The SFC segment remains the most promising in factoring

Despite the expected slowdown in the growth rate of the factoring market as a whole, supply chain finance (SFC) will continue to grow at an accelerated pace in 2024, market participants predict. The penetration level of this tool into the client base is not yet high enough. In addition, financing flows into the SFC segment from classical factoring. However, no new players are expected in SFC: the capital-intensive business with a specific operational component is divided between the largest players.

At the end of 2023, the factoring market demonstrated strong growth in indicators. The portfolio of market participants grew by 57%, reaching 2.26 trillion rubles, follows from the materials of the Association of Factoring Companies (AFC). The volume of disbursed financing amounted to RUB 7.72 trillion, an increase of 22%. The client base increased by 20% – to almost 15 thousand companies.

However, the impressive growth of the factoring market at the end of last year “was largely due to the effect of deferred demand for 2022, when the dynamics were near zero,” notes General Director of VTB Factoring Group Igor Vnukov. At the same time, “the market average return on paid financing decreased year-on-year from 2.46% to 2.2%,” the expert points out.

At the same time, the main trend was the active use of supply chain financing, the portfolio of which at the end of the year reached almost 643 billion rubles, a third of the total volume.

At the end of nine months of 2023, the segment accounted for only a quarter of the market (see “Kommersant” dated November 14, 2023). On a year-on-year basis, SFC’s portfolio has doubled.

In the coming years, the factoring market will grow dynamically, although at a slightly slower pace than in 2023. According to AFK, in 2024 the portfolio of companies will grow by 28%, to RUB 2.88 trillion. Alfa Bank is more optimistic and expects growth of 30–40% annually. “The development of financing programs for oil and large industrial companies, the new market for car dealers, the continuing growth of marketplaces, as well as the penetration of such services into an increasing number of sectors of the economy will continue to move the factoring market,” says Pavel Shishov, head of the corporate business factoring directorate at Alfa Bank. .

However, according to Boris Melnikov, general director of RB Factoring, against the backdrop of the high cost of funds, market growth could be 15–20%, although market participants will maintain business margins, since “the cost of factoring services is also growing.”

At the same time, the SCF segment will grow at a faster pace, including due to the flow of volumes from classical factoring, experts believe. Factors under the SCF scheme work only with the largest buyers and customers, “with zero or minimal credit risks, avoiding interaction with a large number of small suppliers,” explains AFK executive director Dmitry Shevchenko. In addition, according to Pavel Shishov, “supply chain financing is just beginning to develop, and there will be no limit to its exhaustion for a very long time.”

Experts do not expect an influx of new participants into this segment.

“SCF is a capital-intensive business with a specific operational component. It grew out of factoring processes, which remained underutilized in the classical model. Launching SCF from scratch in 2024 will bring dividends no earlier than two or three years later, so this is not the most attractive option for investment in a highly competitive market,” says Mr. Shevchenko.

Polina Trifonova