities. It also saves them the collection discomfort between the sellers and the buyers in addition to eradicating all possible opportunities of procrastination in payment. One of the most important tasks of the factoring company is to protect doubtful debts as the company guarantees payment by some buyers and thus provides clients with security in addition to continuous and effective capital turnover.

Mr. Shaheen expects that factoring will grow much quicker than other finance methods as the number of companies that provides such service will grow from one company to ten companies during the coming three years. The possibilities of this growth is supported by the fact that the volume of factoring activity has reached 1.3 trillion Euros and that it exists in more than 70 countries worldwide. He confirmed that the preliminary results of this activity in Egypt is very promising and indicates the effective interaction of the small and medium enterprises in the local market with factoring activity.