The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an agreement in Malta to provide Fimbank with up to US$10mn in tier two capital by way of convertible loan to support the establishment of up to five factoring companies in IFC’s client countries.
The investment supports Fimbank’s investments in export factoring companies in a number of selected countries such as Argentina, Brazil, China, Russia and Dubai, thereby creating a network of specialised trade finance institutions geared towards the promotion of factoring as an alternate trade finance product. These companies will cater to the needs of SMEs especially exporters who will use factoring to mitigate the credit risk of the buyer while at the same time be able to trade on an open account basis.
Fimbank was established in Malta in 1994 and is a provider of trade-related financial services to clients in emerging markets. Fimbank’s strategy is to establish a global platform that would introduce trade finance products (factoring and forfaiting) in emerging markets in partnership with local banks.
In line with this strategy, it has acquired (i) London Forfaiting Company (LFC), one of the leading forfaiting companies in the world, focused on trading assets originating from emerging markets; (ii) a 38.5% shareholding in Global Trade Finance, a factoring company based in India; and (iii) a 40% shareholding in Factors Egypt, a factoring company based in Egypt.
For the new investments Fimbank will continue its strategy of aligning with a strong local partner while playing the role of technical partner capitalising on its international expertise in trade. As of December 2004, Fimbank had over US$220mn in total assets and an equity base of over US$48mn.
IFC’s director for financial markets, Jyrki Koskelo states: “IFC is pleased to be working with an institution like Fimbank which is entirely focused on enhancing trade-related financial services to emerging markets. Given Malta’s recent membership in IFC, we are looking forward to partnering with other Maltese companies to promote the further development of the private sector in our client countries.”