Al Alaam Al Youm Newspaper
33 millions is the volume of Egypt's trade through factoring
25% of export shipments to foreign countries do not exceed 10 thousand dollars
• Increase of the volume of debit accounts of exporters due to the world financial crisis
Few days ago, events of the International Factoring Promotion Conference, the new alternative for developing cash flow and credit protection, were closed in Egypt and resulted in a number of results, most important of which was Ministry of Trade, Cairo Chamber of Commerce and Industries' Federation's invitation of exporters to deal with factoring. The conference was held under the sponsorship of Ministry of Trade & Industry, Cairo chamber of Commerce, Egypt Factors, Factors Chain International (FCI) and Egyptian Company for Export Credit Guarantee.
Jihad Al-Taweel wrote:
Jeroen Konstamm, Secretary General of FCI stressed that Egypt Factors Company is committed to support and promote international Egyptian trade, whether regarding exports, imports or local trade, out of its apparent focus on commercial financing tools.
In designing packages of services to be delivered by the company, it took into account that such packages should meet requirements of suppliers of both internal and external markets. The purchase capacity of purchasers from the local and international market will increase without the need to link or limit their bank facilities.
On another aspect, small and medium-size enterprises (SMEs) will be able to have access to the working capital as well as the bigger companies.
Egypt Factors (An Egyptian joint venture), supported by the latest systems, will provide high quality service that guarantees access to more than 60 countries around the world.
Jeroen Konstamm, Secretary General of FCI, also stated that the volume of world trade, which is made through factoring, have reached about US$1,1 billions by the end of 2008, then such figure has decreased in Europe, which represents the market leader in this domain, due to the repercussions of the global financial crisis at the end of 2008. Jeroen Konstamm added that FCI included 252 members from 66 countries around the world, pointing out that factoring business represents big benefits for exporters as it protects them against credit risks.
He also added that trade volume in Egypt through factoring is still meager and does not exceed 33 million dollars, in comparison to China, United States, in which factoring trade volume exceeds 8 billion dollars.
From his side, Cagatay Baydar, the member of FCI Executive Committee, spoke about factoring advantages for exporters in times of crises and said "export factoring is an international tool for development and growth of exports. We have tried it in China and it attracted companies from America and Europe." He pointed out that SMEs are looking forward to protection, financing and collections of debts. They may be able to do this, but they are in need of other services provided by factoring. He added that China's use of factoring industry contributed in the increase of growth rates and production as factoring guarantees payment 100%, there is no official claiming procedures, it provided protection against risks and it protects income statements against risks. All these are matters that contributed in mitigating the severity of the global financial crisis, protected exporters from seller's risks and contributed in exempting exporters from taxes in accordance with factoring from banks.
From their side, Egypt Factors and Factors Chain International spoke about the benefits of factoring for Egyptian companies, stating that such benefits include protection of Egyptian exports from commercial and political risks, importer's bankruptcy, its default or failure to pay, non transfer of local currency into payment currency, confiscation by importing country (crossing country), civil wars and pulic riots at importer's country. It also protects exporter against non-payment risks and makes it avoid risks, compete ruthlessly in international markets and obtains funding from banks without guarantees related to identifying customers' data. Within the framework of these companies' efforts to serve their customers, they are currently introducing new service, which is the local market sales' credit guarantee, where the company provides an integrated service, represented in providing non-payment guarantees to the Egyptian exporter over its credit local sales, a matter that will have impact on increasing exports and promotion of trade in the local market, where compensation rate reaches 80% of losses. During this year, the company concluded contracts with a group of data companies in order to provide new product, which is represented in data reports about importers for the purpose of horizontal integration of services provided by the company to its customers, as this will enable exporters to inquire about customers and differentiate among them. Consequently, exporter will be able to have good planning and avoid high risks. This, in return, will lead to the increase of local exports, a matter that will have its positive impact on the national economy.
At the same context, it stressed that one of the services provided by the company is represented in importing of debts for debt processes which became mature and were not paid yet, a matter that provides exporters with new capabilities of competency and control that enable them to regain their rights from foreign importers and therefore avoiding losses resulting from non-payment.
At the same time, Eng. Ali Moussa, Chairman of Cairo Chamber of Commerce, spoke about development of commercial capabilities. He said "There are changes that took place in Egypt due to open door policy and conclusion of many international agreements that have encouraged Egyptian producer to access these markets. The result has been an increase of volume of exports and imports, increase of purchase capacity and therefore the Egyptian market has become a good and attractive one.
Chairman of Cairo Chamber of Commerce stated that 95% of businessmen are working in small and medium-size businesses, while 25% of export shipments are within the value of 60 thousand Egyptian pounds, i.e. equivalent to 10 thousand US Dollars. Thus, business volume does not exceed this value as its financial capabilities do not allow it to break this figure. In other words, 25% of businessmen can not deal with banks, a matter that makes factoring represent the future solution due to its advantages that are accompanied with fast performance, easy obtaining of working capital financing without recourse to exporter in case of default and there is also flexibility without being exposed to credit risks.
He added that factoring has another role regarding Egyptian exporters, whose significance lies in dealing with neighboring countries that deal through shipment of goods like Libya or those we deal with through local transportation like Sudan. Those countries do not deal through credit and do not acknowledge banking system.
Also, there are countries that we know little about and we can not risk dealing with them like COMESA countries, which deal with open invoice. Therefore, to deal with those markets, there must be a financial arbiter, who is capable to deal with those markets.
Moussa expected that factoring will occupy a good future position in Egypt, calling for amendment of Egyptian regulations in order to allow application of factoring, due to its importance in the local market, especially for SMEs in order to create a balance with greater entities.
Galal El-Zorba, Chairman of Industries' Federation said that factoring has been introduced in Egypt at the suitable time due to the repercussions of the financial crisis over exporters, as they have faced numerous problems in America and Europe, which resulted in an increase of debit accounts' volume.
He said that factoring is a good tool, and I hope it will be promoted in Egypt in both financial and commercial deals; particularly there is lack of data and absence of transparency.
Chairman of Industries' Federation expected that Egyptian exports will face difficulties during this year, 2010, due to continuation of the repercussions of the global financial crisis, pointing out to the decrease in contracts during the forthcoming period.
El-Zorba pointed out that there is an expected severe competition from foreign companies, which strive to regain their position and develop their financial indexes at the account of prices.
Galal El-Zorba, chairman of Federation of Egyptian Industries , in special statements on the sidelines of the International Factoring Promotion Conference, held by Egypt Factors, stressed that the preliminary indicators of export contracts to be carried out during this year, 2010, have shown recess in both prices and