The global factoring market has slowed down for the first time in several years, from €2.37bn in 2015 to €2.36bn in 2016.
The annual survey by FCI states that while many regions showed increases, total numbers were offset by a continued reduction of volume from China and UK currency volatility.
According to deputy secretary general at FCI Erik Timmermans, the Chinese market grew fast for 10 years before seeing a decline in the last two to three years.
“A number of banks in China have probably gone a little too fast in their factoring development, without really managing the best practices. It’s a great business, but you have to do it correctly – you need to follow up on the securitisation and constantly monitor the receivable,” he explains to GTR.
The 25% decrease seen in China represents about €100bn and is an important part of the total factoring market, he adds.
Meanwhile, the European market saw a slowdown in growth. The preliminary numbers collected by FCI show a 2.5% increase in 2016 compared to 6% in 2016. The reduction is largely due to a weak pound in the UK, which represents 20% of the European market.
The drop in the exchange rate of the currency compared to the euro, which the data is reported in, resulted in a 13.5% drop in value for the country despite an increase in volume terms. The pound has been struggling following the UK’s decision to leave the European Union in June last year.
In other parts of Europe, markets showed an upward trend with France seeing an increase of 8%, Germany 5%, the Netherlands 26% and Italy near 10%.
Despite political turmoil in the US, in 2016 the Americas market grew overall by almost 10%. Brazil led growth with a 50% increase in value while Mexico, Chile and Argentina posted 16%, 12%, and 22% rises respectively.
Despite the decline, Timmermans says factoring is becoming an increasingly popular form of financing: “Banks have been shifting SME lending from non-secured lending into receivables finance and factoring. Factoring is also moving up from SMEs to larger corporates who have discovered this as a stable form of financing.”
This trend is visible in all industries ranging from manufacturing to trade to services, he says.
FCI is a network of some 400 global members which it says represent 90% of the global factoring market.