A seminar on export finance and risk mitigation relating to factoring and forfaiting was organised jointly by Global Trade Finance Private Limited (GTF) and its shareholder, Export-Import Bank of
GTF is promoted by WestLB AG, Germany and India Exim. International Finance Corporation (IFC) is the third shareholder in the company. GTF’s objective is to promote market driven export-financing solutions for small and medium-sized Indian exporters (SMEs) operating in an increasingly competitive world trade environment. By combining forfaiting and factoring under one roof in India for the first time, it offers a comprehensive receivable management service. GTF is headquartered in Mumbai with three representative offices one each in New Delhi, Bangalore and Chennai.
In his inaugural speech, Subramanian highlighted the role of India Exim as a principal financial institution in India for co-ordinating, facilitating and financing the country’s international trade. He said that India needed to maintain its export growth of 12% per annum to reach its target of 1% of worldwide trade by 2024. The regions where there was tremendous growth potential and which were not adequately tapped were Africa, Latin America and China where Indian exports could easily strive to attain a share of 10% of the regions import. He stated that factoring and forfaiting should be constructively used as financing and risk mitigation solutions and cited the example of East Asia where factoring has grown in importance to support their exports to low risk developed markets. He also highlighted that the small scale industry in India form an integral and important part of the Indian economy contributing to 30% of the industrial GDP and 30% of the exports. This sector stood to gain the maximum from using factoring for meeting their requirements for growth.
In his keynote address, Kohnstamm highlighted that factoring is a main stream financial product in developed and several developing countries with a total volume in 2001 of US$728bn of which the international business was US$48bn. There were more than 965 factoring companies operating worldwide. FCI is an international chain of 160 factoring companies operating across 53 countries with a combined turnover of US$298bn in 2001. Factoring was increasingly seen as a tool to promote trade with its benefits of flexible financing, risk protection and efficient receivable management. Among the most successful developing markets were Taiwan, Chile, Turkey and China. He also said that while domestic factoring had an older history, international factoring was growing as a viable alternative for letters of credit to handle cross border trade. International factoring requires global solutions and FCI offers a platform for factoring companies worldwide to work together with common communication systems and legal code to facilitate open account trade, which is both buyer friendly and reduced risk for the seller. He concluded by saying that there was enormous potential for factoring to support the growth of international trade in a developing economy such as India. GTF was among the new brand of factoring companies which started with a focus on international trade and as a member of FCI was well poised to meet the requirements of Indian exporters.
Margrith Lutschg-Emmenegger, managing director at WestLB – Factoring&Forfaiting, confirmed WestLB’s commitment in India to support GTF and thereby play an active role in introducing internationally tried and tested products such as factoring and forfaiting, adapted to the Indian environment.
The seminar also included expert speakers from India Exim and GTF. SR Rao from Exim Bank spoke about the bank’s role in trade finance, while Veena Mankar, managing director at GTF elaborated on GTF’s products. GTF is leveraging its international relationships membership of FCI, an association with Coface and its shareholders thereby providing access to its Indian clients to international trade finance and risk mitigation solutions. One of the innovative solutions offered by GTF in conjunction with WestLB was the ability to finance small forfaiting transactions (below US$250,000 which are generally considered too small for the international market). She indicated that in its first year of operations, GTF had successfully extended lines to exporters in diversified industries such as textiles, auto ancillaries and pharmaceuticals.
The seminar was well attended by 120 people mainly exporters, representatives of industry associations and export promotion councils and professionals from the financial services industry.
The seminar concluded with a lively and interactive question and answer session.
GTF’s paid up capital is Rs450mn of which 40% is held by WestLB, 35% by Exim Bank and 25% by the IFC. With an asset base of €400bn, WestLB is one of the largest credit institutions in Germany and one of the 10 largest in Europe with a presence in more than 35 countries. It is also a market leader in international forfaiting.
Exim Bank, established by an act of parliament in 1982, is India’s premier export finance institution. The bank facilitates, promotes and finances exports from India responding to exporters needs on a continuous and proactive basis. It was the first to introduce forfaiting into India in 1992. The IFC, a member of the World Bank Group, is the world’s largest multilateral source of loan and equity financing for private investment in developing countries and India continues to be among the main recipients of its funding.
The board of directors of GTF has six directors, of which three are representatives of WestLB, two are representatives of Exim, and one is an independent nominee. The managing director and deputy managing director of GTF are on deputation on a full-time basis from WestLB and Exim respectively, indicating the extent of involvement of WestLB and Exim Bank in the operations of GTF.