The Factoring & Commercial Finance Industry in 2012.
The Global Factoring Industry grew in 2012 by 8% to reach a total estimated turnover (amount of assigned receivables to factoring companies during the year) of 2.119 billion EUR. The industry financed at year end an estimated amount of 309 billion EUR to almost 500.000 companies, mostly SME’s with a yearly turnover of less than 10 million EURO. Approximately 46.000 staff are directly employed in factoring activities.
In the EU, the industry grew almost 5%, which is an impressive result in the light of the difficult economic circumstances that face Europe. The Polish Factoring industry stood out with an impressive growth figure of almost 37% (27% if a correction is applied for exchange rate fluctuation to the Euro). With a total turnover of almost 25 billion Euro, the Polish Factoring industry is now definitely playing in the Factoring Champion’s League!
The Factoring Industry breaks turnover records year after year and plays a role of growing importance in SME financing, development of exports and supporting economies on the road to recovery and job creation. The industry’s product portfolio is evolving and now embraces Supply Chain Finance solutions and Asset Based Lending techniques. The growth potential is still huge. The total volume of factoring compared to world GDP gives a penetration of 4,19% (9,36 % in the EU). Another interesting way of looking at the potential for Factoring is to compare its turnover with the total amount of Business to Business payments which according to VISA can be estimated at around 110 trillion US Dollar in 2012. This indicates that less than 2,5% of inter-company receivables are being financed through factoring worldwide. Room for growth!
But there is still a lot to do in this industry apart from developing the turnover. Factoring and Commercial Finance solutions are still not well enough known and understood by businesses and policy makers (and may I add also by many banks…). But isn’t creating this awareness in the first place our own industry’s responsibility?
And of course it’s not just about knowledge. Why for example is the industry not regulated in country X whereas in country Y there is a regulatory environment that is extremely difficult to comply with if you are not part of a big bank? Why are the laws on assignment of receivables completely different from one country to the other? Why do we use the same names for different products or different names for the same ones? How is it possible that a head of a bank factoring department could tell me “we only do With Recourse Factoring, so that we can take the risk entirely on the client and don’t have to bother with the debtors…”? Did he never learn that the foundations of factoring are about being able to get your money back from the receivables? By the way these are often the same people who will cut costs on training for staff or on attending industry events…
The whole point is that the Factoring Industry needs harmonization, needs top education, needs a unified voice to defend and promote itself. In IFG we aim to create this international representative body that lobbies on behalf of the industry and that connects with service providers and like-minded organisations. Here are some illustrations of our efforts in this respect.
Together with the University of Malta and with FIMBank we launch in October 2013 the first University certified Course on Finance of (International) Trade (3 modules of 2 weeks intensive learning, one week being entirely devoted to Commercial Finance). A breakthrough initiative for our industry and a first time ever recognition from the academic world.
We have put in place a strategic partnership with the Commercial Finance Association (CFA) to share best practices and promotion efforts both in Factoring and in Asset Based Lending. Our Legal Committee is finalizing a model law on Factoring, which can be used as a basis for countries that wish to create a clear legal environment for factoring activities. This initiative will hopefully be supported by many other national and international associations.
We are glad to see that IFG’s EU lobby initiative, the EUF is now representing 97% of the EU factoring activities. The EUF is working on a scientific study that will show the economic impact of the Factoring industry in Europe.
Finally we will bring knowledge about Supply Chain Finance and Asset Based Lending to the Factoring world at our conference in Istanbul 23-24 October. Our industry has the potential to become a mainstream financial solution, offering much needed liquidity and working capital to businesses all over the world and this with very low risk for the financial institutions.
IFG is working with its members, sponsors and partners to shout this message from the rooftops! If you are not a member, please join us in our campaign. If you are already a member but not so actively involved, please work with us to communicate the message!
Source: IFG