Russia Sees Factoring Market Nearly Double in 2011

Apr. 19 – Russia’s factoring market almost doubled last year, according to worldwide industry statistics for 2011 released this week by Factors Chain International (FCI). The total worldwide volume for factoring grew by 22 percent in 2011 compared to 2010.

Russia’s market factoring turnover totaled 21.174 billion euros, with 20.944 billion euros from the domestic market and 230 million euro made internationally. In 2010, Russia’s total market turnover was 12.163 billion euros.

The country’s total market growth came to 74 percent, according to FCI experts – good for second place behind only China’s market growth of 77 percent in 2011. South Africa (41 percent), the Netherlands (31 percent), and Australia (28 percent) came in at third, fourth and fifth respectively.

However, the Russian Association of Factoring Companies (AFC) came up with an even bigger figure. According to AFC, the country’s total market volume increased by more than 82 percent in 2011.

The impressive worldwide results illustrate that exporters are becoming more and more familiar with the advantages to be derived from a factoring arrangement: working capital, credit risk protection and collection service. Meanwhile, importers are benefitting from buying on open account terms without the need to open letters of credit or to accept other payment conditions with a similar restrictive character, FCI wrote in it press release.

“Factors do not replace the services offered by banks. On the other hand, more and more banks are developing factoring capabilities, either through specialized subsidiaries or through specialized departments. The factoring approach to risk management is fundamentally different from the way banks assess financial risks. As a result, the factoring industry is more and more an extension of the banking industry, but with ample space for independently-owned factoring companies,” said Jeroen Kohnstamm, Secretary General of FCI.

The factoring industry in Russia is developing very fast, as demand for commercial financing is very high and industry potential remains underdeveloped. The total volume for factoring in Russia in 2005 was 2.540 billion euros compare with 21.174 billion euros in 2011.

At the same time, the Russian factoring market is very much concentrated into two regions, with major shares held by the Moscow region – 64 percent – and the northwest region, with 12 percent. Other Russian regions account for the remaining 24 percent of market share.