Factors Chain International Annual Review 2015 Fa ct or in g N – E x p l o NW r i n g NO W n e w h o r i z SW E o n s SE S Fa ct or in g The factoring industry is exploring new N – horizons, both in geographical terms and in E functionality. x p l Factors Chain International plays a very o NW r important role in that process, introducing i the factoring concept in more and more n g markets and by extending the range of NO services typically offered by its members. W n e w The world economy is still in turmoil but the factoring industry has shown to be an h excellent service provider, even in difficult o times, supporting and facilitating domestic r i and international trade. z SW E o n International trade in particular is heavily s relying on ocean transportation, and SE lighthouses have played for many centuries an essential role in providing ships with safe passage. Lighthouses symbolise, both at night and during day time, the guiding hand S in this process. Found all around the world, lighthouses and horizons are inseparable, like factoring and trade. Factors Chain International Annual Review 2015 Letter from the Chairman 3 Introduction 5 The Latest Developments in FCI 6 The Mission of Factors Chain International 9 A Growing Industry 1o Fa ct A Global Network 11 or in g The Role of Factoring in International Trade 12 N – How E Export Factoring Works with FCI 13 x Casep study : International Factoring 14 l o NW r Selling Morei Competitively Overseas 15 n g Invoice Verification 16 NO W n Case studye : Supply Chain Finance 18 w Spotlight onh FCI Education Programme 20 o FCI Expressedr in Figures 21 i z SW E Factoring o Turnover by Country in 2014 23 n s SE Total Factoring Volume by Country in the Last 7 Years 24 S Factoring – Exploring new horizons Gibraltar, Europa Point Light Gibraltar, Europa Point Light 2 FCI Annual Review 2015 Letter from the Chairman By Daniela Bonzanini, FCI Chairman The Global Factoring Industry and FCI are moving forward! The weak recovery which began in 2014 has continued even being members. Positive relations have been established if at a different pace at different regional levels. The global with development banks, including the European Bank for outlook for 2015 remains moderately positive and the risks Reconstruction and Development (EBRD), the Inter-American appear more balanced than they did at the end of 2014. In Investment Corporation (IIC), the African Export Import many countries, foreign orders are on the upswing, exports Bank (Afrexim) and the Islamic Development Bank, mainly continue to be one of the main drivers for the growth and focused on education, industry promotion, and participation renewed confidence has started showing positive indicators in their guarantee programmes in order to mitigate Import for investment. Factors’ risks in emerging markets. Fa The improved economic environment has already generated The Prudential Risk Committeect (PRC) of the European some benefits: lending to companies has increased, cost of Union Federation (EUF), chairedor by our Secretary General funds for banks has decreased, and in general terms the credit has further strengthened cooperationin with the EUF. This g environment has improved. However, this positive story will enableN FCI to influence the representative – bodies of remains differentiated based on the size and the economic regulators and governments proving the Evalue of factoring sector of the borrower’s industry. There is still inadequate and its less risky nature. Recently, a great successx has been financing for a number of SMEs, limiting their ability to achieved by influencing the Italian Central pBank on KYCC l borrow, which adversely impacts their competitiveness. procedures. o NW r SMEs form the backbone of the world’s economies and i account for the vast majority of enterprises; they remain the The investments on education programmes continue,n the g engine for development of worldwide economies. large range of qualitative training courses will be enhanced, NO W as well as the topics covered during the different seminarsn in While still below the growth rates achieved before the crisis, order to better meet the needs of the members. FCI coursese w the global factoring industry continued to grow in 2014 are no longer restricted to only FCI members but are now reaching 2.35 trillion euros which represents a 6% increase available to non-member financial institutions as wellh and compared to the previous year. Cross border factoring very soon courses in Mandarin and Spanish will be released.o growth has been more robust exceeding 22% increase in the The high level of education has been appreciated byr EBRD i same period. with which FCI has entered into a partnership agreementz to SW launch a joint e-learning offering onE factoring. o With the aim of being one of the actors of the economic n s recovery, FCI has already undertaken a path which will Network SE extension is a must because of the new trade lead to important results. Two important projects have been corridors, and new regions and countries are being explored, opened aiming at: implementing the Supply Chain product in particular the ones where factoring is yet to blossom in and offering a modular solution to better meet the different order to increase the awareness of the attractive benefits it needs of its members; and investigating the UnionS with IFG offers such as Africa and most recently Bangladesh. These in order to create a stronger organisation. markets will demonstrate their potential in the near future. In addition, discussions with the ICC Banking Commission In order to help our organisation move forward and become concerning the GRIF endorsement have progressed. the worldwide reference for factoring and receivables finance Cooperation has also been extended to other areas such as changes and innovation are needed. 2015 will be a very the organisation of joint events focused on international important year in the history of FCI, with new strategies to be factoring and participation in the Steering Committee on implemented to make our organisation bigger and stronger Supply Chain Terminology, the Secretary General and myself and have our industry flourishing globally. FCI Annual Review 2015 3 United States of America, Marblehead Lighthouse, Ohio Lighthouse, America, Marblehead of States United Singapore, Johor Strait Lighthouse, Raffles Marina 4 FCI Annual Review 2015 Introduction By Peter Mulroy, FCI Secretary General The Winds of Change Continue to Blow in Favour of Factoring! 2014 was another impressive year for the factoring industry. FCI has an exciting agenda for change, to expand our In fact, it continues this amazing trajectory of growth, as mandate through alliances with development banks and evidenced in the doubling in size of the industry since the the ICC, incorporate a wider view of supply chain finance, start of the financial crisis in 2009. Even as international increase promotion of our industry in developing markets, trade softens due to the uneven economic recovery and as we enhance the awareness of the many benefits the service witnessed the plummeting of commodity prices, along with offers to SMEs, and take a more assertive role in lobbying to quite a volatile foreign exchange environment, the factoring reduce the sometimes adverse impact prudential regulations industry grew by 6% in 2014, surpassing EUR 2.35 trillion in can have on our industry. However, FCI will continue to focus global annual volume. Cross border international factoring on our core mandate,Fa the continuous delivery of a highly grew at an even faster pace, generating over of € 490 reliable and user friendlyc tcorrespondent factoring system. billion in volume last year, representing a 22% increase! or This continued strong emerging market-led rebound marks As open account trade continuesi nto expand, FCI has become g a significant milestone for trade finance in general and the platformN and method of choice – for most financial factoring in particular. institutions to offer their local clients crossE border open account solutions as an alternative to traditionalx letters Founded in Stockholm, Sweden in 1968, FCI was created of credit and documentary collections. However,p FCI is l at the initiative of just 6 relatively young and unrelated more than just a bridge between its members,o but also a NW vehicle for change, by representing the interestsr of the factoring companies located in Northern Europe and the i US. Today, with its headquarters in Amsterdam, FCI boasts receivables finance industry through promotion, educationn g 271 members in 73 countries and acts as a bridge between and lobbying efforts targeted to those institutions that can NO banks and factoring companiesW located in different markets. influence and effect change in their home markets, includingn FCI offers members a ‘correspondent factoring’ platform, ministries of trade, central banks, trade associations,e and w enabling an exporter to obtain working capital against their leaders in trade finance around the world. They have come open account foreign receivables from an Export Factor by to understand and appreciate that factoring is a secureh and using the services of an Import Factor in the country of the reliable method of financing trade and an invaluable meanso buyer to provide collection service and credit protection to provide liquidity to SMEs, the engine of growth inr most i against debtor default or bankruptcy risk. This ‘bridge’ economies. It is my hope that this publication will contributez SW allows exporters to obtain financing against their foreign to a better understanding of our industryE and the importanto receivables and offers them the comfort and knowledge that role international factoring plays in providing solutionsn in a s the invoices are protected and collected locally by a member more globalisedSE marketplace.