UK: FACTORING IN CHINA ‘SET TO BOOM’ Factoring in China
Last Updated: 29 September 2003

Senior executives from the receivables finance industry in Asia, representing 30 organisations from 14 countries, met at the Oriental Hotel in Bangkok to share their analyses of the industry and their strategies for meeting the challenges facing factoring in the region. The event, from 17 to 19 September, was organised by BCR Publishing Ltd. in association with Factors Chain International (FCI) and the International Factors Group (IFG).

"At just over €80 billion a year turnover, Australia and Asia accounts for under 10% of the total factoring turnover in the world", observed Michael Bickers, managing director of BCR Publishing Ltd. "In terms of future growth, the potential is enormous. Everyone instinctively looks to China as the ‘sleeping giant’, and rightly so, but undoubtedly other countries in the region have the economies and business infrastructure conducive to producing startling growth too. There is a lot to do to realise this potential and I am pleased that the conferences BCR put on focus the minds of practitioners, legislators, industry advisors and intermediaries on shaping the future of factoring."

Veena Mankar, managing director of Global Trade Finance India and Jeroen Kohnstamm, secretary general of FCI chaired the two days.

Speakers came from the factoring industry, legal profession, trade credit insurance and factoring software suppliers.

Jeroen Kohnstamm presented a personal view of Asia-Pacific factoring in the short- and medium-term, with an analysis of the major markets in the region and a review of those markets that are failing to grow satisfactorily. He gave his views as to why some markets were succeeding and others failing.

Puntrika Baingern, managing director of Kasikorn Factoring in Thailand and the secretary general of the Thai Factors Association, gave an overview of the Thai factoring industry and an analysis of how factoring companies can compete with other finance companies and banks by providing an alternative source of working capital in a crowded market.

Bart Pattyn, regional managing director of Coface Group South Asia-Pacific, analysed how factors could advance more against a portfolio of invoices by assessing and hedging or syndicating the risk and explained some alternative financing methods for factors to reduce cost and the advantages of each proposition.

Silas Berry, managing director valuation and consulting Asia, Henry Butcher GoIndustry reviewed why asset-based lending in the Asia-Pacific region has struggled to fulfil its promise, where in the region it works well and where it lags behind and what is needed to kick-start this source of business finance.

Doug Collins, vice president trade credit, AIG SE Asia assessed the opportunities for factors and credit insurers to work closely together. Doug explained that, while competing for the same customers in certain circumstances, credit insurers provided contingent funding, paying out in the event of an insured loss, whereas factors provided ‘real time’ funding to the seller, so factoring and credit insurance can be a solution. A factor can use trade credit insurance to leverage its in-house credit expertise to grow and manage risk.

Fenella Barnard, business development director, Dancerace plc, discussed the Internet and developing B2B e-business on the activities of factors, offering opportunities to streamline factoring operations and achieve cost reductions. She touched on the latest developments in risk modelling and management tools to control fraud and client failure. Fenella finished by examining how telecommunications allow factors to outsource their information technology operations to hosting companies to simplify the provision of hardware, security and disaster recovery, minimising cost and allowing remote operations overseas to be smaller and more cost effective.

Chief Judge Thammanoon Phitayaporn of the Thai Office of the Judiciary, described work to produce new legislation in Thailand, in line with the draft UNCITRAL legislative guide, to update Thai law for secured transactions. The objectives were to remove the obstacles to secured credit, encourage business finance through improving the cost and availability of credit and promote international trade and economic development.

A popular feature of BCR’s conferences is the roundtable discussion groups’ session, sustained by a glass or two of chilled bubbly. From a short list including tackling fraud, harmonisation in cross-border receivables management, technology and profit, credit insurers and factors - friends or foes, surviving in crowded markets and asset-based lending, an experienced led attendees in an informal debate.

Veena Mankar, managing director of Global Trade Finance India, drawing on her experience of starting up a factoring business in India, presented her strategy for factors to enjoy rapid expansion in fast growing emerging markets. She suggested a strategy built around client acquisition and retention, strategic partnerships and risk management in an environment with unreliable credit analysis information. Key to her strategy was market segmentation, an iterative segment performance analysis, using selected partners to manage resource expenditure and expanding service offerings to increase competitiveness.

Philip Cheng, senior factoring manager for Asia-Pacific, HSBC, explained the differences between Asian and European factors and markets. He analysed the differences in current market size, market segments, providers and the split between domestic and international factoring and explained these differences. Philip then discussed the rapidly growing demand for receivables finance and the obstacles that need to be overcome to allow the potential of the region to be realised.

Jan Becher, secretary general of the International Factors Group (IFG), reminded the conference of the history IFG and FCI and the reasons for their separate evolution. He gave his vision of how IFG would develop whilst still promoting and supporting the two-factor system. He defined the responsibilities of associations, being to preserve, protect and promote the industry and practitioners interests and to encourage professional development and fair competition.

Jan identified the European Union and its regulations, UNCITRAL, Basel II and money laundering requirements as issues requiring monitoring, lobbying and follow up. Banking and credit insurers faced similar challenges and associations from these industries could collectively deal with these challenges.

Undetected fraud damages a factor and can result in major loss. Robert Weekes, partner in finance law, Hammonds, presented the latest methods employed by the dishonest to deprive factors of their profits. He reminded the conference of the real cost of fraud, going beyond monetary loss and described how the nature of fraud has changed in the last dozen years, with clever felons using technology and audacious techniques to perpetrate their crimes. He emphasised that the old rules still apply; know and understand your client and his business, examine a client’s factoring ‘history’, keep client relationships on a professional level, do not accept excuses and audit well and often. Robert concluded with a guide to identifying suspect situations and avoiding fraud.

Matthew Erwin, business development manager of Bibby Financial Services Australia, spoke of how a factoring association is necessary to protect the interests of the industry. He related how the Personal Property Security Act gone into law against the interests of the factoring industry, because of the lack of a lobbying association. Subsequently, the Institute for Factors and Discounters of Australia (IFDA) started to retrieve the situation. In contrast, Matthew related how the IFDA had worked with government officials in Australia during the introduction of the Goods and Services Tax (GST) to ensure the factoring industry was aware of this important legislation and was in a position to take full advantage by helping Australian businesses prepay GST financed by factoring services.

The last session was a panel session, facilitated by Jeroen Kohnstamm and Philip Cheng, exploring the potential of China and the challenges that need to be overcome to realise this potential. The discussion was lively, fuelled by searching questions from the floor and insightful and informative responses from the panel.

Note

Based in London, BCR Publishing Ltd. has been established for nearly 12 years and is universally recognised as the only single source of in-depth information on the global receivables finance and credit insurance industries. BCR publishes the World Factoring Yearbook (in its 7th edition), World Credit Insurance (in its 1st edition) and Factoring in the UK (in its 8th edition).

BCR hosts the only subscription website on the Internet devoted to receivables finance and credit insurance worldwide, www.factorscan.com.

BCR organises receivables finance conferences in Europe and the Asia-Pacific region, attracting senior executives from independent and bank-owned factoring and invoice discounting firms, credit insurers, law firms, corporate recovery practices, brokers, consultants and intermediaries.

For more information
Please contact:
Christopher J. Brayley
Commercial Director
BCR Publishing Ltd.
3 Cobden Court
Wimpole Close
BROMLEY
BR2 9JF
T: +44 (0)208 466 6987
F: +44 (0)208 466 6987
E: chris@bcrpub.co.uk

 

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