Transcript Session three - Arab SCF Conference

SCF: Promoting Growth
Through Structured Working
Capital Solutions
Moderator:
Layalee
Ramahi
Head of Strategy,
Tawreeq Holdings
PANELISTS:
ERIK TIMMERMANS
Deputy Secretary General,
Factors Chain International
SAMIA ELNESOQI
The Internal affairs Consultant
to the Council of Arab
Businesswomen
YAZAN AL NASSER
Chief SCF Officer, iSCF Capital
MINKYU KIM
Head of Legal Department, LG,
Regional Headquarters Middle
East & Africa
ABDEL HAMID IBRAHIM
Board Member, Egyptian
Financial Supervisory
Authority
Mohamed El- Bahea
Federation of Egyptian Industry
(FEI) Board Member, Chief of
Arab Cooperation Committee
DISCUSSION
TOPICS
Available offerings for corporates when it
comes to structured solutions
What are the key drivers for trading
companies when assessing trade
finance products
How are structured working
capital solutions fit for
supporting trade
How can factoring
facilitate trade
How can SCF facilitate
SME finance
Business Finance Challenges
 According to ICC Global Survey on Trade Finance 2015
Statistics 53% of respondents perceive a shortfall of trade
finance globally
 SMEs trade proposals rejected 53% of occasions
compared to large corporates acceptance rate at 79% of
occasions
 Compliance AML/KYC is a restriction for financial
institutions and lack of structure for corporates and data
for regional businesses add to the problems in accessing
finance
 Ridged products and structures from banks that fit
business requirements for working capital
 Liquidity and working capital access to businesses
remains restricted
Standard Definition of SCF
 The first standard master definition of Supply Chain Finance
according to the Global SCF Forum issued by the ICC:
“Supply Chain Finance is defined as the use of financing and
risk mitigation practices and techniques to optimise the
management of the working capital and liquidity invested in
supply chain processes and transactions. SCF is typically
applied to open account trade
and is triggered by supply chain events. Visibility of underlying
trade flows by the finance provider(s) is a necessary
component of such financing arrangements which can be
enabled by a technology platform.”
Factoring: Alternative Solution
Factoring is a specialized financial service, offered either by a subsidiary/division of a
bank or an independent provider that offers a range of services to a business based
on their clients accounts receivable.
How it works
Serving Suppliers that Sell to Businesses Globally
1
Buyer places
an order with
supplier.
2
Factor evaluates
credit worthiness
of buyers.
Factor approves
the buyer.
3
Supplier ships
products to
buyer.
4
Supplier invoices
customer and
assigns invoice to
Factor who pays
supplier with
reserve
5
Factor collects
funds from buyer.
Factor pays
supplier difference.
Factoring : Why does it matter?
Support for (in
particular SME)
business
to develop and grow
Support for export
development
Efficient economic
growth
Creating and
supporting
employment
Low risk for the
Financial Institution
Global Factoring Volume 1995 - 2015
(IN EURO BILLIONS)
€ 2,500
€ 2,000
€ 1,500
€ 1,000
€ 500
€1995
2000
2005
International
Domestic
2010
2015
Market Share 2015
Total in € Bn
Market Share
GDP Penetration
UK and Ireland
402.6
17.0%
14.1 %
China
352.9
14.9 %
3.5 %
France
248.2
10.5 %
11.1 %
Germany
209.0
8.8 %
6.8%
Italy
190.5
8.0 %
11.3 %
Spain
115.2
4.9 %
10.4 %
USA
95.0
4.0 %
0.6 %
Netherlands
65.7
2.8 %
9.7 %
Belgium
61.2
2.6 %
14.6 %
Japan
54.2
2.3%
1.4 %
1794.5
75.8%
4.2%
Top Ten
Source FCI, IMF GDP estimates
Market Structure
Concentrated:
Bank dominated:
• Combined market
share of 5 biggest
factoring companies
in each country: on
average 82%
• 48 % : bank divisions
• 30 % : bank
subsidiaries
• 22 % : non-bank
finance companies
Egypt Market
Number of Clients
The growth in client numbers continue to reach in July 2016 *234
‫عدد العمالء‬
250
200
150
‫عدد العمالء‬
100
50
0
2011
2012
2013
2014
2015
‫ يوليو‬2016
Egypt Market Factoring
Volumes
Total Factoring volumes in Egypt as of July 2016 reached 72.2
billion Egyptian Pound
‫حجم األوراق المخصمة‬
5,000,000,000
4,500,000,000
4,000,000,000
3,500,000,000
3,000,000,000
2,500,000,000
‫حجم األوراق المخصمة (جنيه‬
)‫مصري‬
2,000,000,000
1,500,000,000
1,000,000,000
500,000,000
0
2011
2012
2013
2014
2015
‫ يوليو‬2016
A Regional Landscape
Niche market with no major coverage outside traditional banking
sector products – focus on invoice discounting and traditional trade
finance products
MENA is estimated to have roughly 5,000 medium to large firms
with net assets around $600 billion
Growth in MENA markets, despite slowing down, averages around
4% with strong population growth
Strong presence of multinational corporations - especially in GCC
The MENA region is a center of trade, growing trade route amid
rapidly growing markets connect the East to the West
Rising expansion of open account trade with tighter banking
liquidity and capital restrictions on risk exposure for banks