Al Mal Newspaper
During the 1st International Conference
120% growth in factoring during 2009
Egypt Factors acquires 55% of market share…..45% goes to ECGCE
By NASHWA Abd El-Wahab. Al-Maal paper, 14 Jan 2010.
Factoring grew by 120% in 2009: $110 m compared to $50 m in 2008.
Egypt Factors took over 55% of the factoring market, with a turnover worth of $60 m of total factoring transactions. The remaining 45% went to the Export Credit Guarantee Company of Egypt (ECGCE), which is equivalent to $50 m.
On the sidelines of the first International Factoring Promotion Conference which was held yesterday, Ahmed Shaheen, general manager of Egypt Factors, stated that factoring was experiencing a remarkable welcome from exporters and importers alike as it provides one of the new finance tools. It comprises a package of services for open account customers, such as collecting amounts due to [factoring] customers, providing protection against risks of non-payment, and advancing instant finance up to 100% of the value of invoices with credit terms of up to 180 days.
Mr. Shaheen attributed the last surge in factoring activities in Egypt during last year, with Egypt Factors clinching a turnover of $60 m, to remarkable growth in the factoring activity during the final quarter of last year, which jumped from $25 m in last September to $60 m by the end of December 2009. He pointed out that the breakout of the financial crisis drove many exporters and producers to seek factoring services to hedge risks of non-payment by foreign customers. Thus, international factoring turnover in the company represented 60% of its total factoring , while domestic factoring scored 40%.
He also highlighted diverse kinds of factoring customers, i.e. big and multi-national corporations as well as small and medium enterprises (with the lion share of 80% of the factoring portfolio).
He pointed out that Egypt Factors took several steps to keep abreast of the huge surge in demand for factoring: increasing paid capital of the company from $ 5 m to $12 m, which was done in installments, where major shareholders subscribed to the first installment of $3 m; strengthening cooperation with banks to facilitate access to customers, especially owners of small and medium enterprises who benefit the most from such services, and educating them on factoring services.
On the other hand, Jeroen Kohnstamm, FCI Secretary General, stressed that the organization’s purpose behind holding the first factoring conference in Egypt was to highlight the opportunities for growth of exports through using factoring which has been around in Egypt since 2005. He indicated the small volume of that activity in Egypt where the turnover of factoring as transacted by the FCI members did not exceed $33 m in 2009 as compared to $2.073 b in Turkey for example.
Kohnstamm expected a pending surge in factoring at the international level as well as Egypt, giving the improved pattern of international trade, and return of growing demand for exports. A point in case, he pointed out, is the improved figures of factoring in the last quarter of 2009 after they receded at the start of the year as a result of the varying impact the international financial crisis had on countries, which consequently caused decline in demand for exports and factoring.
Eng. Rasheed Mohamed Rasheed, Minister of Trade and Industry, stressed in his word, which was delivered on his behalf by Dr. Ola Gadallah, Chairman of ECGCE, the necessity of focusing on financing exports and creating new mechanisms to facilitate penetration of exportation [into foreign markets], especially after the tremendous growth in the volume of trade.
NSGB and HSBC stormed the Factoring Scene with Two New Companies
Marius Savin, general manager of Egypt Factors, broke the news during the first international factoring conference that a number of banks, including NSGB and HSBC, took up factoring activities, thus following in the steps of the CIB. To note, Egypt Factors, the first company to be specialized in providing factoring services in Egypt, was founded by the CIB (40%), FIMBank (40%), and the International Funding Corporation (IFC) (20%).
“Al-Maal” came to know that NSGB is currently in the process of entering the factoring business with a new company to be incorporated in the model of bank finance leasing companies as it is getting closer to completion of the study.