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Financing trade key to sustaining growth, say experts

CAIRO: As fears of global recession and tight lines of credit begin to suffocate trade in vital parts of the world, several finance providers gathered Monday in Egypt to give a boost to trade finance tools. The one-day Egypt Trade and Export Finance Forum on Nov. 10 gathered manufacturers, distributors, importers/exporters, export credit agencies, multilateral …


CAIRO: As fears of global recession and tight lines of credit begin to suffocate trade in vital parts of the world, several finance providers gathered Monday in Egypt to give a boost to trade finance tools.

The one-day Egypt Trade and Export Finance Forum on Nov. 10 gathered manufacturers, distributors, importers/exporters, export credit agencies, multilateral institutions, financiers, insurers and lawyers to discuss the effects of the global economic crisis on international trade.

“With the [ongoing] financial crisis, that has tightened liquidity and [in turn] impacted support given to SMEs, we raise the question: How can factoring help trade companies? said Marius Savin, general manager of Egypt’s first export factoring company, Egypt Factors.

“We are committed to supporting and promoting Egyptian cross-border as well as domestic trade – particularly in smaller businesses – because banks tend to finance large organizations, he said. “We protect their cash flow and mitigate risks to help businesses integrate into the global market.

Export factoring is an alternative form of finance for local exporters that face difficulty obtaining domestic bank finance. A factoring company typically pays cash for an exporter’s foreign accounts receivables, freeing the exporter of risk that a foreign purchaser might not be able to pay. Egypt Factors finances up to 90 percent of a client’s trade receivables, collects invoices, and provides bad-debt protection services.

“Factoring is the fastest growing trade financial product, and it outperforms other instruments.because it offers value-added services that banks do not offer, Savin added.

However, as various trade finance experts gather in Egypt to inform traders of tools that could revamp their businesses, credit and economic woes pushed the sea freight index for global resources trade down to a nine-year low last week.

The London-based index, which tracks prices for carrying commodities like iron ore, coal, grains and cement on top export routes, fell 12 points to 815, its lowest level since February 1999.

Until we get some sanity back in the banking system, financial stability, the interbank lending rates narrowing, economic life in the world is going to continue to be stifled, Nick Collins a director of dry commodities trade at Clarkson PLC ship consultancy in London told Reuters.

Nobody is lending, nobody is buying steel – ArcelorMittal has cut output, most of the steel mills in the West are much the same, people aren t buying cars and that just feeds through, he added. Credit underpins the whole of the business world. There are even ships hanging outside China full of cargo waiting to get the banks approval to discharge it, Collins said drawing on anecdotal evidence.

While globally, a lack of trade finance – crucial letters of credit – that grease the wheels of commerce were adversely affecting trade, finance experts speaking at the conference argue that they have what it takes to shower Egyptian traders with cash.

“Not in Egypt, is how Amr Abou-Zeid, senior trade manager at BNP Paribas bank, responded when asked if the global tight-credit scenario could find shores in Egypt.

“BNP Paribas Egypt still confirms on [access to liquidity] all over the world. This is based on a risk study and approval from our trade center, headquartered in Paris.

The bank’s trade center is a global network of 90 centers operating in 55 countries across the world. The center, Abou-Zeid explained, offers trade related-finance products such as inventory, payables and receivables financing, short-term loans, forfeiting (discount without recourse), trade development tools, training, as well as risk management.

“It’s a full package, from traditional trade products to structured and customized transactions, he boasted.

Topics: FJP

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