SCF: Promoting Growth Through Structured Working Capital Solutions

Moderator: Layalee Ramahi Head of Strategy, Tawreeq Holdings PANELISTS: ABDEL HAMID IBRAHIM Board Member, Egyptian Financial Supervisory Authority ERIK TIMMERMANS Deputy Secretary General, Factors Chain International SAMIA ELNESOQI The Internal affairs Consultant to the Council of Arab Businesswomen MINKYU KIM Head of Legal Department, LG, Regional Headquarters Middle East & Africa Mohamed El- Bahea Federation of Egyptian Industry (FEI) Board Member, Chief of Arab Cooperation Committee YAZAN AL NASSER Chief SCF Officer, iSCF Capital

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 can factoring facilitate trade How are structured working capital solutions fit for supporting 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 2 3 4 5 Buyer places an order with supplier. Factor evaluates credit worthiness of buyers. Factor approves the buyer. Supplier ships products to buyer. Supplier invoices customer and assigns invoice to Factor who pays supplier with reserve Factor collects funds from buyer. Factor pays supplier difference. Suppliers are referred to as “sellers” Retailers/debtors are referred to as “buyers”

Factoring : Why does it matter? Support for (in particular SME) business to develop and grow Support for export development Creating and supporting employment Efficient economic growth Low risk for the Financial Institution

Global Factoring Volume 1995 - 2015 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

Market Share 2015 Source FCI, IMF GDP estimates Total in € Bn 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 % Top Ten 1794.5 75.8% 4.2% Source FCI, IMF GDP estimates

22 % : non-bank finance companies Market Structure Concentrated: Combined market share of 5 biggest factoring companies in each country: on average 82% Bank dominated: 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

Egypt Market Factoring Volumes Total Factoring volumes in Egypt as of July 2016 reached 72.2 billion Egyptian Pound

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