OTP Bank uses the latest technologies for the development of factoring services, which allows to significantly speed up work processes and provide financing to customers faster. This was stated by Lina Zaika, Head of Factoring Finance Department of OTP Bank, during the round table discussion “How factoring can support business development during the war” organized by the Financial Club.
According to her, the Bank has switched to full electronic document management: from signing relevant agreements and executing documents on assignment of the right of monetary claim to compiling registers and storing loan files. “We are actively using new technologies, including robots, artificial intelligence and all possible means that help, for example, in verifying supporting documents for loan applications and speed up work processes. We are developing in such a way that our clients can exchange not only electronic documents online, but also receive all the necessary information from the Bank,” said Ms. Zaika.
Factoring financing for small and medium-sized enterprises (SMEs) is an affordable and convenient product. Factoring allows you to get working capital for your business immediately after the delivery of goods, without waiting for the end of the deferred payment period under the contract with the buyer. “This type of financing is especially relevant for small companies with limited assets due to the absence of the need to provide collateral, as well as a reduction in the interest burden for them,” she added.
This instrument of bank financing was supported by the state in the form of the “Affordable Factoring” program, which operates within the framework of the state business support “Affordable Loans 5-7-9%” to provide working capital for SMEs.
OTP Bank was one of the first to join the implementation of the “Affordable Factoring” program. “The bank is already considering several limits and plans to sign the first factoring agreements under the 5-7-9 program in the near future,” said the Head of Factoring Finance Department.
About the state program “Affordable Factoring” (data from the Ministry of Finance). Financial support for business entities under factoring agreements provides for compensation of the interest rate at the level of up to 13% per annum. The authorized factor will provide factoring to a business entity in the amount of up to 95% of its receivables, but the amount of financing cannot exceed UAH 150 million, including funds received under the programs “Affordable Loans 5-7-9%” and “Affordable Financial Leasing 5-7-9%”. The program is open to SMEs resident in Ukraine that supply goods manufactured by Ukrainian producers on a deferred payment basis, whose ultimate beneficial owners (controllers) are individuals resident in Ukraine and agricultural producers.
Factoring reform has the potential to address the market gap in receivables finance in Ukraine, currently estimated at between EUR 1.5 billion and EUR 3.4 billion, and developing the factoring sector will help expand access to finance for businesses and save jobs, Head of the Trade Facilitation Programme of the European Bank for Reconstruction and Development (EBRD) Rudolf Putz said during a webinar held jointly by the EBRD and the National Bank of Ukraine (NBU) on Tuesday.
According to the EBRD, in Ukraine, receivables finance represents only 0.1% of the country’s GDP, compared to 8% of output in neighboring Poland, where the factoring market remains the fastest-growing financial sector, worth EUR 66.1 billion and serving more than 18,000 businesses.
“The demand from smaller businesses, which typically find it difficult to secure bank loans, will grow exponentially as the COVID-19 pandemic shows no signs of slowing down,” Putz said.
The EBRD said that the webinar brought together more than 100 trade professionals, bankers and international experts. The two-day virtual event called for sound policy and a good regulatory framework to enable the healthy development of factoring, to expand access to finance for small and medium-sized enterprises (SMEs) and to strengthen their financial resilience.
The event was delivered by the factoring working group at the National Banking Association of Ukraine in cooperation with FCI, the largest global representative body for factoring and financing of open-account domestic and international trade receivables.
According to the report, drawing on the experience of Greece, Poland, Turkey, the United Kingdom and the United States of America, the working group and the National Bank of Ukraine agreed the next steps in reforming the sector.
These include the separation of factoring from debt collection; business education and marketing of factoring; the promotion of paperless and automated document flows; the protection of creditors’ rights; the rethinking of factoring-related risk assessment; the establishment of a factoring risk insurance framework; and improved legislative regulation.
FCI expressed a strong view that Ukraine needs to develop an effective regulatory policy governing the factoring business and to adopt a factoring law.
The EBRD is the largest international financial investor in Ukraine. To date, the Bank has made a cumulative commitment of almost EUR 15 billion through 466 projects in the country.
The EBRD launched two Solidarity Packages in response to the COVID-19 crisis and now expects to dedicate its total business investment of up to EUR 21 billion in 2020-21 to overcoming the economic impact of the crisis.
