The 11th Asia-Europe Business Forum (AEBF 11)
Seize the trend, Time for Action and Public-Private Partnership
Intervention by
Margrith Lütschg-Emmenegger President
21st – 23rd October 2008China World HotelBeijing, P.R. China
CONCURRENT SESSION III: SME DEVELOPMENT WORKING GROUP
Table of Contents
1. FIMBank’ Corporate History in Brief
2. SME – Financial Crises – Evaluation and Consequences
3. Some Potential Solutions – Trade Finance and Products
4. Which Products and Why
5. What it can mean for China
6. Way Forward – Actions Needed
100%
38.5%
40%
100%
100%100%
Rights issueUS$25m
FIMBank established in Malta by leading Middle East businessmen
Setting up of FIM Business Solutions
IFC joins as a shareholder and long
term partner
Acquisition of LFC• Global reach• Forfaiting
expertiseIncrease in
capitalUS$15m
Initial licence DIFC Dubai for
MENAFACTORSAcquisition of
GTF• Factoring• India
FIMBank is listed on the Malta Stock
ExchangeDebut in the
International Capital Market
Syndicated loan US$30m
Hired key management from WestLB (leader in
trade finance)
Opening of LFC office in Singapore
Rights issue
US$15m
Setting up EGYPTFACTORS
1994
Mar 01
Feb 03
Sep 01
Dec 04
Nov 05
Jun 05
Dec 06
Oct 03 Dec 07
Jun 05
Nov 03
Dec 05
Oct 06
Selling Equity in GTF India
March 08
FIMBank’s Corporate History
BE THE BEST TRADE FINANCE BOUTIQUE IN THE WORLD
BY PROVIDING INNOVATIVE SOLUTIONS IN ALL TRADE RELATED ACTIVITIES
GLOBALLY
Vision
FIMBank Group’s Core Mission
FIMBank Focus
Trade-related Business
Trade will never stop Trade drives economies
7
FIMBank’s Core Products
We provide TRADE FINANCE, i.e. the following products:
Support Services
International Fund Transfers
FX, Forward Contracts, Currency Options and Swaps
Issuance of Guarantees
Core Competencies
Trade Finance
Pre-demolition Ship Finance
Syndications / Risk Participations
Forfaiting
Factoring
8
Istanbul
Sao Paulo
New York
Cairo
Mumbai
Malta
Moscow
Dubai
UKGMT
MaltaGMT +1
SingaporeGMT +7
US WestGMT -9
US EastGMT -5
SydneyGMT +9
FIMBank Group – Overseas Network
LFC FIMBankJoint VenturesJoint Venture and FIMBankLFC and FIMBank
Singapore
London
Group Key Performance Ratios
Key Performance Ratios Jun-08 Dec-07 Dec-06
Operating Income/Total Assets 5.1% 4.5% 4.7%
ROAA 4.7% 2.0% 0.8%
ROAE 31.6% 13.0% 5.1%
Impaired Loans/Gross Loans 2.6% 4.0% 4.5%
Loan Loss Reserves/Impaired Loans 109.7% 102.0% 94.2%
Group Solvency Ratio 21.2% 35.4% 27.1%
Group Solvency Ratio
Basel II impacted ratios (as from March 2008), however capitalization remains well above regulatory threshold
0%
5%
10%
15%
20%
25%
30%
35%
40%
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Regulatory Minimum Solvency ratio
Group Liquidity Ratio
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
03/0
1/06
03/0
2/06
03/0
3/06
03/0
4/06
03/0
5/06
03/0
6/06
03/0
7/06
03/0
8/06
03/0
9/06
03/1
0/06
03/1
1/06
03/1
2/06
03/0
1/07
03/0
2/07
03/0
3/07
03/0
4/07
03/0
5/07
03/0
6/07
03/0
7/07
Regulatory Minimum Daily Liquidity Ratio
FIMBank’s liquidity ratio (monitored daily) consistently above the regulatory minimum, with an upward trend in the last two months (despite global liquidity crunch)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%0
3/0
1/2
00
7
03
/02
/20
07
03
/03
/20
07
03
/04
/20
07
03
/05
/20
07
03
/06
/20
07
03
/07
/20
07
03
/08
/20
07
03
/09
/20
07
03
/10
/20
07
03
/11
/20
07
03
/12
/20
07
03
/01
/20
08
03
/02
/20
08
03
/03
/20
08
03
/04
/20
08
03
/05
/20
08
03
/06
/20
08
03
/07
/20
08
Regulatory Minimum Daily Liquidity Ratio
SME’s are in (almost) all countries the main Drivers of the Economy;
SME’s will be the first to ‘suffer’ from the lack of liquidity;
Larger financial institutions – in crises and in normal circumstances – have found/find it difficult to service the SME sector;
Trade (domestic and international) will continue to drive the global economies for many centuries to come:;
Trade Finance is not synthetic business but real and true – hard work and honest;
There are certain products that support trade finance for SME’s particularly strong and well
Financial Crises and SME’s
13
Products: Forfaiting
Discounting of international trade receivables on a “without recourse” basis
In essence, a form of supplier credit
Negotiable documents:
Accepted Bills of Exchanges by Importer/Buyer
Promissory Notes issued by Importer/Buyer
Letters of Credit
Book receivables with separate guarantee
Tradable assets:
After discounting the debt instruments, the forfaiter can hold them to maturity or trade them in the secondary market
14
Products: Forfaiting
Offered within the FIMBank Group through our 100 % Subsidiary
Acquired in 2003
Market Leader – Best Forfaiting House Award in 2005, 2007 and 2008
15
Products: Factoring
Financing of Open Account sales/invoices on a continuous basis
Tenors: usually 30-90 days (max. 180 days)
Usually covering exports from Emerging Markets (performance risk) to Developed Markets (payment risk)
Notice of assignment is given by debtor/buyer
Factor assumes at least two of the following functions:
Credit Protection
Financing/Prepayment
Collection
Credit Management
Sales ledger administration and analysis
16
Products: Factoring
Blueprint for Factoring within FIMBank
Joint Venture with Export Import Bank of India, International Finance Corporation (World Bank) Bank of Maharashtra – FIMBank 40 % acquired in 2004;
SOLD in 2008 – NOT Strategy but good profit opportunity;
Case Study !
Followed by : in 2007 and in 2008
Global Factoring Growth Rates
Domestic Factoring
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2002 2003 2004 2005
Global Volumes (US$ billion)
CAGR: 17%
2006
International Factoring
$0
$20
$40
$60
$80
$100
$120
$140
$160
2002 2003 2004 2005 2006
Global Volumes (US$ billion)
CAGR: 32%
Source: FCI
Factoring is the fastest-growing product in global trade finance Factoring is the fastest-growing product in global trade finance
Source: FCI
Market size: US$1 trillion
Ongoing arrangement
Open Account Sale
Provides other than financing services
Used for offering short-term credit to regular buyers (up to 180 days)
Both with and without recourse
For domestic and export receivables
No minimum size
Cross-border trend = EMERGING DEVELOPED
Market size: US$80 billion (est.)
Single transaction based
L/C or Bank Acceptance Required
Primarily a Financing Service
For medium/long-term transactions which could be “one-off” (90 days to 7 years)
Without recourse
Usually for export receivables
Transactions should be minimum US$100,000
Cross border trend = DEVELOPED EMERGING
FACTORING FORFAITING
Similar but different – highly complimentary
FASTEST GROWING
TRADE FINANCE PRODUCT
MORE STABLE
MATURE PRODUCT
The Products Compared
Pre-Post shipment
Financial Risk
Security/Collateral driven
Price effective for good Balance Sheet
With recourse
FACTORING and FORFAITING: By experience – does not work at its best within a
Banking Environment but much better in a separate independent Company.
Post shipment Performance and Debtor
Payment Risk Cash flow/Portfolio/Buyer
driven Value proposition for all
clients (including SME’s) Without/Limited
(performance) recourse
Trade/Bank Finance Factoring/Forfaiting
The Products Compared vs Bank Trade Finance
These products can support SME’s to facilitate trade (domestic and international)
• Access to trade finance NOT based on balance sheet/size but performance, track record, quality of product and buyers
• Less risk – better conditions
• Less cost – better cash flow
• Concurrent Session IV: Trade and Investment Facilitation Working Group
Consequences for SME’s in CHINA
IMPORTANT
Products must be offered professionally – NOT as a pure banking product
Non-Banking-Financial-Institution proven to be the best format to offer these products most successfully and beneficial
CHINA does NOT YET have the right environment to offer these products optimal to the Chinese SME’s which need the help urgently to master
the crises !
Jointly we should be able to cooperate with the authorities to adjust to the market needs so that SME’s can get access to these products professionally and easily and accelerated.
Consequences for SME’s in CHINA
We cannot change We cannot change
the direction of the wind,the direction of the wind,
however we can adjust however we can adjust
our sails!our sails!
Thank you for your attention