Making factoring work.
Viktor Nosov, Head of Factoring Operations, Promsvyazbank
A tool such as factoring can significantly improve trade relations between contracting parties amid Russia’s participation in the WTO, and facilitate the stable growth of both import and export operations. The greatest advantage of international factoring is in business development, as you can deal with a customer even without any previous business relationship. The potential for this market is huge.
But there are number of stop factors in acting currency legislation. Amid stable growth in export volumes, market players cannot provide better terms of trade to their loyal foreign customers, and this restricts their ability to increase the volumes of risk-free payments.
Meanwhile, importers hold on to agreements with their foreign counterparts so they can begin work on the basis of open accounts. Import factoring is set to solve this problem, as well as the problems connected with shortage of working capital.
Boris Melnikov, General director, FactorRus
Factoring is a very fast-growing business in Russia, and such a market is of course very interesting. One of the factors impeding its further development is the large concentration of factoring companies in Russia’s Central Federal District, while their presence in other Russian regions remains weak.
Ilya Pokamestov, Business development director, Politeks
International factoring is hampered first of all by a lack of professionals, along with some problems in the legislation. One is the structure of Russian exports and imports, meaning its nature and volume: factoring works primarily as an instrument to facilitate the import of goods.
It’s quite important to develop a unified terminology, for example, a description of factoring procedures, as it’s currently different from one country to another, and finally to create comprehensive legislation.
Do you support the recent initiatives of the Russian Association of Factoring Companies (AFC)? Which additional measures would you like to see?
Corneliu Robu, Deputy chairman of the board, National Factoring Company
We support the AFC’s idea of ratifying the UNIDROIT Convention. Traditionally in Russia, the share of international factoring has always been quite low, and this segment should be developed first of all. In addition, we strongly support the efforts of the Association to raise the awareness of market participants about factoring. I know that the Association has sent out letters to various governmental institutions, and a few days ago AFC executive director Dmitry Shevchenko mailed us responses from key institutions, such as the Finance Ministry, the Industry and Trade Ministry (which has already responded very favorably) and the Economic Development Ministry.
Boris Melnikov, General director, FactorRus
FactorRus is an AFC board member and we strongly back all the Association’s initiatives. It’s especially true when it comes to measures aimed at improving the current Russian legal framework factors operate in. Additionally, we support and are willing to participate in the AFC initiatives aimed at popularizing knowledge about international factoring. The market is growing in Russia and many financial institutions, including foreign ones, want to build up their presence by creating subsidiaries or joint ventures, such as ourselves. The prospects of the Russian market are constantly being discussed, and for a good reason.
Ilya Pokamestov, Business development director, Politeks
Undoubtedly, regulation should be in place, as factoring is part of the financial industry and therefore it needs to be regulated, just like finance. At the same time initiatives outlined at the round table, held in December, would enable international factoring operations only for members of international factoring groups, and we think that they would impose certain limits on freedom of competition. Ratification of the UNIDROIT convention isn’t a remedy by itself – Ukraine is a vivid example of this. It has ratified the convention, but we don’t really see any significant development there. UNIDROIT rather serves the goals and objectives of harmonizing legislation. Regarding the latest initiatives to amend the Russian Civil Code, I think it would be better for the AFC to advocate a separate law on factoring.
Viktor Nosov, Head of Factoring Operations, Promsvyazbank
We support AFC’s initiatives as we are seeking to improve the conditions for participants in foreign trade. Without changes to existing market legislation, it will be difficult to realize their potential. In view of the existing constraints, participants in foreign economic activity can’t avail themselves of all the opportunities enjoyed by Russian participants in the International Factoring Association.
Corneliu Robu, Deputy chairman of the board, National Factoring Company
There are problems with existing currency regulation: these discrepancies should be removed, as they make it impossible for non-banking organizations to offer international factoring services. Besides, the structure of Russian exports currently is focused on the export of commodities, while factoring works better for operations with manufactured goods.
Source: The Moscow News