International Factoring Lee Kheng Leong Asia Chapter Director

White Paper on Factoring by EUF Factoring is a success story in Europe Factoring is used primarily by SME Factoring provides working capital to businesses that drive the true economy The loss given default of factoring is low

Export factoring increases world trade Study by WTO Export factoring enables MSME to have access to international trade 10% increase in export factoring will increase world trade by 1% During the FCI annual meeting in Cape Town, South Africa, the WTO made a presentation on factoring and world trade. The presentation showed two very important findings: Export factoring enables MSME to have access to international trade. A 10 % increase in export factoring will increase world trade by 1%. This is a global figure and different countries will have different multiplier effect. It could be more in China. This shows that export factoring is important for all countries.

Early Origins of Factoring, Savannah, Georgia 1870s Modern Era of Factoring began in the U.S. Early Origins of Factoring, Savannah, Georgia 1870s

Factoring... spreading its wings USA Europe Canada UK Australia, South Africa HK, Japan, Singapore,S. Korea L. America, SE Asia, Turkey E. Europe, China, India MENA region Sub Sahara Africa, South Asia 1870s 1950s 1960s 1970s 1980s 1990s 2000s 2010s

FCI Vision & Mission Statement FCI Vision Statement FCI”s Vision is to be the Global Association for the Open Account Receivables Finance Industry. FCI Mission Statement Receivables Finance is the core focus of the association and includes Factoring, Invoice Discounting and other Supply Chain Finance solutions. FCI is the Global Voice for Open Account Receivables Finance: facilitates and promotes International Factoring through a Correspondent Factoring platform. supports the growth of the Industry and works jointly with policy makers and stakeholders worldwide promotes best industry practices through education publishes Information & Statistics about the Industry endorses financial stability, the prevention of financial crime and respect of regulatory compliance and conduct

Power of FCI Network Promotion Advocacy Legal Education Compliance FCISystem Network Two-Factor System Advocacy Global Statistics, Lobbying Legal Assignment, Notification, & Regulation Compliance Internal, KYC/AML, & Membership Education Product, Risk, Legal & Sales Promotion Industry, Government, Central Bank

FCI Correspondent Network Access to Edifactoring.com, FCI’s platform for cross border factoring solutions Proprietary platform that is accessed by our nearly 400 members in 90 countries GRIF promulgated by FCI over its nearly 50 year history In this 50 year period, only 5 cases have been brought to arbitration Members have utilized the correspondent network to help solve working capital issues for their clients

FCI Global Factoring Statistics 2016 by Region All figures given in Euro Billions 2015 2016 Group rate % change Europe 1,557.0 1,595.1 +2.5% Asia 563.0 479.1 -14.9% Americas 187.4 205.0 +9.4% Africa 18.7 27.6 +47.6% Australasia 41.7 47.7 +14.1% Total 2,367.8 2,354.5 -0.6%

Global Factoring Volume 1996 - 2016 20 year CAGR = 9% Global factoring grow on a CAGR basis over the 20 year period by 11%. International cross border increased over the same period by

Comparison to other forms of Trade Finance Factoring, LC & Credit Insurance Comparisons with World Exports 2011-2016 (USD Millions) 2011 2012 2013 2014 2015 2016 CAGR X border factoring 355,379 467,860 555,879 588,185 579,552 550,107 9.2% Credit insurance 1,495,227 1,538,609 1,630,925 1,709,579 1,586,000 1,615,000 1.7% Letters or credit (LC) 2,806,965 2,854,918 3,125,957 3,044,682 3,014,235 3,044,375 1.6% Total world exports 17,816,372 17 930 470 18,378,730 18,935,210 18,432,650 16,943,000 -1.0% Sources: Factoring figures reported by FCI. World Factoring includes both domestic and cross border factoring volume Short and medium term sovereign credit insurance figures reported by the Berne Union (2016 estimated) The LC figures from ICC/SWIFT study. Swift does not release LC issuance data, but in December 2010 its board agreed to carry out a ‘trade snapshot’, releasing the number of MT700 commercial standby and guarantee messages, including average invoice size. All figures are estimates based on actual data (2016 estimated) The world merchandise export figures from the WTO in US dollar value (2016 estimated) Despite the growth in world trade in 2015, world merchandise exports in dollar value declined by 14 percent in 2015, to US16 Trillion. There is a strong need for open account trade, if we look at this slide we see that although the long predicted decline of the Letter of Credit - which is time consuming, paper intensive and expensive – this instrument has proved its value in mitigating the risk involved and giving access to liquidity in a difficult economic environment. However if we compare L/C with factoring, we notice that cross border factoring growth has been constant and substantial in the last 5 years and its growth is a clear indication of what the trend will be in the next few years. Today, with 79 member companies from around the world as members of the Berne Union and the Prague Club, we have grown to be the leading global organisation for the export credit and investment insurance industry. In 2014, members of the Berne Union collectively insured USD 1.9 trillion of exports and foreign direct investment – more than 10 percent of international trade, and indemnified USD 4.6 billion to exporters and investors, protecting them from losses suffered due to buyer defaults in all regions of the world. ST Insurance actually declined in 2014 (based on credit limits) by 4%, first decline since the start of the great recession!

Domestic versus International Volume

Asia Factoring Statistics Asia declined by XX %, greatly led by the influence of a very challenging Chinese environment, dropping over 25%. This was followed by Taiwan, which delinked 10% and Japan, declining 9%. On the contrary, HK grew by 28% and Singapore by 4%. Also positive growth figures were reported in Malaysia, Thaliand and Vietnam. YOY -25.00% -8.71% -10.45% 4.11% 27.68% 7.43% -12.90% 5-Y CAGR -5.08% -2.77% -7.66% 36.11% 8.20% 18.57% -3.26% * Data from FCI World Factoring Statistics 2017

FCI members in India SBI Global Factors Limited IFCI Factors Ltd SCB DBS Bank ECGC Limited India Factoring& Finance Solution Pvt Ltd Yes Bank Limited ICICI Bank Blend Financial Services Ltd Genpact India

India the future Giant Of factoring in Asia