Marie-Renée Bakker Lead Financial Sector Specialist World Bank Factoring Conference, Warsaw October 23-24, 2003 FACTORING AS A TOOL FOR SME DEVELOPMENT

Why A Factoring Conference For The EU-8?  Limited Credit to the EU 8 Private Sector  Development Potential of Factoring  SME Development Tool  Increased Regulatory Focus  Potential Bank Group Role

Factoring Fundamentals Factor Seller Buyer Goods A/R Obligation to pay

Factoring Fundamentals  Purchase/pre-financing of A/R  Administration and collection of A/R  Credit Approval  Credit Risk Management  Credit Risk Transfer

Domestic Factoring Benefits to the Seller  Constant Cash-Flow  Lower Administrative Costs  Reduced Credit Risk  More Time to Concentrate on Core Business Activity

Export Factoring Benefits to the Exporter  Faster collection  Ability to Sell on Open Account Terms  Increased Access to Foreign Markets  Protection Against Export Credit Losses

Benefits to the importer   Allows buying on open account terms   No need to open letters of credit   Preserves existing credit lines Import Factoring

 Credit information services  Functioning payments system  Efficient IT infrastructure (internet)  Specific legal framework for factoring services  Conducive taxation  For export factoring -- FX license  Ideally – credit insurance Enabling Environment

Increased Regulatory Focus  Trend towards conglomeration  Factors often owned by banks  Issues in consolidated supervision  Reporting standards  FX exposures  Large/connected exposures

Role of the World Bank Group  Initial Focus: EU Accession Countries  Factoring Conference  Conference Follow-up - Research Paper  Lessons for other emerging markets  Technical Assistance and financing