ICC Banking Commission Meetings "Factoring; Bridging the Continents" Çağatay Baydar Factors Chain International (FCI) – Chairman General Manager of TEB Faktoring, Subsidiary of BNP Paribas 12 – 15 November 2012

2 What is factoring Factoring; Bridging the continents The role of factoring for Turkey and for Turkish exporters Agenda

3 Factoring Factoring is a complete financial package that combines working capital financing, credit risk protection, accounts receivable bookkeeping and collection services. It is offered under an agreement between the factor and a seller. Under the agreement, the factor purchases the seller's accounts receivable, normally without recourse, and assumes the responsibility for the debtor's financial ability to pay.

4 Economic crises Recession in domestic market Trials for exporting Foreign competition Discounts Risk free sales cheaper funding Increase in sales and in profitability FACTORING Losses Why factoring ?

5 Types of factoring Domestic factoring ▪ Invoices ▪ Post dated checks International factoring ▪ Export factoring Without recourse (import factor guaranteed) transactions With recourse (no guarantee) transactions ▪ Import factoring

6 Fears of exporters in old days Different customs applications Different currency systems Different laws and languages Collection difficulties Credit risk Lack of working capital

7 Factoring; “The Solution” today International factoring provides a simple solution regardless of whether the exporter is a small organisation or a major corporation. The role of the factor is to collect money owed from importers in their own country, in their own language and in the locally accepted manner. As a result, distances and cultural differences cease to be a problem. A factor provides exporters 100% protection against the importer's inability to pay and working capital against their receivables.

8 What were the traditional obstacles in old days ? Lack of legislation and procedures to protect factors, clients and debtors. Lack of familiarity of factoring. Factoring “image” problem. “Resistance to change” by the old fashioned accountants. Cost of factoring (especially commissions and service charges).

9 Factoring generally operates in regulated environments in most countries A well-known financial tool in most countries, especially in developed markets A low-cost alternative source of funding Factoring’s image improving around the world Factoring; “The Solution” today

10 Cost of factoring Guarantee Collection Funding Interest charge Factoring commission

11 Agenda What is factoring Factoring; Bridging the continents The role of factoring for Turkey and for Turkish exporters

12 (Million EUR) Domestic International 2011 Growth: 22% Factoring : Bridging the continents – Annual volumes

13 Increase in factoring volumes due to... Global economic turmoil and increasing level of commercial risks ▪ Corporate, banking and sovereign bankruptcy risks due to massive loss of assets ▪ Late payment and default risks Need for working capital High level of funding costs and difficulties in obtaining financial tools High level of operational expenses for A/R management " Risk averse approach of continents, countries and companies "

14 What is factoring Factoring; Bridging the continents The role of factoring for Turkey and for Turkish exporters Agenda

15 Factoring industry in Turkey today Number of factoring companies : 75 Number of clients : ~ 100,000 Number of debtors : ~ 500,000 Turnover : 31 billion EUR Loans : 6,12 billion EUR Corporates, commercials and SME’s, service to all segments for the last 25 years.

16 International factoring volumes – Turkey (Milion EUR)

17 (Mio EUR) Growth 4% 35% 0% 54% 43% 24% 40% 8% 19% Market share 23% 18% 15% 10% 7% 5% 3% 3% 100% 17,073 14,360 *FCI export factoring volume per country * Factors Chain International is the largest factoring chain in the world accounting for approx 90% of world international factoring volume

18 (Mio EUR) Growth 47% 75% 23% 11% -2% -17% 38% 16% 19% Market share 16% 6% 4% 4% 3% 3% 3% 3% 100% Bank of China EFG Factors (Erubank Factors) China Minsheng Banking TEB Faktoring HSBC Bank (Taiwan) Yapı Kredi Faktoring Taipei Fubon Comm. Bank HSBC Bank (Hong Kong) Total 17,073 14,360 FCI export factoring volume per company

19 TEB Faktoring from Turkey; the best export factor of FCI for the last four years

20 Turkey: Bridging the continents – Billion EUR of exports to 5 different continents; to 213 different countries

21 Export of Turkey per payment term - (000 EUR) 54,921,804 USD Total 2011 : 104,152,747 EUR 60% 50,349,318 EUR Total 2010 : 84,981,135 EUR 8% 12% 18% 2% %59 %9 %10 %18 %4 Open Account Cash Payment L/CreditCash Against Doc.Other 60% 8% 10% 18% 4% 62,812,417 EUR

22 Grand Total 2011 : 62,812,417 EUR Factoring industry share in export volume – 2010 / 2011 (000 EUR) Grand Total 2010 : 50,349,318 EUR 95% 96% 5% 4% Open account export without factoring Industry share "Big potential for factoring"

23 Exports of Turkey per continents – June 2012

24 Turkey: Bridging the continents Exports to European countries are decreasing Exports to Middle East and Africa, Americas, Asia and Australasia are increasing " New Continents, New Countries, New Markets for factoring "

25 Factoring Should be promoted particularly in the developing countries Bridges mature and developing countries Can play an important role in increasing trade and wealth to these countries

26 Factors Chain International (FCI) As the largest Factoring Chain in the world and growing, FCI promotes trade through; Reliability of FCI platform State-of-the-art communications (edifactoring.com) Quality of FCI members Excellent legal framework. FCI’s 2-factor volume of Euro 25 Billion is governed by the General Rules of Arbitration (GRIF) in existence for many years. Only 6 conflicts between more than 250 members, eventually settled under FCI arbitration with parties accepting the outcome.

27 Thank you very much for your support and cooperation