BLEND FINANCIAL SERVICES LIMITED - African … · Blend Financial Services Limited IFFSPL ......

BUILDING FACTORING BUSINESS PLATFORM PRESENTED BY

BLEND FINANCIAL SERVICES LIMITED

AT

WORKSHOP ON

“ACHIEVING SUCCESS THROUGH FACTORING”

ORGANIZED BY

AFRICAN EXPORT – IMPORT BANK

(AFREXIMBANK)

ON 2ND, DECEMBER, 2011

AT

ACCRA, GHANA

Private & Confidential

AGENDA

BLEND: AN OVERVIEW

FACTORING: AFRICA OVERVIEW

FACTORING: INDIA EXPERIENCE

BLEND : OFFERING

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2

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BLEND FINANCIAL SERVICES LIMITED

AN OVERVIEW


BLEND OVERVIEW

Market Position

India based fast growing

Corporate Advisory company

offering wide range of

financial services

People

Strong Management

team, 130 strong

professionals supported by

team of experts in Banking, Factoring &

Financial services

Global presence

Pan India network with International presence in Dubai, Hong

Kong, Sri Lanka, USA and UK

Customer

Strong clientele globally with cumulative

mandates of USD 2.42 billion

Relationship

Strong banking and corporate

network in India and

Internationally

4


BLEND : BUSINESS MODEL

MSME focused financial advisory company poised to offer 360 degree financial solutions.

Seed Startup Growth Established Expansion Exit

Debt Syndication Angel Funding

Working Capital & Structured Products

Venture Capital

Private Equity Mezzanine Capital

Initial Public Offer

Promoter funding/ Foreign Subsidiary funding

FCCB/Private Placement

Mergers & Acquisitions/LBO

GR

OW

TH

MANAGEMENT CONSULTANCY SERVICES

Expert Advisory in Factoring

Debt Syndication

Investment Banking

Allied services/advisory in Banking & Financial Services

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JOINT VENTURE – FACTORING

FIM Bank

Banca IFIS

Punjab National Bank

Blend Financial Services Limited

IFFSPL

Facilitating trade

through factoring

and related financial

services in trade

Finance.

India Factoring and Finance Solutions Pvt. Ltd (IFFSPL)

Blend has catalyzed the globalization of factoring services in India by bringing PNB, FIM BANK and BANCA IFIS together to facilitate trade promotion through factoring

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JOINT VENTURE – ROLES

FIM Bank- Credit institution having specialization in International trade finance & Factoring.

Punjab National Bank- 2nd largest Public Sector Bank in India with Business of USD 113616 million.

• Focused on developing Markets and to expand its foot print in India.

• To provide technical support and assistance to the company.

• Foray into new business.

• Acts as Strategic Investor. Gives its Brand to the JV company.

• To Provide line of credits.

Banca IFIS (Strategic Partner)- Italy based bank having

expertise in factoring and trade finance business

Blend Financial Services: A leading financial services company with expertise in Factoring and allied activities

• Brings Global expertise of factoring business.

• Brings new factoring and leasing products.

• Marketing partner.

• New product development.

India Factoring and Finance Solutions Private Limited (IFFSPL)

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CERTIFICATES & ASSOCIATIONS

MOC with Afreximbank

Blend Certified with Quality

Management System

Member of

International Network of SMEs

Member of

International Factors Group

“Extending support to the SME Sector in the continent of Africa.

Blend and Afreximbank agree to cooperate in developing and promoting trade services between India and Africa”

“Signifying its linkage with Global SME support organizations”

The network comprises at present 80 members based in 32 countries in 5 continents

Blend is among the few Financial Services Company to avail ISO 9001:2008 Certification.

“IFG is the first international association of factoring companies.”

IFG helps factoring companies to conduct cross-border business acting as correspondents for each other

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FACTORING : BLEND’S EXPERTISE

With the experience and expertise gained in India and with the intermediation of relevant institutions, Blend can play a pivotal role in developing factoring product in Africa

Proven Track record

Technical Knowhow &

product capability

Understanding of SME

SME centric organization and understands SME

funding requirement and issue

Expert team with complete knowledge of factoring business/ product and business

processes.

Instrumental in setting up India Factoring, in 12 months time has factoring turnover of

approx USD 250 million with zero NPA

Wide structuring ability for each transaction. Have developed unique industry specific product.

In factoring business for past 12 years; in depth understanding of all challenges of the business & product

Resource management – ability to

assist raising funds through

innovative structures

Knowledge of

challenges of product

and business and its

mitigate

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FACTORING

INDIA EXPERIENCE


FACTORING – INDIA SCENARIO

India - 2010-11

Number of Factoring companies: 11

Domestic Factoring Turnover (in Millions of EUR): 2,600.00

International Factoring Turnover (in Millions of EUR): 150.00

Total Factoring Turnover (in Millions of EUR): 2,750.00

Started in 1991 with SBI factors

Grew by over 800% from 1998 to 2003

Between 2003 to 2006 grew by 120%

Slowdown had a large effect on the product and turnover became half vis-à-vis 2008 in 2009

85% of the market share of SBI Global Factors

Turnover Growth from 2009 mere 4% in 2010

Source – Factor Chain International

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FACTORING – INDIA SCENARIO

Till date limited nos. of players engaged in factoring activity.

In 2010, factoring turnover reached Euro 2750 million, which constitutes roughly 0.40% of India’s GDP. Factoring turnover in India is approx. 0.048% of the total Bank credit.

Factoring turnover in India is mere 0.17% of the World Factoring turnover and 0.77% of total Asia turnover.

Products offered by factoring companies constitutes Domestics, International, disclosed, undisclosed. Currently facility offered are with recourse factoring due to ban on credit insurance.

International Factoring still to gain momentum and factoring volume constitutes 95% of domestic factoring.

Majority of the factoring business in India is controlled by top 3-4 major players.

1625

1990

3560

5055 5200

2650 2750

0

1000

2000

3000

4000

5000

6000

2004 2005 2006 2007 2008 2009 2010

Factoring Volume - India

Million €

Source: Reserve Bank database/Factor Chain International

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FACTORING – INDIA SCENARIO CHALLENGES

Absence of Regulatory framework.

High stamp duty on factoring transaction.

Lack of supportive legal framework – uneven playing ground with Banking system.

Competition from Commercial Bank.

Access to information on credit worthiness.

Mitigated once Regulation of Factor (Assignment of Receivables) Bill, 2011 is enforced

Improved since establishment of CIBIL; Reserve Bank of India has already given approval to 3 new players

Challenges are similar in African Market & the story can be build taking cue from Indian experience 13


FACTORING – INDIA SCENARIO FACTORING BILL

For any factoring business to grow, there has to have robust legal and regulatory framework. With the advent of “The Regulation of Factor (Assignment of Receivables) Bill, 2011”, the same will get addressed giving way to development of Factoring in India and allowing International Factors to set up shops.

What we are going to achieve with “The Regulation of Factor (Assignment of Receivables) Bill, 2011”

Registration of NBFCs as a Factor with Reserve Bank of India (RBI) and RBI to regulate the Factoring Companies.

Clarity on the Rights and Obligations of parties to the contract for Assignment of Receivables and setup of Central Registry for registration of assignments.

Linkage with MSME Act, 2006 which will give better market coverage to the Factor.

Central Registry to be set up under section 20 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 to give right to the Factor(Assignee) on specific Assignment.

Amendment in Civil Procedure Code, 1908 to extend the law relating to recovery of Debt to dues under a Factoring Arrangement.

Amendment in The Credit Information Companies (Regulation ) Act, 2005, bringing disclosure with regards to recovery of Assigned Receivables.

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FACTORING – EMERGING BUSINESS OPPORTUNITY

Trade finance to drive the global economies for years to come.

Emerging economies will consolidate their position as the ultimate provider of commodities, food and fuel to the rest of the world.

Emerging economies are enhancing their political – economic influence in the world.

International trade is shifting towards open account terms – supply chain financing and innovative trade finance to replace L/Cs.

Factoring critical for trade finance – global economy.

SMEs in emerging markets are important for driving global economy.

Factoring becoming a mainstream product and getting wide acceptability.

Liquidity crunch and factoring (boutique of services).

Rewarding for – all stakeholder, i.e. institutions, investors, the product and economy. 15


FACTORING – BENEFITS TO SME

Source: A Study on Factoring by SIDBI

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FACTORING

AFRICA – OVERVIEW


Factoring Companies in AFRICA

FACTORING - AFRICA

Africa Number of Factoring

companies

Domestic Factoring Turnover (in Millions

of EUR)

International Factoring Turnover (in Millions of

EUR)

Total Factoring Turnover (in Millions of EUR)

Egypt 5 50 150 200

Mauritius 2 122 3 125 Morocoo 4 905 166 1,071 South Africa 5 14,895 225 15,120

Tunisia 4 260 35 295

Major Factoring Companies - AFRICA

Egypt

1. Egypt Factors S.A.E.

2. Export Credit Guarantee Company

of Egypt

Mauritius

1. MCB Factors Ltd

2. Mauritanie Leasing

Morocoo

1. Attijari Factoring Maroc.

2. Banque Marocaine pour le Commerce et

l'Industrie

3. Maroc Factoring

South Africa

1. Nedbank Corporate

2. Standard Bank Debtor Finance

Tunisia

1. UNION DE FACTORING

(UNIFACTOR)

2. Tunisie Factoring SA

Source : Factors-chain international

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Factoring Companies currently present in Africa

NEED TO ESTABLISH MORE FACTORING COMPANIES

With the experience and expertise gained in India, Blend can play a pivotal role in development of factoring in Africa by way of assisting existing companies developing sound systems and establishing new companies/divisions (with a Financial Institution) on Turnkey Basis.

Source: Factor Chain International

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BLEND: OFFERING


WHO SHOULD GO FOR FACTORING?

HOW TO PREPARE A FEASIBLE BUSINESS PLAN?

WHAT SHOULD BE THE CAPITAL OUTLAY?

HOW TO IMPLEMENT THE BUSINESS PLAN?

WHEN TO START THE BUSINESS?

DEMOGRAPHIC VS DOABLE BUSINESS

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THE THOUGHT OF STARTING A FACTORING COMPANY


Blend proposes to take up projects for establishing Factoring Business Platform on turnkey basis

Training of staff

Implementation of pre sanction process

Credit & risk management process.

Operations (Collection & Debt Management)

Sales & Marketing

Resource mobilization structres

Setting up the business process –

Establishment of policy guidelines and standard operating procdures

IT – Factoring Management System

Finance

Simulations & Trial Runs

System control audits

Handover to pre trained team

Periodic Audits and system enhacements

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FACTORING ADVISORY – START UPS

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Advisory to existing factoring companies – New product development. Assistance in building Credit, risk monitoring and scoring systems.

Risk management & mitigation, fraud prevention systems and processes.

Assistance on building sound IT interface to suit factoring.

Assistance on Innovative resource mobilization structure (depending upon

strength of the principal and economic environment of the country).

Credit Insurance advisory and liaising to facilitate down selling of portfolio.

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FACTORING ADVISORY – EXISTING COMPANIES

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SUCCESSFUL FACTORING STARTUP – KEY ELEMENTS

AT THE START – Thorough understanding of economic condition/environment of the country a. Regulatory environment, development of financial

system, legal system support.

Understanding of existing factoring setup/environment a. Analysis of existing factors and their business b. Liaise with the association, if any present in the country Choosing the right team to prepare the plan which is

profitable for the investors/stakeholders

Elements of successful startup – a. Local business specs

b. Legal requirements for the business

c. Human Resource Management

d. Financing/Fund Raising options

e. Suitable IT platform/solution

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SCOPING – KEY INFLUENCING FACTORS

Country’s legal infrastructure needs to address the issues with respect to legal assignment of receivables, security interests of the property, requirements of registration system of collaterals etc.

Legislative

Framework

The role of judiciary in settlement of disputes is also of extreme importance to ensure effective factoring operations in any country

Judicial Framework

Governed by a regulatory body and in case of no regulations factoring companies operate as per the corporate governance rules

Regulatory

Framework

The accounting rules and tax code and their application and other key elements and thus this essential to clearly define the tax provisions

Tax Framework

POLITICAL

•Political change : Change in government through democratic election can influence future business strategy

• Trade policy

•Political uncertainty can lead to a fall in investment by businesses and influence decisions on expansion and business ventures

ECONOMIC

• Sophistication of Financial Markets – ease with which capital can be moved and raised

• Monetary and Fiscal Policies – interest rates, tax regimes, government aid

SOCIAL

•The impact on the local environment not only affects human communities but can also inflict widespread ecological damage.

TECHNOLOGICAL

•Availability and developments in technology can have a powerful influence

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SCOPING - MARKET & PRODUCT SEGMENT

Advanced

Stable

Growth

Start up

SME

Mid & Large

Corporate

Factorable

Industry Growth products

Complex Products

Advanced products

Geographical Coverage

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SCOPING - COMPETITION & BARRIERS

Banks &

Financial

Institutions

Existing

Factoring

Company

Competitive

Products

Competitors

MAJOR COMPETITOR

• Existing presence

• Vast resources

• Product Reach

Lack of established players leaves gaps to explore the market

Product / Services

Value Proposition Competition

Factoring Cash flow finance; increases with business

-

Traditional Financial Products

Only finance/balance sheet funding/low cost

Domestic & International Factoring

Trade Finance Payment system widely used International Factoring & Invoice Discounting

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RISK MANAGEMENT

Board Approved Risk Policy & Procedures

Risk Committees at Board/ Management Level

Combination of Rating and Appraisal System

Evaluation of Performance and Financial Risk

Non Traditional Information Sources

Independent Concurrent Internal Audit Reports to Board

New Product Introduction Process

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START UP SUPPORT

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BUSINESS Start up Manuals

Training

Daily Communication

On Ground help & Support

IT Implementation

Decision making matrix

Human Resource


BUSINESS SETUP

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SOP’S AND PROCESS FLOW

•Describes and structure the different phases of process of selling services, assisting marketing activity and its decision making process.

Sales

•Provides guidance on the risk appetite and risk policies. Credit & Risk

•Contains the various processes of Finance and eligibility and authorization matrix.

•Functions, duties and responsibilities of the finance department within the company.

Finance

•Details the various processes of operations with organization.

•Functions, duties and responsibilities of the department within the company along with work flow for operations activity.

Operations 31


SALES – SOP & PROCESS

Describes and structure the different phases of process of selling services, assisting marketing activity and its decision making process.

Products

Formal Selling Structure

Credit Assessment/

Approval Process

Guidelines on pricing

Sales & Marketing Strategy

- Products to offer - Basic qualifying criteria & requirements

- Prospect tracking - Indication of terms - Client visits - Documentation - KYC guideline

- Client risk scoring - Financial spreads - Client survey - Approval

- Fees - Funding cost/Interest - Collection cost - Stamp Duty & Taxes - Tariff Card

Application Form

Debtor/Vendor Information Sheet

Client Information

Sheet & KYC

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CREDIT & RISK – SOP & PROCESS Provides guidance on risk appetite and risk policies

Risk Management

Managing Risk

KYC - Policy & Procedure

Credit Approval Process

Quality of Asset & Provisioning

Capital Adequacy

Maximum Exposure

Approval Powers

Credit Risk Policy

Counterparty Exposure

Company information form

Personal information form

Client Assessment note

Financial Spread

Client Risk score

Client survey form

Debtor Assessment

- Responsibilities - Risk Categories

Policy guideline for managing risk categories

- Provisions - Revenue recognition

Policy guideline on credit approval process & client assessment

Management of CAR as per statutory regulation/requirement

Guidelines on concentration risk/exposure norms

Approving authority as per the facility type & exposure

Framework for monitoring Credit

risk as per the statutory and

regulatory requirement

Framework for decision making and internal limits for counterparty/country

exposure

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FINANCE – SOP & PROCESS Details the function, duties and responsibility of Finance Function

(overall control and management of company’s Finances)

Duties &

Responsibilities

Liability Management

Bank Accounts

Investment & Treasury

Accounting

Expense Management

Approving Authorities &

guidelines

- Approving Authority - Levels of authority - Exceptions

- Budgetary controls - Statutory monitoring & reporting - Pricing & cost benefit analysis - Expense control

- Borrowing - Pricing

- Authorization - Monitoring - Liaising with Banks

- Investment - Treasury

- Financial Statements - Record keeping - Financial Reporting - Accounting System - Statutory Audit - Internal Audit

- Capital - Operating

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OPERATIONS – SOP & PROCESS Details the function, duties and responsibility of Operations

(work flow of operations activity in accordance with the Factoring Management system)

Client Setup

Debtor Setup

Processing of Documents

Disbursement

Payout

Receipt & Appropriation

Client Contact

Debt Management

- Collection follow up - Debtor follow up - Vendor follow up

- Facility note - Facility Setup - Amendments if any

- Debtor Setup - Debtor limit - Debtor contact

- Required documents - Document handling - Document checking - Checking procedure

- Fund availability - Limit availability - Exchange rates - Authorization

- Client -Entry - Authorization - Advise

- Correspondent

- Cheques handling - Receipt - Appropriation - Non Factored cash - Cheque returns

Dispute resolution

Dunning

Adjustments & Reassignments

NPA

Disaster recovery

Controls

Authorization Matrix

Document checklist

- Overdue/Dunning - NPA Management - Legal recourse

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IT – FACTORING MANAGEMENT SYSTEM

IT system enables, integrated management of various assets involved in the factoring business.

Why it is required? Factor processes and input massive amount of

complex data everyday.

Fast and reliable info necessary for business to identify trends.

Proper tools are always required to take informed and effective decision.

Increased productivity and optimal resource utilization.

It cannot do – Replace human judgment

Find and provide appropriate solution to the problem

Real time account management

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SYSTEM INTEGRATION Integration of Factoring Management System with other systems

(inside and Across organization)

Factoring Management

System

Bank

Regulatory systems

Other External Systems/

Organization

Accounting System

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PRE SANCTION PROCESS

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Client/Prospect

Visits

Preliminary Analysis

Indication of Terms

Field Survey

Internal Risk Rating

Credit Assessment

Approval

Verifications

- Debtor/Vendor Verification - Client plant visit - Credit history verification - Reference checks – Bank & Trade

- Adherence to risk parameters as per the policies - Product parameters

- Performance risk - Debtor/vendor track record

- Recommendation on overall performance and credit risk - Recommendation on term & condition - Recommendation on contract - Documentation requirement – Transaction & Legal

A well defined and co ordinate process facilitates informed decision and enable risk mitigation


OUR OBJECTIVE

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Factoring Africa

Emerging Business Opportunity

BLEND PREPOSITION

Build Train Transfer

Feasibility/Scoping/Business Plan

Business Setup

Train the team on ground Transfer the business setup to trained team

POST TRANSFER SUPPORT (IF REQUIRED)

THANK YOU

Blend Financial Services Ltd

4th Floor,C Wing, Pramukh Plaza, Cardinal Gracious Road, Chakala, Andheri(East), Mumbai 400099, India t +91 (22) 67770000 |f +91 (22) 67770019

E [email protected] | w www.blendfinance.com

mailto:[email protected]




http://www.blendfinance.com/

BLEND FINANCIAL SERVICES LIMITED - African … · Blend Financial Services Limited IFFSPL ......

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