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Global Trade Finance in talk with SIDBI for alliance

Written by: Staff

Mumbai, Mar 12 (UNI) Global Trade Finance (GTF), a major factoring service provider in India, has been in consultation with Small Industries Development Bank of India (SIDBI) to popularise factoring facilities among the small and medium Industry Enterpreneurs (SMEs) in major SMEs clusters in the country.

''We are in the evaluation process with SIDBI to provide constancy services in terms of factoring,'' said GTF Managing Director and CEO Arvind Sonmale.

In an interaction, Mr Sonmale told UNI that the company is planning eight summer training camps at SMEs clusters in Hyderabad, Tripur and Coimbatore to create awareness among the enterpreneurs about the benefits of factoring services particularly for those who are engaged in export business.

Factoring is a comprehensive receivable management service encompassing finance, collection, sales ledger and credit protection for exports for open acount terms without the requirement of bank guarantess or letter of credit.

GTF is also contemplating certain factoring products for the seasonal business like agriculture, food processing and irrigation where the products are being exported on seasonal basis. GTF is presently engaged in providing factoring services to wine manufacturers and irrigation projects.

In this context, he said that a sum of Rs 18 crore has been infused to the company by promoters to meet the future business growth of the company. Presently, it has paid up capital of Rs 63 crore. The main promoters of GTF are Exim bank (40 Per cent), FinBank of Molta (38.5 per cent) IFC of Washington (12.5 per cent) and Bank of Maharashtra (9 per cent).

Though factoring is relatively expensive due to various taxes as compared to bank finance, Mr Sonmale said, it provides total protection to exporters and also the lending banks towards its exposure to the concerned exporters.

In 2005, GTF recorded a growth of 100 per cent and the turnover rose from Rs 1,500 crore to Rs 3,000 crore.

The key success factors for export factoring in India are good inernational networking as well as the ability to assess credit and performance risks of exporters and thus control asset quality.

While several insurance companies are planning to provide credit risk coverage, but the major factor could be the cost involved, he said.

Mr Sonmale said that the structure of India's export trade make an ideally suitable for fctoring since over 50 per cent of the country's export are going to developed nations where factoring is well developed and open account terms are preferred by importers.

He further said that the presence of an efficient legal system could have been an important element for fostering growth of factoring in the country.


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