Factoring reform could address market gap in receivables finance in Ukraine estimated at EUR 1.5-3.4 bln – EBRD
Factoring reform has the potential to address the market gap in receivables finance in Ukraine, currently estimated at between EUR 1.5 billion and EUR 3.4 billion, and developing the factoring sector will help expand access to finance for businesses and save jobs, Head of the Trade Facilitation Programme of the European Bank for Reconstruction and Development (EBRD) Rudolf Putz said during a webinar held jointly by the EBRD and the National Bank of Ukraine (NBU) on Tuesday.
According to the EBRD, in Ukraine, receivables finance represents only 0.1% of the country's GDP, compared to 8% of output in neighboring Poland, where the factoring market remains the fastest-growing financial sector, worth EUR 66.1 billion and serving more than 18,000 businesses.
"The demand from smaller businesses, which typically find it difficult to secure bank loans, will grow exponentially as the COVID-19 pandemic shows no signs of slowing down," Putz said.
The EBRD said that the webinar brought together more than 100 trade professionals, bankers and international experts. The two-day virtual event called for sound policy and a good regulatory framework to enable the healthy development of factoring, to expand access to finance for small and medium-sized enterprises (SMEs) and to strengthen their financial resilience.
The event was delivered by the factoring working group at the National Banking Association of Ukraine in cooperation with FCI, the largest global representative body for factoring and financing of open-account domestic and international trade receivables.
According to the report, drawing on the experience of Greece, Poland, Turkey, the United Kingdom and the United States of America, the working group and the National Bank of Ukraine agreed the next steps in reforming the sector.
These include the separation of factoring from debt collection; business education and marketing of factoring; the promotion of paperless and automated document flows; the protection of creditors' rights; the rethinking of factoring-related risk assessment; the establishment of a factoring risk insurance framework; and improved legislative regulation.
FCI expressed a strong view that Ukraine needs to develop an effective regulatory policy governing the factoring business and to adopt a factoring law.
The EBRD is the largest international financial investor in Ukraine. To date, the Bank has made a cumulative commitment of almost EUR 15 billion through 466 projects in the country.
The EBRD launched two Solidarity Packages in response to the COVID-19 crisis and now expects to dedicate its total business investment of up to EUR 21 billion in 2020-21 to overcoming the economic impact of the crisis.