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magazine Alaam Rakamy
04/04/2010

The General Manager of Egypt Factors

"Factoring is not a banks substitute, but a complementary activity"

The spread of e-commerce widely participates in factoring activities


Factoring is a newly introduced activity on the global market. It globally began fifty yeas ago, and entered Egypt only one year ago with the start-up of Egypt Factors, the only factoring service provider in Egypt. The global financial crisis was the main reason behind proliferation of this activity. As the financially insolvent companies increased and debts accumulated, it emerged a need to find a new mechanism whereby exporters ensure proper collection of their invoices from customers. The factoring activity then came to bridge the gap between the exporters and their customers.

To learn more about factoring activity and the importance of e-commerce as means of increasing the factoring activity, Alam Rakamy magazine interviewed Mr. Ahmed Shaheen, the General Manager of Egypt Factors, and conducted the following dialogue:

Question: …
Answer: Factoring is an integrated group of services enabling customers to better serve their dealers both on the local and the global markets. It provides facilities helping customer to improve their liquidity and avoid the non-payment risks.

Question: …
Answer: Before the factoring activity begins, the only way for expanding the activities of local exporters in the foreign countries was to open Bank L/Cs, but they were facing many difficulties. The factoring activity then came to allow exporters to deal with foreign customers under an open account system and to guarantee proper collection of their financial entitlement from the foreign customers.

Question: …
Answer: Factoring has many types, and a factoring customer may enjoy all types of services under one contract with the factoring company. The factoring customer may also gain part of these types and leave others. The first type of factoring is "the factoring with the right to have recourse against the seller". This type enables the customer to better serve its dealers on the local and international markets under conditions satisfying the dealers' needs, improving liquidity and allowing the seller (customer) to properly follow up the process of collection from its dealers. The second type is "the factoring without having the right to recourse against the seller". This type is different from the first one, as it allows the customer to avoid non-payment risks. In this type, the factoring company is required to pay the invoices, in case of non-payment by the dealers of the contracting customer. The third type is the "purchases factoring", which provides an integral group of services enabling the customer to expand its purchasing power from local and global markets, without prejudice to the then available limits of its banking facilities.

Question: …
Answer: Factoring has various benefits; it gives factoring customers a reassurance regarding their dealers' payment of due invoices and allows customers to avoid the non-payment risks. It further enhances the cash flow, as the factoring company may pay the customer up to 90% of invoice value. Factoring is also considered an alternative means of finance and by which debts are collected without affecting the customer's business relationship. It also saves the time and costs incurred for collecting the commercial debts and following up the dealers' balance.

Question: …
Answer: A study was first made by the company to select the customer eligible for the company's factoring services. This study is not only based on the capital volume, but also mainly focuses on the customer's activity. The invoices and commercial papers are properly reviewed even more than the customer's capital. According to the results of this study, the customers who shall enjoy factoring services are specified.


Question: …
Answer: Factoring's role is complementary to the banking activities, and not a bank substitute. Banks customarily finance the main requirements of companies, while factoring finances the companies' capitals. We cooperate with the companies that do not deal or obtain finance from banks. We also deal with companies with special quality. Factoring companies, as compared to banks, are distinguished by their fast decision-making process; as the customer can obtain the required finance within only two weeks.


Question: ….
Answer: As Egypt Factors is considered the only company rendering the factoring services in Egypt, the company managed to create a customers base comprising of about 100 companies. It primarily targets the small and medium enterprises operating in the fields of information technology and communications, as well as the commercial and industrial companies selling products or rendering services on credit for a grace period of up to 15 days to a proportionally fixed number of purchasers having debit accounts and commercial papers arise out of properly concluded, unconditional and enforceable contracts. Based on these transactions, the business volume of Egypt Factors reached LE 61 million.


Question: ….
Answer: Egypt Factors mainly relies on the information technology and communications as means for linking the factoring companies spreading over seventeen countries with each other. The communication between Egypt Factors and the other factoring companies are developed through the EDI system over the internet. The company's advertising and marketing activities are also based on the website: www.egyptfactors.com which is continuously developed to suit the nature of EF customers.

Question: …
Answer: E-commerce is one of the important mechanisms that will greatly increase the factoring activity. Through e-commerce, transactions between countries are electronically made, which definitely participates in expanding the factoring activities and facilitating transactions. Therefore, Egypt Factors plans to apply the electronic transactions in stead of paper-based transactions that are customarily conducted between factoring companies and their customers, and further plans to use these electronic means for collecting the invoices from customers in the foreign countries.

Question: …
Answer: Egypt Factors faces various challenges, including the public awareness. Factoring is still a newly introduced activity on the Egyptian market, and its concept is still unknown. The currently targeted entities are the small and medium enterprises, and these entities lack awareness of the importance of factoring services. Therefore, the company meets this challenge by holding symposia and conferences at the businessmen associations in an attempt to spread the factoring culture and properly define its importance and role. In the upcoming period, the company aims to further expand its activities on the local market.


Question: ….
Answer: In the current year, the company focuses on the small and medium enterprises, because they are most in need of factoring activity which provides them with proper finance solutions. The company also plans to expand the purchases factoring and the local factoring, as they both suit such small and medium enterprises.


Interviewers: Sally Retb- Nadia Fawzy