EBRD disburses first factoring loan in Russia
The EBRD has made its first factoring transaction in Russia by lending to Credit Bank of Moscow.
The bank signed a factoring finance facility with the EBRD Trade Facilitation Programme earlier this year of up to $20 million to finance sales by small and medium-sized producers, importers and traders across the country.
Through factoring, Credit Bank of Moscow provides its corporate clients with an additional way to obtain trade finance without having to mortgage property. Factoring - the purchase, administration and collection of short-term accounts receivable by a financial intermediary - is a fast and flexible method of improving a company's cash flow. With factoring companies get immediate access to cash that is normally tied up for 30, 60 or 90 days in accounts receivable.
The EBRD's first disbursement to Credit Bank of Moscow is for RUB 80 million to support a factoring agreement for financing sales of telephone sets in Russia. This will allow the sellers to immediately receive funds for their deliveries instead of waiting for payments from their clients.
The EBRD has added factoring as a new product to its Trade Facilitation Programme (TFP) in order to further transfer know-how and innovative trade finance solutions to its countries of operations. Through TFP, the EBRD also provides guarantees to international confirming banks and factoring companies, taking the political and commercial payment risk of international trade transactions undertaken by banks in the countries of operations (the issuing banks). In addition, the EBRD grants short-term loan facilities to banks and factoring companies for the purpose of funding sub-loans to their clients.
Established in 1999, the programme has grown rapidly. As of October 2008, TFP has facilitated more than 7,600 trade deals worth nearly €4.7 billion, including 1,600 transactions in Russia worth €2 billion.
Jean-Marc Peterschmitt, EBRD Director Bank Relationships, said the loan to Credit Bank of Moscow will have a wide impact in helping local SMEs to become more competitive through better access to finance. With factoring services, a business can take advantage of growth opportunities, reduce debt and solve problems associated with the collection of the accounts receivable.
Credit Bank of Moscow benefited from consultancy services organised by the EBRD, funded by the Italian government and provided by Silvio Fasola, a leading expert with long-standing experience in factoring. In five missions to Russia over the past one and a half years he helped to establish factoring services at five local banks.
"It is exciting to see Credit Bank of Moscow further improving their domestic factoring operation, introducing international factoring and taking its place in the expanding global factoring community which reached a total world volume of €1.3 trillion in 2007. I am confident that factoring will support the growing SME sector in Russia", he said.
"This is another milestone in the long-standing cooperation between Credit Bank of Moscow and the EBRD", added Rudolf Putz, Head of TFP at the EBRD. Credit Bank of Moscow joined TFP in 2005 and has since used facilities for financing foreign trade transactions worth €68 million.