December First words... and Last words. Summary. Jeroen s Logbook September, October and November 2011

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1 H o r i z o n s December 2011 First words... and Last words Dear FCI friends, After many years of involvement with FCI, initially as International Manager of Factofrance Heller (the later GE Factofrance) and in the more recent years as the editor of the FCI Horizons, I have to bring you the sad news that my health condition forces me to send a warm farewell to all of you. This will be the last Horizons edited by myself and that explains the above title. From now on I must concentrate on my family and my closest friends, and I will lack the time and energy to write more personal notes to the FCI friends and colleagues, near and far, who have enriched my life for so many years. It is not easy to say farewell, but life comes and goes. With my very best wishes, Frans Milders frans.milders@yahoo.com Summary Jeroen s Logbook September, October and November 2011 State of Affairs: ExCom Member Daniela Bonzanini Extract from the minutes of the Communication Committee Meeting Education Committee update December 2011 FCI s new seminar on Purchase Order Management POM Spotlight on Education Best Students 2010 FCI Courses: Mr. Tamer Wasfy Mr. Edgards Niedra Ms. Yan Xu Extract from the minutes of the Marketing Committee Meeting Member s Showcase: Introducing Octet Finance Pty Ltd and its unique Trading card offering FCI Statistics Miscellaneous Coming Events New Members We re welcoming: A brief on Ecobank Kenya limited F a c t o r i n g E x p l o r i n g n e w h o r i z o n s

2 2 Jeroen s Logbook September, October and November 2011 Singapore After the summer period, spent primarily in Amsterdam, I returned in September to Singapore for meetings with three of our four local FCI members. Each time I am visiting a bank member, I must be prepared for changes in organisation, new reporting lines, new faces, new opportunities, new obstacles, new excuses, new promises. This time it very much applied to Singapore and I found the mood varying from very positive to very negative. Much time was dedicated to Basel 3, as some of the Export Factors claim that under Basel 3 additional capital has to be reserved when the selected Import Factor is NOT a bank. They forget to mention that under the same Basel 3, the superior controls resulting from a factoring solution, and the proven track record over time of lower write offs, allow that LESS capital is to be reserved for factoring than for traditional bank lending instruments. Singapore itself kept amazing with the ongoing improvement of infrastructure and the addition of spectacular architecture, but I had the distinct impression that there was a sombre mood in the press, in business circles, in the street, all as a result of Singapore s extra vulnerability to world economics. Let us hope that the forthcoming FCI Legal Seminar in April 2012, in Singapore, may make all our local members more positive again about their FCI membership. Ju Ming museum, Taiwan. Singapore. Taipe i, Taiwan In Taiwan I visited 15 of our 18 members. All but one were banks and nowhere did I feel the energy and atmosphere of a stand-alone factoring company, or even a stand-alone factoring division. When I was received by senior executives, they were often poorly informed about what is really going on in the factoring world, and when I was received by junior executives, I had to hear that senior management was unsupportive and only interested in cost-cutting and cost-cutting. And then there were the visits where the key-persons suddenly proved to be absent, invariably due to important other business. All in all, and despite the reported figures for domestic and international factoring, I found this particular visit very depressing, partly because I only heard negative comments about the future market conditions for factoring, partly because the number of people in Taiwan with a real fire for factoring has diminished to practically zero. Cut throat competition among the banks has eroded the margins, Taiwan is the only major factoring market without a national factoring association, and the lack of commitment is also illustrated by the fact that nobody is interested to serve on FCI committees. The common opinion is that FCI development should be done by others. continued on page 3

3 3 Jeroen s Logbook continued from page 2 The one and only positive development I detected was that our Chinese members and our Taiwanese members seem to find each other more and more. The factored invoices are sometimes of such a size that one wonders what is really going on, but it certainly contributes to the edifactoring.com measured volumes. T ianjin, China With the improved relations between China and Taiwan, a direct flight from Taipei to Tianjin was the perfect way to reach the city where BCR organised its traditional Asian Factoring and Asset Based Finance Conference. I was asked to deliver an opening address presentation under the title: Is Asia Pacific becoming the new global leader for factoring markets?. Quite frankly, my answer was no. The reported volumes are substantial, but levels of know-how are thin in most instances and as long as most of the banks involved are treating factoring as a service of lesser importance, there is no way to speak about leadership. BCR had arranged a very impressive panel of speakers, but it was sad to notice that during the Q&A sessions, most of the people involved were foreigners rather than local representatives. It was another illustration that the factoring industry, whether in China, Taiwan or to a lesser extent Hong Kong has not yet reached a level of maturity. Painful was the complete absence of delegates from Japan, Korea, Taiwan and the entire ASEAN region. Belgrade, Serbia With excellent cooperation and hospitality of our two local Serbian members, AOFI and Marfin Factors & Forfaiters, FCI organised an Export Factoring Promotion Conference in Belgrade. With speakers Aysen Cetintas, Panos Papatheodorou and myself we addressed in the morning an audience of more than 100 people, in the head office of the Belgrade Chamber of Commerce. Aysen and I explained the mechanics and advantages of international factoring, Panos focussed more on the success of the factoring industry in countries like Greece and Bulgaria as examples to be followed. And as the always successful finale we staged the Role Play together with our local members. After a luncheon with the participants we continued with an afternoon Brainstorming Session to which we had invited factors, banks and other financial institutions BCR Conference Tianjin. from Serbia and the surrounding Balkan countries. With close to 40 participants we focussed on legal barriers, commercial practices, image of factoring, factoring inside a bank, and factoring offered by independents. There were no conclusions other than the need for more cooperation on national level in the form of factoring associations, but the atmosphere was extremely stimulating and the attendants thoroughly enjoyed meeting so many of their own industry colleagues, for many a first time. With the old section of Belgrade as magnificent backdrop, we enjoyed two dinners which illustrated that life in Belgrade has changed considerably from the darker years in the past. It was a real privilege to be there! continued on page 4 Serbia Speakers Panos Papatheodorou & Aysen Cetintas.

4 4 Horizons December 2011 Jeroen s Logbook continued from page 3 Paris, France In combination with the visit to one of our local FCI members, I attended a short Board meeting of the EU Federation for the factoring and asset based financing industry. EUR has recently published A study of Legal Environments across Europe, a document which will in due course also be shared with the FCI members. EUF is also dealing with issues as VAT, accounting standards, Basel 3 and the Rome Convention and the need for lobbying towards the authorities in Brussels. Legal Committee visiting Freddy and Ann Salinger. Horsham, UK During the early part of October the Legal Committee met for 2 ½ days in the UK. More than a day was set aside for finalising the Supplemental Agreement for POM (Purchase Order Management), the remaining time was used to review all the questions from members which during the past six months have been presented to the Committee, and which in the meantime have been commented on by way of extensive exchanges. In addition, preparations were made for the next Legal Seminar in Singapore (15-18 April, 2012) where the Legal Committee hopes to repeat the very successful Legal Seminar held in Spitzingsee, Germany, earlier this year, and more than four years ago in Hong Kong and Miami. The EUF Committee on statistics is making gradual progress, but too many local factoring associations are still ineffective in gathering even basic information in a timely manner. From our own experience in FCI, we know how difficult it is to get cooperation from all. Bangkok, Thailand The first POM Seminar was a great success and took place as planned in Bangkok, without any complications resulting from the floods which affected Thailand at the same time. Our Education Director is reporting on the Seminar on page 11. continued on page 5 A social highlight of the meeting was an evening visit to Freddy Salinger and his wife Ann. As Honorary Member of the Legal Committee, Freddy is still deeply involved in the work of the Committee, but at the age of 93, attending committee meetings has become too strenuous. Recovering from recent hip surgery, we found a much more cheerful Freddy than we had dared to hope and it was a unique joy to revisit the past with Freddy and even look at some aspects of the future. The meeting was also used to say a formal farewell to Helmut Paris, an important member of the Legal Committee for many years, and together with Marco Loni, the architect of the new GRIF, the document that succeeded the earlier FCI Code of International Factoring Customs. River View from Bangkok Sheraton Hotel.

5 5 Horizons December 2011 Jeroen s Logbook continued from page 4 all-time high, the country has too many banks with relatively weak management structures, sme s are not properly served, the education system does not keep trend with the economic developments. Under the circumstances, the government is fearful of allowing additional financial institutions to enter the market, including some much needed separately incorporated factoring companies. Left in the hands of the banking sector, factoring volumes will remain marginal as a result of lack of commitment. Modern Ho Chi Minh City view. Hanoi and Ho Chi Minh City, Vietnam I was asked by McKinsey (management consultants) to give a presentation on international factoring to one of their clients, a major commercial bank in Vietnam. At the end of my two-hour presentation, one of the McKinsey consultants startled me with the question: What is the difference between lending against receivable and factoring?. Even though I had touched several times on the unique capability of a factor to manage the debtor portfolio risk by controlling the collection function, and by benefitting from all the associated information about disputes, credit notes etc. etc., the lack of understanding by a welleducated McKinsey consultant made me wonder: why is it so difficult to break through the brick wall of misconceptions? Why is it so difficult to understand that factoring and banking are not the same? The other visits in Vietnam, to our member Vietcombank and to other potentially interested parties, left me with the impression that the building boom of commercial and residential property does not fully reflect the state of the economy, or the health of the backing sector: non-performing loans are at an M anila, Philippine s One of the best known banks in the Philippines has expressed an interest to join FCI, or to be more precise, to rejoin FCI. Their factoring and leasing subsidiary was a member of FCI until the Asian financial crises in 1997 when the factor s parent bank failed, later rescued and merged into another bank, now the largest in the country. An excellent reception, also including officers of IFC, with very good questions from both the leasing/ factoring subsidiary and the international banking division, put me into a more positive mood again. Even so, it was time to go home again, partly for the final preparations of a series of brainstorming sessions in December/January in Chile, Sri Lanka and Thailand. They will be covered in the next edition of FCI Horizons. Jeroen Kohnstamm Secretary General Lunch with all the ladies of Vietcombank.

6 6 State of Affairs ExCom Member: Daniela Bonzanini Positive Developments in her Area of Responsibility I am pleased to provide you with an overview of the factoring industry in the countries for which I am responsible as Executive Committee member. The general economic environment The crisis which started in 2008 has become more severe in the last months. While some countries are suffering more than others, the entire European Community is affected by the economy slowdown with possible repercussions on consumption and investment decisions. The financial sector - and banks in particular - are hit by difficulties generated by the sovereign debt tensions which are impacting on banks market evaluations and their ability to raise medium- and long-term funds. As a result, and certainly compared to the past, the overall more selective assessment methods have seen the cost of funds being raised considerably. The present economic conditions, characterized by credit restrictions, make factoring an easier and quicker solution to obtain working capital financing in particular for SMEs. Present State of Affairs by country Austria The Austrian economy experienced a very good first half of However, since then the mood has changed. In spite of this decrease in optimism, the GDP will still show a real growth rate of 2.9% in 2011, with exports being the main drive behind this growth. The factoring market in Austria has - in general - developed along the lines of these economic trends. After a strong first half year 2011 with growth rates of the individual companies of 20% and more, these rates came down in the second half while for the whole year 2011 a market growth of 5% looks likely, keeping the ratio of factoring volume versus GDP roughly at the 2010 level of 2.9%. One reason for this reduced growth lies in the fact that Coface has terminated to offer factoring and not all of their clients have continued to use this product. This exit leaves the market with four major factoring companies, each one of them entirely owned by one of the four big Austrian banking groups. With this background in mind, the factoring industry is hopeful to get a stronger tailwind from their shareholders in need to decrease their risk weighted assets due to the stronger solvency requirements to be met in Czech Republic After an important drop registered in 2009, the factoring industry has returned to growth and at the end of September 2011 the Factoring Association reports a market increase of 21%. International factoring represents an important share of the total turnover, almost 27%, while Export factoring maintains a predominant position having registered an increase of 36% and a market share of almost 24%. There are 8 main players operating in the Czech market, however in 2012 this number will be reduced as a consequence of the decision by Lubljanska Banka and Coface to terminate their factoring activities. Hungar y 2011 Showed a positive trend, confirmed by a 9.8% increase compared to The 8 largest players have a market share of 85%, but only 4 of them exceed a share of 10%. The other 15% is covered by about 22 other smaller factors. The Factoring market is very competitive and even though the financing and liquidity costs keep going up, factoring companies need to lower their conditions in order to get new clients. continued on page 7

7 7 State of Affairs continued from page 6 Poland Factoring proves to be once again the fastest growing branch of financial services in Poland with an enormous potential. During the 3rd quarter of 2011 the Polish factoring market witnessed an increase of more than 17% of turnover compared to the same period last year. An analysis of the current macroeconomic situation in Poland, as well as the plans and expectations of Polish entrepreneurs, confirm that this positive trend will continue. The growth estimation for 2011 is between 18 and 25%! A major challenge for Factoring companies is the threat of a decrease in export turnover of Polish entrepreneurs caused by the weakening economies in some European countries. Last September the Polish Factoring Association organized the 2nd International Factoring Congress which took place in Warsaw, attended by a large representation of domestic and foreign factoring companies. Subjects focused on the present situation of the industry and its future outlook with particular attention to two important issues: funding for factoring companies and regulations. Romania Factoring has become a popular product in Romania and it is used by SMEs and large companies. The factoring market is dominated by banks which cover 75% of the industry. The 2011 trend is very positive with most of the factoring companies showing an increase in their business. The Romanian Factoring Association estimates a growth of about 20%. The demand for without recourse products is growing, but because of the economic context, credit limits are difficult to be granted. As a result, this situation also impacts the development of import factoring. Two major events took place in 2011 from a legislative point of view: a new law (Law 125/ ), regulating the assignment of debts on public institutions, and the updated Civil Code bringing forth several changes which the factoring companies are in the process of assessing. Rus sia In the first half of 2011, the factoring market showed a growth of approximate 87%, compared to the similar period of By the end of the year the volume of factoring is expected to reach 700 billion rubles (more than 20 billion USD) exceeding the pre-crisis level. Recourse factoring continues to be predominating but the non-recourse share is increasing. This in spite of the fact that at least for the time being this product is used mainly by large clients. The volume of international factoring is growing while its market share will reach about 1.1% of the market. In spite of such a small share, this does reflect a positive trend. In order to maintain growth, most of the players will have to turn to the different client sectors than the current ones, namely suppliers to the federal retail chains. However this will require changes to the development by the factors of their risk management systems. Main targets will be: Service quality enhancement, reduction of response time to clients, the development of reverse factoring and integration of electronic document circulation. Slovak ia After a prolonged period of a downturn, the factoring industry has returned to growth. The first half of 2011 registered a 20% increase compared to the same period in One of the main consequences of the current crisis is the 5% decrease in the non-recourse volume due to reluctance of insurers to grant higher credit limits. The three main players in the country cover a market share of almost 80%. VUBF, the only FCI member in the country, maintains its position as market leader. Italy The biggest problem with which the country is faced is the high public debt combined with the difficulty in establishing and supporting a proper growth plan. The difficulties encountered by the government authorities in implementing suitable countermeasures as well as the delay in fiscal reform and structural changes, are the underlying reasons for the lack of confidence and as a consequence the postponement of investments.. continued on page 8

8 8 State of Affairs continued from page 7 Italian banks are basically solid but they are hit by the economic turmoil. The recent downgrade of the country has caused an additional increase in cost of money and a greater perception of risk. In addition banks will have to comply with more severe solvency requirements. In this economic environment factoring has a better chance than other methods of financing. It continues to register a positive trend with a yearly average increase of about 30%. The main reasons are a. new clients and b. difficulties in obtaining banking loans. Statistics at 31st August, compared to the same month of the previous year, show an increase of 28.23% in turnover; 18.56% in outstandings and 20.85% in advance payments. Without recourse factoring represents two thirds of the total turnover. Ukraine Factoring is still a new product in this country and, as a consequence, the industry is growing fast. Factoring products and services are offered by both banks and non-bank financial companies. According to the Ukrainian State Financial Services Commission as of there were 78 registered financial companies licensed to provide factoring services. In 2010 the sales of factoring products and services reached the total amount of UAH 6.4 billion, which is 4 times more compared to 2009 when UAH 1.59 billion was recorded. Domestic factoring is predominant, while within international factoring, the two-factor import product prevails over two-factor export. Although the large majority of the factoring products are offered by banks, the potential market share of independent factoring companies has increased due to the decision of some of the factoring companies affiliated with banks to decrease their activity. Arma Factoring LLC is the largest non-banking factoring company in terms of volume of factoring transactions. I wish to take this opportunity to thank all members of the respective countries for their continuous support in providing me with updated information about their markets. Daniela Bonzanini, ExCom Member Banca IFIS S.p.A. Milan, Italy.

9 9 ComCom Extract from the minutes of the ComCom Meeting The Communication Committee meeting was held in New York at the offices of HSBC, Sept General A new member joined the Committee: Sevil Dinçer (Strateji Factoring Hizmetleri), to replace Erich Offermanns (Deutsche Factoring Bank) after years of service and contribution to the team. The Education Director, Aysen Çetintas was also present and the documentation for the Bangkok POM Seminar was finalised. The proposed Supplementary Agreement was discussed and a number of comments (in reference to the terminology of Purchase Order Approval Amount (POAA) vs. Pre-Shipment Approval Amount (PSAA) ) were made and passed over to the Legal Committee. The ComCom had the opportunity to meet with a number of local members CIT, Rosenthal, HSBC and Wells Fargo and they provided important feedback on the POM. edifactoring.com The project Follow the sun help desk to guarantee all members sufficient cover during their working hours irrespective of their location was again reviewed. A new Security Audit will be carried out after the POM messages have gone live and then on a regular basis every 2 years. In reference to Article 11.edifactoring rules and to the Alternative Interfactor Agreement, there is a concern Members of the Communication Committee Mr. Neal HARM, Chairman (Branch Banking and Trust Company) Mr. John BEANEY (HSBC Invoice Finance (UK) Limited) Ms. Sevil DINÇER (Strateji Factoring Hizmetleri A.S.) Mr. Ian REES (Octet Finance Pty) Mr. Bent SMIDT (Fortis Commercial Finance A/S) within the ComCom that factors do not understand the potential accounting implications of the Alternative Interfactor Agreement. Members are therefore strongly advised to specify in message 1 in the Service required field: Special Service and a note is to be added in the Message Text indicating that we are dealing with the Alternative Interfactor Agreement operation. Assistance to new Members It is felt that very often new members tend to dive into edifactoring without sufficient knowledge. This is wrong, but it is also a fact of life. In order to assist, a suggestion is made that new members can contact FCI for a WEBEX video conference in which they receive online quick start guide for edifactoring.com. In addition a training video could be developed for new users explaining the basics: Logging in User Profiles FSBC CRS mandatory fields, loops, CSV files. ComCom and the Education Director Aysen Çetintas met with A. Suskavcevic, C.E.O. of Commercial Finance Association (CFA) in their premises. He illustrated the Mission and History of the Association and their education programs. He also stressed that they would be very happy to further investigate the possibility of cooperation between our associations. John Beaney brought to the attention of the ComCom a number of websites worth looking at for Competitive Products/News from the web (e.g. Foreign Account Tax Compliance Act and VISA supply chain finance platform). The topic of Single Euro Payments Area (SEPA) was never fully analysed and it is felt that deeper investigation should be made with the ultimate aim to inform all members on how they could benefit from it. Harry Biletta Director of Planning and Development FCI EVER WANTED TO IMPORT MULTIPLE EDIFACTORING REPORTS INTO EXCEL? LEARN HOW TO WITH THE NEW GUIDE PREPARED BY BENT SMIDT (FortisComFin DK) AND RELEASED BY THE COMCOM IN THE PRIVATE NET

10 10 EduCom Education Committee update December 2011 The Education Committee has held its first meeting of the term in Bucharest, September Joint meeting with FCI members in Romania On Thursday 15 September 2011, the Education Committee held a joint meeting with the Romanian members of FCI in Bucharest at the offices of UniCredit Tiriac Bank. Attended by 15 persons the meeting was very successful, useful and generated very valuable input. Similar joint meetings will be repeated in Hong Kong and Moscow in 2012 Once more the meeting showed how much the local FCI members appreciate the opportunity to voice their suggestions and criticism in an informal atmosphere. Members of the Education Committee Ms. Daniela BONZANINI, Chairman (Banca IFIS S.p.A.) Mr. Jerry CHEN (China Minsheng Banking Corporation Limited) Ms. Sharon LEIGH (HSBC Invoice Finance (UK) Ltd) Ms. Yvonne WEDEL-ANDERSEN (Consultant) Ms. Joy ZHU (The CIT Group/Commercial Services, Inc.) Guide to the Establishment of a Factoring Operation After its publication in 2003, this was the first revision work on the guide. All chapters were reviewed and modified in line with the current changes. The revised and updated guide is ready for release. Progress report on e-learning platform The new platform was successfully implemented and it is in use since July The first feedback from the users is very positive. The Committee proposed to start the second level of the project on content customization with STOAS in Work Plan of the Education Committee in Release of the 3 diploma courses (twice) Release of the 5 proficiency courses (twice) Coordination and organization of POM seminars Section on POM in the FCI Manual Release of the revised FCI Manual Release of the updated Guide to the Establishment Chapter on the correspondent evaluation in the Communication Manual POM in the manuals Joint meetings with members Further development of E-learning portal, course content customization Production of the FCI Education Catalogue Aysen Çetintas Education Director FCI Bucharest City Creative Commons Attribution by Gabriel from Bucharest, Romania

11 11 EduCom FCI s new seminar on Purchase Order Management POM An excellent platform to meet with factoring professionals and for a better understanding of ªPOM A seminar, where the forces, practices and the knowledge of all FCI Technical Committees are combined. The first seminar in the series was held from 23 to 26 October 2011 in Bangkok, Thailand. As a follow-up to a long development period and lengthy discussions at the FCI annual meetings in Vienna and San Francisco, FCI offers a new product: POM. In order to educate FCI Export Factors and Import Factors on this new product, the FCI Education Programme now includes a newly developed POM seminar. The first POM seminar was organised in Bangkok, Thailand, in October 2011, and was a great success 35 participants from 11 countries enjoyed an interesting and busy programme which was based on the POM Practical Guide and the POM Supplemental Agreement. The seminar covered all aspects of POM, starting with a definition of the product, the marketing & sales of the product, continuing with legal and risk issues and ending with operational advice. Following the presentations given by the members of the FCI Technical Committees and related Q&A sessions on each topic on Monday and Tuesday, the rest of the time was dedicated to lively discussions on cases and several POM exercises for the working groups. After exhaustive and informative discussions continuing all day long, the delegates found a chance to rest and entertain themselves during night programs and also developed friendly relations with other participants. The next seminar on POM will take place in Spitzingsee, Germany, between 5 and 8 February Don t miss this golden opportunity! Aysen Çetintas Education Director FCI

12 12 EduCom Spotlight on Education As 2011 draws to a close, personal performance reviews will be occupying a lot of your time and with training and staff development being a major component of the process what better time than now to be writing about the FCI Education programme?! 44 years of knowledge and experience that has culminated into a key, USP (Unique Selling Point), a jewel in our crown which has already supported the development of thousands of factoring professionals within our membership, providing everything from knowledge of basic factoring skills to technical disciplines to supporting new products and creating opportunities for our members to foster learning within their own business environment. The exciting thing about education is that it is never ending. The first education programme within FCI was introduced in 1987, one course, The Correspondence Course which today equates to our Foundation and Intermediate courses. Since then we have gone from strength to strength providing an education process which covers all aspects of the factoring cycle. Today FCI offer 8 courses, 5 proficiency courses: The New Foundation Course. ( A must for anyone new to International Factoring) Buyer Risk Control Seller Selection and Control Dispute Prevention and Handling Legal 3 diploma courses: Intermediate Course Advanced Course Selling Export Factoring If I could make a recommendation, how about linking the New Foundation Course together with the Intermediate and Advanced Courses to create the FCI Career Plan, a cohesive three stage development process which supports your staff from a first stage as, Career Entrants through to Seasoned Professionals. This October saw the launch of Moodle, our new on line course management system. Moodle already facilitates 5.7 million courses for 37 million users in 222 countries worldwide and we are confident that this new platform will foster an enjoyable and informative e learning experience for all of our students. (Full details of all of our courses are available in Circular no dated 1st November 2011.) Ultimately our aim is to make education a sharing process; the Education Committee regularly meet students and their managers in order to gain invaluable feedback on course suitability and content, information which helps us to determine the seminars we need to run and the topics we need to consider to keep our courses totally up to date and ultimately help students fulfil their potential as factoring professionals. In 2010 the number of students sponsored by their member companies looked like this: Certificate Courses 69 students from 32 companies Foundation Course 301 students from 57 companies Advanced Course 56 students from 25 companies Selling Export Course 101 Students from 28 companies I am completely impressed! Yet, when you think that we currently have 257 member companies in FCI I do think we have the capacity and enthusiasm for more! We are committed to reaching out to those members who aren t yet fully embracing our programmes. If that s you! please tell me what s holding you back. Our challenge is to create a totally inclusive educational environment for all of the members. Experience tells us that there is a direct correlation between service quality and education. Winners of the prestigious accolades, Export Factor of the Year and, Import Factor of the Year, are members who year after year, enrol students to the education programme. continued on page 13

13 13 Horizons December 2011 EduCom continued from page 12 Spotlight on Education Knowledge, accuracy, and efficiency, delivered in a timely and professional manner are the main attributes we all seek from our partners, so it is equally important that we ensure that we can reciprocate fully and maintain the competitive spirit of FCI to the highest standards possible! Enrolment in our education programme is twice yearly, with courses starting either 1st January or 1st July each year. Details can be found in the General Library in the Private Net. So, if you are planning to enrol students, please take a look. If you have any comments or ideas to share regarding the FCI education programme these will be gratefully received by the Education Director and the Education Committee. Yvonne Wedel Andersen Education Committee (Consultant) Tips and Tricks Where to find it? FCI Course Management System (MOODLE) Have you always wanted to check the interim exam results of your enrolled students to FCI Courses? What if I told you that you can check the results with a single twist easily in Moodle. If you are assigned the role of a Monitoring Manager and given the password and user name then please follow the following steps. Log in the FCI e-learning platform via FCI Private Net On the front page (left hand block) simply choose the course you would like to check. On the next page you will find the results of your students under Interim Exam Results. Aysen Cetintas Education Director

14 14 EduCom Best Students 2010 FCI Courses (1) Mr. Tamer Wasfy Best Student of 2010 FCI Foundation Course on International Factoring What brought you to the decision to participate in this course, organized by the Education Committee? As the Head of Business Development (Credit and Marketing) in Egypt Factors, being the first factoring company in Egypt, and with a background of Banking & Corporate Credit, I have to get myself professionally educated with ALL aspects of the business I am in. In this context, I have already passed The Selling Export Factoring Diploma, with distinction, and participated in this course, which had the advantage of introducing the main principals of international factoring, FCI and provides, in one document, everything you need to know about the communications procedures for the FCI two-factor system. Now that you finished it so well, what do you expect are the main benefits in your daily job? Holding all the strings and being professionally and technically solid, make my job easier. As the Head of Business Development in EGF, I have to be very confident, convincing, and strongly aware of all the product technicalities, this is the most important benefit from the course to me. The clients usually sense how professional you are and the more solid, the higher you get accepted by them. Also, being aware of the system helps me to oversee the process of having credit limit for the buyers from correspondent factors, provide the needed data as to accelerate the process, and interact with other departments in a more effective way. How many hours daily and at what time during the day did you study for this course considering that you have a busy job and (probably) a busy private life? It is true that I have both busy job and busy private life, but it will be easier when the time is well organized, thus, I preferred not to study during the week days but to split the weekend 50% for studying (a full day each week) and 50% for my private life. What do you think you did differently resulting in beating the other participants? Actually, I had the purpose and I was challenging myself. The purpose was to have not only my name but the name of Egypt Factors, the first factoring company in my country, Egypt, higher by being the best student over 300 participants worldwide. The challenge was to get higher ranking than the one previously achieved by Egypt Factors team, as one of my colleagues has won the third prize in the advanced course few years ago. To achieve that, many factors have helped, time management, studying the materials and practicing the previous years exams twice and having some real-life practice with the assistance of my colleagues in other departments, specially the head of the International Department. In what way do you think your colleagues, working with you in international, will benefit from your newly acquired knowledge? The knowledge spread among any organization generally boosts its team capabilities and performance, so I think passing the knowledge to the team, especially the new ones, will participate in enhancing the overall performance of my company, which should come through effective and timely performance within the international business. continued on page 15

15 15 EduCom continued from page 14 Best Students 2010 FCI Courses (2) Mr. Edgards Niedra Best Student of 2010 FCI Advanced Course on International Factoring What brought you to the decision to participate in this course, organized by the Education Committee? I finished the FCI Course on International Factoring in 2006 a year after I joined Trasta Komercbanka in early 2005 to develop international factoring. Since then I participated in two FCI seminars in Spitzingsee, but I felt that it would be interesting and valuable for me to participate also in the Advanced Course to get deeper knowledge and test my skills. Now that you finished it so well, what do you expect are the main benefits in your daily job? 2. Advanced course assumes you have the theory knowledge, but it trains and tests your ability to find solutions to the complex problems in different fields using all the theoretical knowledge and practical skills to the full extent. In international factoring everyday work you have to solve complex issues fairly often, therefore the training obtained in this course is very beneficial. involving specialists from other departments which has resulted in wide range experience and I think this is the key aspect. In what way do you think your colleagues, working with you in international, will benefit from your newly acquired knowledge? We often have to solve complex issues concerning international factoring and usually the best solution is found in discussions and I feel that the knowledge and experience acquired in the Advanced Course helps me to look at each issue from different perspectives resulting in more comprehensive solution. In the end I would like to express my support for the new three-level FCI education system I believe this is the optimal education path. A complex knowledge is always best acquired if it can be attributed to real life situations, therefore I would recommend participation in the Advanced Course for people who already have at least several years experience in international factoring. How many hours daily and at what time during the day did you study for this course considering that you have a busy job and (probably) a busy private life? First of all the Advanced Course is more than just knowing the material. You have to think solutions for as many problems as you can possibly imagine, therefore all my previous work life in this field can be considered as a preparation. Of course I also again reviewed the FCI manuals and the previous years exam questions which helped me to understand what the exam will look like. This took about an hour every day for a month before the exam. What do you think you did differently resulting in beating the other participants? I have benefited from the fact that I was hired in the Trade Finance Department to develop international factoring and participate in various other trade finance projects. All problems are solved in discussions within our small but very competent department and also continued on page 16

16 16 Horizons December 2011 EduCom continued from page 15 Best Students 2010 FCI Courses (3) Ms. Yan Xu Best Student of 2010 FCI Selling Export Factoring Course What brought you to the decision to participate in this course, organized by the Education Committee? Nowadays, more and more international trades are conducted on the open account terms. Factoring is such a service that can solve the problems caused by the A/R receivables facing both the seller and the buyer. So, the factoring service has a great potential for development. The courses, provided by FCI - the world s most important and leading factoring network, is very attractive to me because it contains all of professional knowledge about the factoring industry and how to serve our clients with a high quality. Due to the international development strategy of Bank of Communications, mastering the factoring knowledge is a must in the daily job and the groundwork for providing our clients a truly professional and customized factoring service. So I decided to seize the opportunity to participate in the course. What you think you did differently resulting in beating the other 10 participants? To be honest, I never think of beating the other participants in the course. However, keeping the passion for the study and daily job is very important. To understand the teaching materials is a very basic step. I also learnt from the experienced staff and communicated with customers regarding the factoring business. Then I just expressed what I learnt in the final exam during the course. In what way do you think your colleagues, working with you in international, will benefit from your newly acquired knowledge? My colleagues and I work as a team. We share the newly acquired knowledge and working experience through daily communications and training opportunities. We work in close collaboration with each other and will enhance the competence together. Now that you finished it so well, what do you expect are the main benefits in your daily job? The FCI course will transcend my business capability to a new level. I expect to be more professional when conducting the business of factoring after finishing the course. Broadening the depth and the breadth of the study will support me to deal with complicated factoring issues more successfully, and make me more qualified and competent for my daily job. Besides, it is also very useful to my further career development and get a higher salary. How many hours daily and at what time during the day did you study for this course considering that you have a busy job and a busy private life? Well, the efficient use of time is the point. I studied for an hour or two from 9:00 pm on my working days during the course. But I think that practice is more important than just reading books. Integrating the knowledge into daily job is a quick path.

17 17 MarCom Extract from the minutes of the MarCom Meeting The four committee chairpersons: (from left to right) Julio Nielsen, Daniela Bonzanini, Marco Loni, Neal Harm. A late evening drink on one of Amsterdam s terraces: (from left to right) Alberto Wyderka, Neal Harm, Peter Mulroy, Çagatay Baydar, Harry Biletta and Josep Selles. During the two days meeting, which was held in Amsterdam during the last days of August, we had a very fruitful and rich debate. Among the many topics discussed, the following are the most interesting to mention: Ideedock The aim of this project is to receive and capture new innovative ideas for FCI. The first challenge was launched mid September and closed by the end of October. During that period the MarCom received 19 solutions (ideas) for the challenge: How can we attract more exporters to FCI Promotion Conferences? Currently we are evaluating all the ideas and soon the winner of the first ipad will be known. We will start with a new challenge end of December / beginning of January 2012, so be alert to participate. Members of the Marketing Committee Mr. Julio NIELSEN, Chairman (FactorLine S.A.) Mr. Soumendra GHOSH (IFCI Factors Ltd.) Ms. Tracey HANSON (Wells Fargo Trade Capital) Mr. Marius SAVIN (Standard Chartered Bank Singapore-Head Office) Mr. Michiel STEEMAN (ING Commercial Finance B.V.) Mr. Roberto WECKOP (EUROFACTOR AG) LinkedIn This is one of the new platforms that FCI is using to have an informal, but more interactive communication with the staff of our FCI members. We have created our own Group at LinkedIn, which is called FCI the official group of Factors Chain International. Of course all of you are most welcome to join it. Currently more than 200 persons are members of our group, who are able to discuss and exchange ideas about different topics regarding FCI and International Factoring. New projects There are a number of new ideas that the MarCom has collected from the different brainstorming sessions, workshops and round table discussions that we have done during the last year. We thank all of you who attended those meetings and gave us new ideas and opinions. We are currently in the analysing process and we will start with the feasibility study for some of these new ideas. We will continue with our efforts to find new innovative ideas and invite all of you to participate in Ideedock and communicate with us through our LinkedIn group or the traditional ways. Julio Nielsen Chairman FCI Marketing Committee

18 18 Horizons December 2011 Member s Showcase By Clive Isenberg Introducing Octet Finance Pty Ltd and its unique Trading card offering Octet Finance Pty was born out of International Factoring and the Two-Factor concept. By way of background: It is a given fact that Working Capital financiers prefer to finance account receivables from point of manufacture through to the wholesaler and then onto the retailer. Over the past 20 years, the Australian and New Zealand local business environment has seen the disappearance of the first stage (Small, Medium sized manufacturers) with the domestic supply chain now beginning with imports, predominantly out of China, Taiwan and Hong Kong. This phenomenon has not just been restricted to Australia. Most Western economies have also seen this small, medium sized manufacturing segment (SME s) migrate to China. Due to various reasons, which includes the reluctance by China s traditional banks to provide SME working capital finance (particularly for exports), the local Small to Medium sized manufacturers in China, who is exporting, has insisted on payment either by way of the receipt of a sight letter of credit or up to 50% deposit on agreement of purchase order with the importer and the remainder on production of bill of lading. And this is done irrespective of the quality of the Australian/New Zealand SME importer. This working capital restriction has a direct impact on the Australian and New Zealand importers cash flow cycle and growth. In order for a financier to tap into this small to medium sized business to business working capital transaction, a model in reverse of FCI s two factor system, which is based on the financial standing and funding of the exporter, had to be introduced. This reverse scenario, that takes the funding risk away from the financier (export factor) of the exporter and weights it with the financier (import factor) of the importer, was required. In addition areas such as buyer disputes, whether it be commercial or otherwise, as well as the legal complexities surrounding accounts receivable, had to be removed. All these factors (excuse the pun) would open the international supply chain finance arena to the largest business to business transactional arena in the world, namely the small to medium enterprise, where funding margins are significantly larger without the perceived business risk. This meant that a new generation international and domestic Supply Chain Financing Solution, using a Trade loan to facilitate a rapid exchange of funds between Buyer and Seller, had to be introduced. Answer: The launch in Australia and New Zealand of the Octet Trading Card concept and Internet portal in February So how does Octet s Four Party Process work. Financial Institutions around the world are very comfortable with the process and risk of funding consumer type receivables, when dealing via the established credit card (Mastercard and VISA) process. The critical reason behind this is that the Financial Institution linked to the merchant (seller) has the guarantee, via the credit card process, from the Financial Institution that has issued the credit loan facility to the actual consumer (buyer). The Octet Trading Card concept includes the same four party processes that exist in the consumer credit card scenario, namely; 1. The Buyer (except that in the Octet Trading Card, the Buyer is a business as opposed to a consumer). 2. The Buyers Financial Institution will lend funds to the Buyer so that it has the credit to make the purchases of the goods or services. continued on page 19

19 19 Member s Showcase continued from page The Seller (this can be any business that is selling a product or service) who wants to be paid cash immediately on transfer of ownership to the Buyer. 4. The Sellers Financial Institution that will immediately pay the Seller for the goods and/or services sold and delivered to the Buyer. Remember that these funds came from the Buyers Financial Institution. The noticeable differences of the Octet Trading Card to the consumer credit card are: A. The need to link in all four parties on the portal from the very beginning of the transaction process i.e. when the purchase order is placed and B. The system requires a series of member (Buyer and Seller) interactions from both sides of the supply chain. It progresses through a series of authorising steps using digital certificates stored on smart cards for user authentication. It ensures a validation and verification process has occurred between all parties at each sequential stage of the trade transaction. This gives the two Financial Institutions, the knowledge and comfort that the Buyer and seller have indeed transacted. The Octet Trading Portal and Trading Card ultimately are there to provide the traditional Financial Institutions the underlying risk control and mitigation, and visibility when providing working capital funding. And at the same time increasing revenue. It ensures that the Buyer, Buyers financier, seller, sellers financier confirm via the smart card and portal, very specific and critical stages of the trading transaction should the financing option be utilised. Other Benefits 1. Sourcing New Business opportunities within the Working Capital Lending Arena: The Octet Trading card provides Working Capital Financiers, especially those who have had exposure to import financing, a means to go out to their market place and market to local importers, whether they be retailers, wholesalers or manufacturers, who are buying from countries like China/Hong Kong/Taiwan and, either need/want credit terms or extended credit terms. There is also an opportunity to broaden the offering to other funding options. 2. Value Add to existing Client base: Allows the financier to offer controlled and efficient Purchase Order Deposits Funding and inventory acquisition funding with all the visibility needed. 3. It significantly reduces back office infrastructure used to control, validate and authenticate receivable or inventory funding. 4. Provides existing clients a margin earn opportunity by using cash flow funding as a means to obtain lucrative cash settlement discounts. See Scenario 4 below. 5. Provides existing clients the option to move high concentration customers out of their cash flow financing facility and therefore obtain 100% cash flow from these receivables as opposed to less than 80%. It also removes the need by the financier to verify high concentration debtors. 6. Provides existing clients greater and clear communication when dealing with overseas suppliers especially Chinese/Taiwan/Hong Kong. 7. Provides additional risk protection for the financier as the Trading Card, with its smart chip and portal, provides visibility as to where funds are being used by the client. 8. It allows the Non Bank Import Receivable Financier to source its own Import Buyers and offer funding against Purchases. a. These Buyers no doubt will be stable and successful SME s (Small Medium Enterprises). b. In these situations the same credit risk exists but the funding is weighted to the importer so the Import Receivable Financier earns much higher yields and totally controls the situation. continued on page 20

20 20 Member s Showcase continued from page Value Add to Good Account Receivable Clients or Good Account Receivable Prospects Scenario 1: Assume client has $100,000 limit with 80% advance rate and facility drawn in full. The Accounts Receivable Financier can provide a stand alone limit of $5,000 provided it s used as a purchasing facility for import or local purchases through the Octet Portal. Major benefit to the client is that a supplementary facility is now available for growth and would apply not only for international purchases but also for domestic purchases of product or services with the additional potential for earning a margin. Scenario 2: Assume client has $100,000 limit with 80% advance rate and facility is fully drawn but client does generally use some of this facility (say 10% of the 80%) to pay its suppliers. The Accounts Receivable Financier allows the client to allocate available funds, say 10%, namely $10,000 to the Octet Trading Card for purchases. The Client uses this to pay suppliers upfront for settlement discount >= to the transaction fee (merchant fee). Major benefit to the client is the 60 days interest free credit and the potential increase in margin. Scenario 3: Assume client has $100,000 limit with 80% advance rate but generally client only draws down 60%. Currently client gets terms from the supplier. The Accounts Receivable Financier allows the client to allocate available funds, say 10%, namely $10,000 to the Octet Trading Card purchasing facility, which is effectively secured by the Receivable Financier reserving 10% out of the existing 80% availability. The Client uses this to pay its supplier upfront for settlement discount > than the transaction fee (merchant fee). Major benefit to client is the 60 days interest free credit and potential increase in margin. Offer these high concentration debtors an Octet Trading Card purchasing facility where the client becomes a Seller and pays for the full transaction fee and these high concentration debtors become Buyers. Seller also has the option of introducing a proven loyalty/rewards program to these Buyers. Major benefit to client is receiving 100% payment on delivery. Conclusion Octet Finance Pty Ltd is now able to cover the transactional flow through the whole supply chain from the point of funding purchase order deposits to the eventual receipt from the end customer. Looking at a bigger picture conclusion/vision, FCI as a closed community in its own right, should seriously consider rolling out the Octet Trading Card and Portal to its members. This would not only open the association (FCI) and its members to the largest business to business market in the world, namely the small to medium enterprise, where margins are significantly larger without the perceived business risk, remove the counter party risk that is so critical to the export factor and at the same time give those non bank owned import factors the opportunity to build up their own import finance arm without the constant need to justify their credit standing to the export factor. Finally It would bring FCI into the forefront not only of international factoring but international trade and therefore providing a critical defense against Closed community type payment systems providers such as VISA, Mastercard (should they enter the business to business financing space), ICC, IFC and SWIFT and deal a critical blow to the trade credit insurers. Clive Isenberg Managing Director, Octet Finance PTY, Sydney, Australia Scenario 4: Similar to Scenario 3 but there is one or two debtors of the client that have high concentrations.