Marie-Renée BakkerMarie-Renée Bakker

Lead Financial Sector SpecialistLead Financial Sector Specialist

World Bank Factoring Conference, WarsawWorld Bank Factoring Conference, Warsaw

October 23-24, 2003October 23-24, 2003

FACTORING AS A TOOL FOR SME

DEVELOPMENT

Why A Factoring Conference For The EU-8?

Limited Credit to the EU 8 Private SectorLimited Credit to the EU 8 Private Sector Development Potential of Factoring Development Potential of Factoring SME Development ToolSME Development Tool Increased Regulatory FocusIncreased Regulatory Focus Potential Bank Group RolePotential Bank Group Role

Bank Credit to the Private Sector/GDP

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

1996 1997 1998 1999 2000 2001 2002

Years

EU 15 Bank Credit to the Private Sector EU 8 Bank Credit to the Private Sector

EU 8 Sources of Domestic Credit

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1996 1997 1998 1999 2000 2001

Years

Tota

l Ass

ets

(US

D, M

illio

ns)

Total Banking System Assets Stock Market Capitalization Total Domestic Traded Corporate Debt

Total Leasing Assets Total Factoring Volume

EU 15 Sources of Domestic Credit

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

1996 1997 1998 1999 2000 2001

Years

Tota

l Ass

ets

(US

D, M

illio

ns)

EU 15 Total Banking System Assets EU 15 Stock Market Capitalization

EU 15 Total Domestic Traded Corporate Debt EU 15 Total Leasing Assets

EU 15 Total Factoring Volume

Total Factoring Volume in EU Member and EU Accession Countries

0

100,000

200,000

300,000

400,000

500,000

600,000

1996 1997 1998 1999 2000 2001 2002

Years

Fa

cto

rin

g V

olu

me

EU

Me

mb

er

(US

D,

Mil

lio

ns

)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fa

cto

rin

g V

olu

me

EU

Ac

ce

ss

ion

(U

SD

, M

illi

on

s)

Total Factoring Volume (EU 15) Total Factoring Volume (EU8)

Total Factoring Volume/Total GDP in EU Member and EU Accession Countries

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1996 1997 1998 1999 2000 2001 2002

Years

To

tal

Vo

lum

e/T

ota

l G

DP

EU 15 Total Factoring Volume/EU 15 Total GDP EU 8 Total Factoring Volume/EU 8 Total GDP

Factoring Volume in the EU Accession Countries

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Czech Republic Estonia Hungary Latvia Lithuania Poland Slovakia Slovenia Total FactoringVolume (EU8)

Countries

Fac

tori

ng

Vo

lum

e (U

SD

, Mill

ion

s)

1996 1997 1998 1999 2000 2001 2002

EU 8 Factoring Volume as Percent of GDP

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Czech Republic Estonia Hungary Latvia Lithuania Poland Slovakia Slovenia

1996 1997 1998 1999 2000 2001 2002

Selected EU 15 Factoring Volume as Percent of GDP

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

France Germany Ireland Italy Portugal Spain TheNetherlands

UK

1996 1997 1998 1999 2000 2001 2002

Factoring Fundamentals

Factor

Seller

Buyer

GoodsA/R

Obligation to pay

Factoring Fundamentals

Purchase/pre-financing of A/R

Administration and collection of A/R

Credit Approval

Credit Risk Management

Credit Risk Transfer

Domestic Factoring

Benefits to the Seller

Constant Cash-Flow

Lower Administrative Costs

Reduced Credit Risk

More Time to Concentrate on Core Business Activity

Export Factoring

Benefits to the Exporter

Faster collection

Ability to Sell on Open Account Terms

Increased Access to Foreign Markets

Protection Against Export Credit Losses

Benefits to the importer

Allows buying on open account terms

No need to open letters of credit

Preserves existing credit lines

Import Factoring

Credit information servicesCredit information services

Functioning payments systemFunctioning payments system

Efficient IT infrastructure (internet)Efficient IT infrastructure (internet)

Specific legal framework for factoring servicesSpecific legal framework for factoring services

Conducive taxationConducive taxation

For export factoring -- FX licenseFor export factoring -- FX license

Ideally – credit insuranceIdeally – credit insurance

Enabling Environment

Increased Regulatory Focus

Trend towards conglomeration

Factors often owned by banks

Issues in consolidated supervision

Reporting standards

FX exposures

Large/connected exposures

Role of the World Bank Group

Initial Focus: EU Accession Countries

Factoring Conference

Conference Follow-up - Research Paper

Lessons for other emerging markets

Technical Assistance and financing