2. SCF: Promoting Growth Through Structured Working Capital Solutions

3. 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

4. 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

5. 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

6. 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.”

7. 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”

8. 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

9. 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

10. 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

11. 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

12. Egypt Market Number of Clients
The growth in client numbers continue to reach in July 2016 *234

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

14. 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