Factoring companies will soon be able to conduct transactions in the currencies of friendly countries. This will reduce the industry's currency conversion costs and allow the international factoring segment to recover. However, these amendments do not remove difficulties with logistics, regulation of parallel imports and geopolitical risks.
The State Duma adopted in the second reading amendments to the law "On currency regulation and currency control", which expand the product range of international factoring and remove barriers in the form of conversion in import factoring transactions. In fact, it will be possible for importers to attract financing for purchases in the currencies of friendly countries.
Factoring - this is operational short-term financing of companies against the assignment of their receivables (future payments by a third party for the supply of goods). According to the Association of Factoring Companies (AFC), the total measured portfolio of factoring companies reached RUB 1.16 trillion in the first nine months of 2022. This is almost the same as last year and is 19% more than in the first half of the year (935 billion rubles).
Until now, all settlements between the factor and the importer within the Russian Federation had to take place in rubles, no matter what currency was used to pay for the contract, explains Dmitry Shevchenko, executive director of AFK. Now the costs of factoring companies in terms of conversion will be lower. “When providing factoring products, financial institutions primarily rely on the currency of the contract, therefore, under the current conditions, switching to settlements in national currencies is preferable. Such a procedure will reduce the risks of possible delays in the transfer of payments, as well as liquidity risks,” PSB Factoring notes.
The ability to conduct transactions in friendly currencies is of direct interest to those who need supply chain financing, it does not depend on the size, the channel through which the payments are made is important, experts believe. “A serious importer can now work through a small bank simply because large credit organizations are on the SDN list,” explains Mr. Shevchenko.
Import factoring has traditionally occupied a small share of the factoring market. As of January 1, 2020, it accounted for slightly more than 3% of the portfolio (RUB 33.3 billion), for the entire year the volume of payments amounted to 1% (RUB 38.9 billion). In 2021, the volume of the portfolio decreased to 17.3 billion rubles, although payments fell less significantly - to 35.4 billion rubles. However, in 2022, after the imposition of sanctions against the Russian Federation, the segment shrank sharply. According to the AFK, as of October 1, the portfolio of import factoring was 0.16% of the total (1.97 billion rubles), and of the financing paid out for the nine months - 0.2% (6.6 billion rubles).
Amendments in the absence of new shocks in the market in the first year of action alone can ensure the growth of the segment by 50 billion rubles, Mr. Shevchenko believes. That is, the market will be able to exceed the indicators of the beginning of 2021. Under an optimistic scenario - reorientation of logistics to the East and building up ties with Asian countries - this segment can show moderate growth in the medium term, believes Alexander Pestov, CEO of Otkritie Factoring. The industry is interested in working with Kazakhstani tenge, Turkish lira, Belarusian ruble, Chinese yuan. “The Turkish economy is resilient. Belarus and Kazakhstan are important trade partners of Russia. Demand for Chinese goods and services is high,” he notes.
However, the adopted amendments will not protect the segment from other restrictions, Mr. Shevchenko clarifies. In particular, he explains, restrictions may be related to the structure of imports by commodity nomenclature, logistics, the composition of exporting countries and the legal regime.