07 tdb vol4 issue7 (jul2017) single

www.thedollarbusiness.com Vol.4 Issue 07 July 2017 100 $2
MANOHAR AZGAONKAR
Minister for Tourism, Goa
A. M. NAIK
Group Executive Chairman,
Larsen & Toubro Ltd.
H.E. MOHAMED MALIKI
Ambassador of Morocco to India
LEE KHENG LEONG
Director - Asia Chapter,
Factors Chain International (FCI)
V. DHARMARAJAN
Executive Director, ECGC Ltd.
TUSHAR BUCH
MD & CEO, SBI Global Factors Ltd.
...AND MANY MORE!
EXCLUSIVE INTERVIEWS
Despite its advantages that are visible to the naked eye, for the common Indian exporter,
factoring has for long remained a concept too complex to digest. Lack of awareness and accessibility
to this tool are to blame. Will anything change and anytime soon?
EXPORT FACTORING
VISIBLE YET LOCKED AWAY
FROM INDIAN EXPORTERS

SMS TDB MONEY TO 56161
SAY GOODBYE TO ALL YOUR WORKING
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OUT ON AN
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FROM CASH

JULY 2017 II THE DOLLAR BUSINESS 3
LETTER FROM THE EDITOR–IN–CHIEF
S
ometimes, maturity is harder to achieve than simply, growing up. And for something
that exerts overwhelming influence on a nation's internal and external policy and
trade decisions like ‘exports’, this is an easy possibility. Clearly, the absence of reali-
ty-checks coupled with continued adherence to blind emotions are to be blamed.
The absence of a reality check transpires in many ways, affecting India’s performance in
trade and foreign policy matters. Imagine, how we still can’t get over even an old-fashion in-
stitutionalised notion like BRICS. Reasons – emotional attachment to pride and lack of reality
checks. Really, BRICS is defunct and the influence the bloc had imagined it would have on
world trade turned out just a wish. Shouldn’t India break the mould and get over the emotion-
al attachment with the bloc? The manner in which BRICS has shown lowered activity in ex-
ports and imports is symbolic of a group gone pale − a shadow of what was imagined – when
it comes to economic progress and individual prosperity. The value of exports and imports
by the BRICS in CY2016 was lower compared to what was achieved even six long years back!
Brittle emotional attachments to old-fashion institutionalised notions need to be dumped
if a nation is to excel in foreign trade. What has been happening for the past many months is
proof. We’ve been celebrating rising export numbers each month. But little do we realise that
in almost a third of product categories (HS code chapter level) our share of world trade has
dipped in the past five years! Reality check is important, lest we get swayed away by emotions.
India’s exports has challenges and even in traditional export destinations. Let me pinpoint
two regions that account for up to a quarter of India’s exports – Middle-East and North Af-
rica. Middle-East has for long played the safety valve to an extent for Indian exports. The
Gulf economies are now moving up various industrial value chains, and while this means a
fall in remittances with lesser dependence on lower-skilled Indian workers, the region may
even start importing less of manufactured goods and more of just raw, low-value materials in
years to come. North Africa, which in recent years has absorbed a considerable proportion of
India’s exports has its headaches too. The oncoming surge in the count of young Africans (100
million-plus) entering the job market by 2025 is a problem; really, the region has insufficient
economic activity or infrastructure to support the influx. Result – by 2025, it could fall sharply
intermsofitbeingasizeablemarketforIndianexporters.Emotionally,wecouldsticktothese
two regions. Logically, it makes sense to hunt for greener pastures, or even switch to erstwhile
popular markets like EU (which has seen quite a quick revival since the second half of 2016).
Emotions don’t drive foreign trade. If that was the case, why is it that despite a “boycott
Chinese imports” sentimental wave that swept through India in October last, the average
monthly imports from China has actually risen? Why is it that despite the massive “anti-Paki-
stan”emotionaloutburstthatsweptthroughIndia,weactuallyboughtmoreMadeinPakistan
merchandise in 2016 as compared to a year back? (Why is it that after the Kargil War that
gave rise to only bitter emotions, our annual purchases from Pakistan have increased by al-
most 600%?) Something delicate here – do you recall the anti-beef consumption and anti-cow
slaughter movements that have forever been in vogue? Here’s to your knowledge – India is the
largest exporter of bovine meat in the world – it commands about 20% of the world supply
annually. Surprising? Well, foreign trade knows no emotions!
Moral of the story – Get over old-fashioned notions, stop guessing and imagining without
reality-checks, and let go of emotions when it comes to cross-border trade. Do these and your
export numbers will tick. Out on the rough seas, where rules and policies of governments
change each day, sanctions and regulations come alive without much
reason, and sourcing strategies are ever so dynamic, it’s forever been
mind over heart. And that forever will remain.
www.thedollarbusiness/blogs/steven
Why is it that despite the
massive “anti-Pakistan”
emotional outburst that
swept through India, we
actually bought more
Made in Pakistan
merchandise in 2016
compared to a year back?
MIND OVER HEART. ALWAYS.
Steven Philip Warner
President (VMPL) & Editor-in-Chief,
The Dollar Business
steven@thedollarbusiness.com
@SPWarner www.tumblr.com/blog/steven-p-warner

4 THE DOLLAR BUSINESS II JULY 2017
President (VMPL) : Steven Philip Warner
& Editor-in-Chief
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COVER STORY18
Factoring as a means to gain access to short-term export
financing and mitigating risks related to payment delays and
defaults has gained traction worldwide. MSMEs in China, UK,
Germany and Brazil, amongst others, have used this tool to
leap into the big league. Curiously in India, where MSMEs
have always rued the lack of access to easy financing
options, factoring has failed to take-off due to matters both
real and perceived. Indian factoring institutions have at long
last started to make an aggressive play for the business. Will
they be able to break the shackles?
EXPORT FACTORING
A BRIDGE
TOO FAR?

INBOX
LETTERS TO THE EDITOR
Readers’ feedback, criticism and
appreciation that hit our mailbox
in June 2017.
MONOLOGUE
PEOPLE SPEAK
Arun Jaitley on implementation of
GST, PM Modi on strengthening
India-Germany ties & much more.
GLOBAL TRADE
Vietnam-US trade deal, UK’s snap
election, China’s investment in
Kenya’s railways & much more.
INDIA TRADE
PM Modi’s visit to US, India-Russia
trade cooperation, the lingering
effect of demonetisation & more.
SPOTLIGHT
MOROCCO
The country is now banking on its
engineering industries to reduce a
yawning trade deficit!
RENDEZVOUS
MANOHAR AZGAONKAR,
MINISTER FOR TOURISM, GOA
Discusses how he plans to make
Goa a round-the-year tourist desti-
nation and increase forex earnings.
IMPORT’ONOMICS
ASAFOETIDA
Health conscious consumers are
driving its imports.
SECRET INGREDIENT
CUTTLEFISH & SQUID
These exotic seafood items are
finding new markets abroad.
POLICY MONITOR
JPDEPC
Manish Kajaria, Chairman, on the
challenges the jute industry faces.
FACE2FACE
ANANDKUMARSINGH,DEPUTY
DIRECTOR GENERAL, IARI
On initiatives taken by CDB to boost
exports of coconut products.
TDB FORUM
Questions about foreign trade that
hit our mail box in June 2017.
DATEBOOK
Some must-visit trade shows.
BORDERLINE
Editor’s Column
EXIMPEDIA
10 WAYS TO BOOST YOUR
EXPORTS BY EXPLOITING
ONLINE MARKETPLACES
Online marketplaces that have fol-
lowed the Internet boom have come
as a boon to new-age exporters.
They can now showcase their
products without travelling the
world. TDB brings to you
the art and science
of exploiting these
marketplaces to boost
your international
footprint.
KAZUYA NAKAJO
CHIEF DIRECTOR GENERAL, JETRO INDIA
On how JETRO is actively facilitating investments
from Japan into India and assisting Indian companies
explore and enter the Japanese market.
A. M. NAIK
GROUP EXECUTIVE CHAIRMAN, L&T
Talks about what it takes to lead one of India’s
foremost multi-interest conglomerates and
the challenges of succession planning.
H.E. MOHAMED MALIKI
AMBASSADOR OF THE KINGDOM OF
MOROCCO TO INDIA
Discusses the ways to strengthen bilateral
engagements and boost trade flows.
06
14
38
40
50
54
56
16
32
08
44
60
62
66
46
34

WE VALUE YOUR FEEDBACK, WHETHER CRITICISM OR APPRECIATION.
AND HERE ARE A FEW THAT HIT OUR MAILBOXES IN JUNE 2017
The magazine is a must-read for those in the export-im-
port business. The articles are easy to understand as
well as to the point. I have heard that free trade agree-
ments (FTAs) are having a negative impact on the coun-
try’s economy. So, in the coming months, if you can run a
story on how FTAs are impacting exports from India, it will
be educational. Look forward to reading
future issues of The Dollar Business.
B. R. GAIKWAD
Director - VVF Ltd.,
Mumbai, Maharashtra
+91-9820083XXX
drbrgaikwad@yahoo.com
Ihave been a subscriber of The
Dollar Business magazine for al-
most two years now. It’s an excel-
lent magazine for all types of trad-
ers. I enjoy reading the magazine,
especially the Q&A section at the
end of the magazine because
the answers are well-explained
and detailed. Indeed, I get a lot
of information on a variety of topics – information that
is hard to find on the Internet.
G. BALASUBRAMANIAN
Sanmar Foundries Ltd. Tiruchirappalli, Tamil Nadu
+91-9443230XXX
gbalu1997@gmail.com
This is a very good magazine, particularly for people
who are engaged in foreign trade. The stories pub-
lished in the magazine are to the point and relevant in
today’s international trade environment. The Dollar Busi-
ness also provides its readers a platform to raise all sorts
of trade-related questions, which is a very good initiative
by the magazine. In fact, one of my questions was pub-
lished in the magazine and I was extremely happy with the
answer. I have recently raised another question and I am
looking forward to receiving the answer.
AMIRTHALINGAM RAMESH
Global Trade Connextions, Chennai, Tamil Nadu
+91-9840115XXX
sales@gtc.org.in
www.thedollarbusiness.com Vol.4 Issue 06 June 2017
100
$2
www.thedollarbusiness.comVol.4Issue06June2017
100
$2RNI:APENG/2014/54643
GST should, theoretically, reduce input costs and boost exports. But the devil, as they
say, is in the detail.And the detail as to the applicability of various remission and incentive
schemes isn’t clear. India’s exporters are wary that GST may cause more harm than good.
Will the new tax regime mean ‘progress with purpose’for India’s exim community?
GSTHOPING FOR ‘PROGRESS
WITH PURPOSE’
Leather BootsA ‘boot’iful exports ideaChina’s loss is India’s gain
EarphonesThe sound of music
Content consumption is driving growth
EximpediaSecret of exportsHow to convert prospects to customers
SARBANANDA SONOWALChief Minister, AssamSHASHI THAROOR
Chairman, Parliamentary Standing
Committee on External AffairsDILIP OOMMEN
MD & CEO, Essar Steel India Ltd.DR. BISWAJIT DHARMember, Board of Trade,
Ministry of Commerce, GoI
H.E. SIRAJUDDIN HAMID YOUSIF
Ambassador of the Republic of SudanSUMIT DUTT MAJUMDER
Former Chairman, CBEC...AND MANY MORE!
EXCLUSIVE INTERVIEWS
inbox editorial@thedollarbusiness.com
SMS your views to +91-7680-80-7111
Iam an ardent reader of The Dollar Business. The maga-
zine provides some good insights into the world of exports
and imports. The information is up-to-date and accurate.
Also, I have noticed that you have revamped your website.
It looks like an incredible platform for Indian exporters to
reach out to clients in the overseas markets. Wish you all
the best in your future endeavours.
ANBUSELVAM SUBRAMANIAM
Mighty Exports Pvt. Ltd.,
Chennai, Tamil Nadu
8903861XXX
sales@mightyexports.com
The articles published in the magazine are
highly informative and provide a true pic-
ture of the global business environment. I am
sure the magazine will continue to be a great re-
source for India’s EXIM community.
BHARGAV PATEL
Positive Group, Rajkot, Gujarat
+91-8511112XXX
lead@positiveplus.in
The TDB editorial team should be proud of the
good work it has been doing. You have motived
me to aim higher, and I am sure there are many readers
like me who feel encouraged by your magazine. We need
more platform like yours that believe in our work and wish
that the exporter-importer community flourishes. Even the
revamped The Dollar Business website looks very good
and I hope it will continue to benefit many traders like me.
JAYAMANICKAM
91-9500077XXX
jayamanickam.n@gmail.com
Your new website looks incredible. Wow! Though there
are many online B2B platforms in India, your offering
are most unique. Your website has plenty of information
and analysis for exporters and importers (both new and ex-
perienced) and is a platform that can further guide them to
better opportunities. Very informative platform, I must say.
P. B. RAO
+91-9848046XXX, sreemaa@yahoo.co.in

CAPITAL WOES WITH
DON’T MISS OUT ON AN
EXPORT OPPORTUNITY
JUST BECAUSE YOU ARE
RUNNING SHORT OF CASH
SHIP.
RECEIVE.
CELEBRATE.

monologue
This will allow us to come
together as a country and
channel our energies towards
a successful Brexit deal
that works for everyone in
this country, securing a new
partnership with the EU which
guarantees our long-term
prosperity.
THERESA MAY
BRITISH PRIME MINISTER
On her party’s partnership with the DUP
Iwas elected to represent
the citizens of Pittsburgh,
not Paris. I promised I
would exit or renegotiate
any deal which fails to serve
America’s interests. Many
trade deals will soon be under
renegotiation.
DONALD TRUMP
US PRESIDENT
On pulling out of the Paris Climate Accord
The way the fitment
discussions have
happened in the GST Council
and the way commodities and
services have been treated,
GST is only going to help in
improving our exports.
NIRMALA SITHARAMAN
INDIAN COMMERCE MINISTER
On the impact of GST on exports
Source: IANS
The times in which we could completely depend
on others are, to a certain extent, over.
ANGELA MERKEL
GERMAN CHANCELLOR
On changing dynamics of EU’s relationship with US
Source: CNBC
Source:ReutersSource:www.whitehouse.gov
Anumber of companies
and trade have been
raising the issue of lack of
preparedness. We don’t have
the luxury of time to defer
GST implementation.
ARUN JAITLEY
INDIAN FINANCE MINISTER
Reiterating that July 1 will be the
deadline for GST implementation
Source: PTI
EU unity, proactiveness
and strong relations with
other countries is extremely
important for global
development. We want the
EU to become stronger, and
India will play a positive role
towards that through the
medium of Germany.
NARENDRA MODI
INDIAN PRIME MINISTER
On strengthening Indo-German ties
Source:PTI

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CAPITAL WOES WITH

GLOBAL
TRADE
LAST MONTH
GLOBAL
TRADE
LAST MONTH
VIETNAM-US
BILATERAL TRADE
From foes to friends
US and Vietnam, once adversaries, surprised many by sign-
ing trade deals worth billions of dollars. US President Don-
ald Trump announced 13 new transactions, worth $8 billion,
with the South-East Asian nation. These deals, the White
House said, include $3 billion worth of US-produced content
that is expected to support at least 23,000 American jobs.
This deal was signed during the recent meet between Viet-
namese Prime Minister Nguyen Xuan Phuc and US Presi-
dent Donald Trump in Washington. The duo also discussed
various means to increase bilateral trade between the two
nations, especially considering America’s growing trade defi-
cit with Vietnam. The North American nation’s increasing
imports of electronics products, footwear, apparel, furniture,
etc., from Vietnam over the years has resulted in an yawning
trade gap. But, will the Vietnamese develop a taste for Amer-
ican goods? Only time will tell.
Source: TDB Intelligence Unit and US Census; figures in $ billion
US-Vietnam merchandise trade
US’s trade deficit with Vietnam is an enormous $32 billion
45
40
35
30
25
20
15
10
5
0
CY10 CY11 CY12 CY13 CY14 CY15 CY16
US imports from Vietnam US exports to Vietnam
The British proved to be as unpredictable as their weather
when they shocked their Prime Minister, Theresa May, in the
snap poll that she had called. May, expecting a sunny day,
had her parade rained on.
The result of the election was shocking as the Conserva-
tive Party under May’s leadership won a total of only 317
seats, nine seats short of the 326 seats required for a majority.
As soon as the results were announced, the pound sterling,
which had already seen a decline post the June 2016 referen-
dum, dropped a further 2.5% against the US dollar. The im-
mediate question on everyone’s mind was about May’s next
move. Many speculated that Britain would see a change in
leadership and that this loss of majority by the Conservative
Party could result in the Jeremy Corbyn-led Labour Party
stepping forward. This change could bring in a very differ-
ent trade policy to the forefront. Corbyn has been critical of
May’s support of US president Donald J. Trump.
Dismissing calls to quit, May, in an overnight move, an-
nounced a deal to form a coalition minority government
with the Democratic Unionist’s Party. While currently the
Conservative Party and its voters are heaving a sigh of re-
lief, it will be interesting to see how this impacts May’s stance
(and relations with leaders of partner countries) on trade is-
sues as well as the Brexit negotiations, and most importantly
till when she remains at the helm. While May has promised
economic and political stability, with the latest turn of events,
the future of EU, UK and Brexit still hangs in balance.
UK
BREXIT
Oh, snap!
KENYA
ONE BELT ONE ROAD
Full steam ahead
China’s ambitious OBOR – One Belt One Road – project is moving full steam ahead, with the latest addition being a $3.2 billion rail-
way line running between Nairobi and Port of Mobasa in Kenya. Around 90% of the line was funded by the EXIM Bank of China and
will be maintained by the China Road and Bridges Corporation. The line is expected to be further expanded and connect Uganda,
Rwanda, Burundi, Democratic Republic of Congo, South Sudan and Ethiopia with the Port of Mobasa. Compared to the previous line,
built during the British Empire (running between Kampala, the capital of Uganda and Mobasa Port in Kenya), the new line is expect-
ed to reduce the travel time for passengers – from 12 to 4 hours, for a 472-kilometre journey. The project, completed 18 months before
its expected completion date, is being touted as a shorter and cheaper route between the two countries. This OBOR initiative aims to
reduce the maritime and inland transportation time between China, Europe, Africa and Asia, thus aiding trade amongst them.

News & Analysis
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CHINA-EU
BILATERAL TRADE
Friends in need
With US stepping away from the Paris Climate Agreement, all
eyes are now on the power dynamics of a changing world order.
China has made a play for the leader’s mantle with regards to
climate change and has found a friend in EU.
However, there seems to be trouble in paradise as just two
days after their display of climate solidarity, the duo failed to
make an announcement related to trade and climate change ties
because of the ongoing trade issues.
Rumour has it that the joint statement fell through due to
China’s demand for recognition by EU as an “economy driven
by market and not by state” – as well as EU seeking a formal
agreement on China cutting its production of steel. Even in the
past, this has been an issue for both US and EU, who have im-
posed anti-dumping duties on Chinese steel.
Despite the disagreement, China and EU have committed to
continue following the Paris Convention without US.
It’s important to note here that though there has been a 1.24%
year-on-year decline in bilateral trade between China and EU
News & Analysis
in CY2016, China has always been an important sourcing des-
tination for EU.
It’s a known fact that many European leaders have in the past
expressed scepticism over closer ties with the Asian power-
house. However, with the changing world dynamics, it will be
interesting to see if the two manage to overcome their differenc-
es in the areas of trade and investment to emerge as leaders in a
new political and economic order.
Source: TDB Intelligence Unit and European Trade Commission; figures in € billion
China-EU merchandise trade
EU and China remain important trading partners
600
500
400
300
200
100
0
CY2012 CY2013 CY2014 CY2015 CY2016
China’s exports to EU China’s imports from EU
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INDIA
TRADE
LAST MONTH
INDIA-EUROPE
FTA
Round the corner?
With the snap elections in UK out of
the way and Theresa May holding on to
power, talks on the importance of the
long awaited EU-India FTA seem to be
gaining momentum. German Chancel-
lor Merkel and Spanish Prime Minister
Mariano Rejoy have both stressed, on
the need to revive the ambitious FTA.
India and EU began talks for a bilater-
al trade agreement in 2007. But despite
for an “early commencement and con-
clusion of FTA talks with the Eurasian
Economic Union (EAEU).” This agree-
ment is expected to help increase bilat-
eral trade to as high as $62 billion. In
FY2017, the trade between India and the
EAEU nations (Armenia, Belarus, Ka-
zakhstan, Kyrgyzstan and Russia) stood
at around $8.40 billion.
Successful negotiations with EU and
EAEU will not only boost India’s exports
to the two trade blocs, but also position
India as a force to be reckoned with in a
global order that has seen many upheav-
als in the last few months.
multiple meetings, EU and India have
failed to conclude the deal. Now, with
UK out of the equation, courtesy Brexit,
and Merkel’s push for strengthening EUs
trade ties with the developing worlds,
hopes of the revival of this trade agree-
ment has been raised. Studies support-
ing the agreement have emphasised the
benefits of this trade agreement which
include an increase in the amount of FDI
inflows into India from EU.
But, the Bilateral Trade and Invest-
ment Agreement (BTIA) is not the only
topic that received a push. The Indian
government also stressed on the need
T
he hype surrounding Prime Minister Modi’s first trip to US
was conspicuously absent this time around. Though 20 top
US CEOs, including Sundar Pichai of Google, Jeff Bezos of
Amazon and Tim Cook of Apple, met Modi for a roundtable and
promised more investments, the meeting lacked the fervour of his
last trip to Silicon Valley. Even the ‘working dinner’ between US
President Donald Trump and PM Modi lacked the usual buzz. Un-
derstandably so, tensions were high and expectations low in the
run-up to what media described as a no-frills visit.
US President had made remarks about India wanting “billions
and billions and billions of dollars” for participating in the Paris
Climate accord. This, naturally, did not go down well with India.
Trump’s hardline stance on H-1B visa issue has also been a major
concern for India, as US accounts for nearly 60% of India’s IT
exports. However, Modi and Trump, consummate showmen that
they both are, put up a rather warm display of friendship during
their joint statement. On the agenda, for the meeting between
Trump and Modi, were issues such as cyber security, trade and
terrorism. As is usual, geopolitics took centre stage with Trump
declaring Modi to be a ‘true friend’ on twitter. However, the
all-important H-1B visa did not make its way into the discus-
sions. Trump discussed, or rather demanded, the easing of Indi-
an trade barriers to give US companies easier access to the Indian
market. On the surface Trump’s aim of bringing manufacturing
jobs back to US to ‘Make America great again’ seems to be at
odds with Modi’s ‘Make in India’ initiative. Will the two leaders
be able to agree on a deal which will do justice to the two great
democracies? Or will we have to satisfied with just bear-hugs and
handshakes?
INDIA-US
BILATERAL TIES
Will good optics result in
great action?

Is Indian economy finally losing steam? Well, that’s what the
March 2017 quarter GDP number indicates. A slowdown,
which had already set in last year, seems to be intensified by
the demonetisation initiative of the Indian government.
A major decline was seen in the last quarter of FY2017,
where the gross GDP growth dipped to 6.1%. This decline puts
India behind China which reported a GDP growth rate of 6.9%
for the January to March period. India’s GDP growth slowed
to 7.1% for FY2017, down from 8% in FY2016. While it is in
keeping with official estimates, it is still the lowest growth rate
for the country in the last two years.
This decline has raised concerns amongst many. While some
analysts have asked for a downward revision of interest rates by
Reserve Bank of India (RBI), others are keeping their fingers
crossed that the decline is on its way out and will not impact next
year’s numbers. The optimists state the good monsoon and an ex-
pected boost from GST as reasons behind their positive outlook.
They are sure that with a cut in the interest rates by RBI the Indian
economy will be back on track. The economy is expected to gather
enough momentum to see 8% growth in three-four year’s time.
DEMONETISATION
GDP SLOWDOWN
Running out of steam?
RCEP
VISA CARD
Travel with ease
Discussions on the framework for the Regional Compre-
hensive Economic Partnership (RCEP) are now in full
swing. Concurringly, Indian Commerce Minister Nirmala
Sitharaman recently suggested the possibility of introducing
an “RCEP business visa card”. This card is being proposed
on the lines of the Asia Pacific Economic Cooperation
(APEC) business card, which facilitates business travellers
within APEC nations such as Australia, China, Mexico,
Peru, Vietnam, etc. Similarly, the RCEP business visa card
will facilitate travel between the 16 proposed signatories of
the RCEP agreement.
RCEP is a major regional free trade agreement that is being
discussed by 10-member ASEAN and six ASEAN FTA part-
ners. This trade bloc is being looked at as an alternative mega
regionalfreetradeagreementalongthelineofthe failedTrans
Pacific Partnership (TPP). The 19th
round of RCEP talks is ex-
pected to be held in Hyderabad in India in July 2017. Negoti-
ations are expected to be concluded by 2018.
India-Russia merchandise trade
India’s imports from Russia reported a 21.10% y-o-y jump in FY17
6
5
4
3
2
1
0
FY2013 FY2014 FY2015 FY2016 FY2017
India’s exports to Russia India’s imports from Russia
INDIA-RUSSIA
TRADE COOPERATION
From Russia, with love
Four nations were in the limelight during Indian PM Naren-
dra Modi’s recent trip to Europe. But, it was the stopover in
Russia that caught everyone’s attention. Other than celebrating
70 years of Indo-Russian relationship, the visit concluded an
agreement between Russia and India to set up two more units
of the Kudankulam Nuclear Power Plant in Tamil Nadu.
During the meeting between PM Modi and Russian Presi-
dent Vladamir Putin, five MoUs and agreements were signed
between the two nations. Apart from the nuclear plant agree-
ment, the other four deals include: A memorandum of cooper-
ation (MoC) between Russia’s ALROSA Joint Stock Company
and the Gems and Jewellery Export Promotion Council of In-
dia; a contract between Russian Railways and the Ministry of
Railways, India for a high-speed rail service between Nagpur
and Secunderabad; an agreement between Federal Service for
Intellectual Property of Russia and the Indian Digital Library
of Traditional Knowledge; and an agreement on a cultural ex-
change programme.
A joint statement released said that the partnership covered
all aspects of “political relations, security, trade and economy,
military and technical field, energy, scientific, cultural and hu-
manitarian exchanges and foreign policy.”
Both parties are confident that they will meet their target of
$30 billion worth of bilateral trade by 2025.
News & Analyses

TDB INTELLIGENCE UNIT
COVER STORY EXPORT FACTORING
EXPORT FACTORING
IN INDIA
A BRIDGE
TOO FAR?TDB INTELLIGENCE UNIT

Factoring as a tool of obtaining quick access to short-term export financing and
mitigating risks related to payment delays and defaults by overseas buyers
is gaining traction the world over. Countries like Brazil, China, Germany and
Taiwan have leveraged factoring to grow their exports. Despite the many
advantages of factoring and a growing demand for exports credit among
Indian MSMEs, factors like lack of awareness, a perception of high interest
rates and cumbersome documentation processes, have prevented the growth
of factoring services in India. To bring matters into perspective, less than a
percentage point of India's exports are backed by factoring services. However,
factors are optimistic about the future and are taking steps to raise awareness
about their services amongst the Indian foreign trade community. Will factoring
finally gain acceptance in India? The Dollar Business investigates the curious
case of India's factoring industry.

A
manufacturer of cotton
t-shirts, Dinesh Chau-
han of Delhi-based N. R.
Traders, was in the final
stages of negotiation to
procure a sizeable order of t-shirts from
Italy. A small manufacturer Chauhan was
unable to raise the funds that would be
required to fulfill the order and lost out
on the opportunity to leap into the big
league of t-shirt exporters. Had it been
any other country, Chauhan would have
thought of export factoring as a way to
raise this short-term finance. But sadly,
for both Chauhan and for India, he had
no idea that this option even existed. [Of
course, we've told him already!]
If you talk to export firms in India, be
it large or small, about export factoring,
it is more than likely that they will ei-
ther be unaware of export factoring as a
means of finance, or if by chance they do
have a clue, they will be amongst those
apprehensive about the process and ex-
penses incurred to avail it. By the factor-
ing industry's own estimates, only about
30-35% of Indian exporters are aware of
export factoring. It is not that exporters
in India do not avail export financing –
the fact remains that they are very much
in need of services that a factor can pro-
vide – but their awareness about the ben-
efits of factoring remains low. According
to the ICC (International Chamber of
Commerce) Trade and Finance report
2016, up to 80% of global trade is sup-
ported by some sort of credit finance. For
any industry, whether it is an MSME-in-
tensive or a large-scale one, banks have
been the traditional means for raising
capital against collateral or some type of
asset. Having said that, many small com-
panies are unable to raise the needed cap-
ital because of a lack of assets. In such a
situation, factoring has supported many
exporters across the globe with a financ-
ing solution. However, factoring has not
yet gained acceptance in India in the way
it has in other major exporting nations
like China, France, Italy and Germany.
Even a seasoned Indian exporter like
Amit Kumar Drolia, Director of D. R.
Coats and Resins, a Mumbai-based man-
ufacturer and exporter of resins, is ap-
prehensive about export factoring. “The
(export) factoring process is complicat-
ed and the rate of interest is too high.
But that said, if factors can synchronise
application procedure and balance the
costs, we would be open to looking at
export factoring,” says Drolia. When it
comes to trade finance, whether domes-
tic, import or export, a majority from the
Indian trade community echo Drolia’s
sentiments and still prefer to go through
traditional financing channels.
Experts though say that embracing
factoring services could give a real boost
to India's exporters like it has done in
many countries where factoring has
gained acceptance. So, what exactly is
factoring and what advantages does it
hold over the many other forms of fi-
nancing? And most importantly, why
haven’t Indian exporters warmed up to
this form of trade finance?
MONEY MATTERS
Traditionally, when it comes to credit
services, one can divide them into two
types – fund-based credit and non-fund-
based credit. Fund-based credit encom-
passes traditional lending methods such
as loans, overdraft facilities, cash and
pre-shipment and post-shipment finance
while non-fund based credit includes
letters of credit (LOC) and bank guaran-
tees. While letter of credit and overdraft
are the most popular forms of financing
amongst the Indian trade community,
world over, sellers (domestic and inter-
national) have found more benefits go-
ing the factoring way. Reasons − ease of
Source: TDB Intelligence Unit and FCI; figures for CY2016
Top countries by number of factoring companies
China boasts of the highest number of factors in the world
6,000
5,000
4,000
3,000
2,000
1,000
0
Chile Germany Brazil US China
Source: TDB Intelligence Unit & FCI; figures for CY2016 and in € million
Top countries by factoring turnover
UK reported the highest factoring turnover for CY2016
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
UK China France Germany Italy Spain
Traditional finance options such as loans, overdraft facilities, pre-shipment and
post-shipment credit, continue to rule the roost in India's trade financing circles.

TDB: Is it true that exporters shy away from factoring be-
cause they perceive the process to be cumbersome?
Tushar Buch (TB): Contrary to this perception, the simplicity
of the process and the time and cost effectiveness that it offers
are the biggest advantages of factoring. Alongside, export fac-
toring offers additional advantages compared to exporting un-
der an ECGC policy as the exporter benefits from the knowing
about the buyer’s credit assessment too.
TDB: Are there products for which factoring is not suitable?
TB: Depending on the destination, the approval process may
take up to eight weeks. So, broadly speaking, factoring is not
suitable for perishable goods and goods whose value is hard to
assess like diamonds, jewellery, etc. India’s Factoring Regula-
tion Act 2011 also prohibits factoring of agricultural products
and commodities. But other than these, as long as goods are
not being shipped to an associate, all other arrangements of
sale on open account basis can be considered for sanction of
export factoring.
TDB: Many people think that factoring isn’t MSME friendly.
Are you doing anything to help MSMEs embrace factoring?
TB: SBIGFL encourages MSME exporters to avail factoring
services. As a member of Factors Chain International (FCI),
SBIGFL has tie-ups with more than 400 factors, globally. And
being a part of SBI Group, we have board-approved policies to
assess credit requirements. Also, SBIGFL has foreign currency
lines of credit to fund export invoices in USD, Euro and GBP.
In fact, SBIGFL, in most cases, is happy to sanction factoring
limits by merely taking an assignment deed for receivables
factored and registering their charge with the ROC for limits
sanctioned to MSMEs.
TDB: Why do you think factoring services have found less
acceptance in india compared to other countries?
TB: Although SBI and Canara Bank had promoted their fac-
toring arms way back in 1991, factoring has never been a main-
stream financial service – mostly because of the absence of a
legislation. However, with the enactment of Factoring Regula-
tion Act in 2011, the necessary legal framework is now in place
for factoring volumes to grow. Unfortunately, the severe global
economic downturn, which we have been experiencing for the
last 4-5 years, has also been preventing the growth. And, in ad-
dition, reservations on part of corporate and PSU buyers to ac-
cept assignment of receivables made in favour of factors, issues
with the legal system and preponderance of banking have been
restricting the growth. But, of late, due to some initiatives that
were taken by Reserve Bank of India (RBI) and associations
like FCI and ASSOCHAM, awareness about factoring and its
superiority as a receivable management service is being rec-
ognised. So, going forward, we expect to see higher volumes.
TDB: Exporters are of the opinion that compared to bank
loans, factoring isn't a cost-effective option. Is this true?
TB: Factoring is much more than just a financing transaction.
It involves providing collection and receivables management
service, due diligence on the buyer and taking a vigilant look
at the transaction structure. The cost of these value-added
services makes factoring costs appear to be on the higher side
when compared to a bank loan. Moreover, the cost of funds to
a bank is generally lower because they have CASA deposits. On
the other hand, the factoring company relies on market bor-
rowings or lines of credit from a bank as principle sources of
its funds. However, due to a much leaner structure and better
operational efficiency, the operating expenses of a factoring or-
ganisation tends to be lower and can partially offset the higher
cost of funds.
TDB: How does factoring help exporters in case of non-com-
pliance by an importer?
TB: Exporting goods involves managing associated risks, par-
ticularly the challenge of getting paid on time. The exporter,
besides facing these challenges, which may be termed as credit
risks, also faces uncertainty due to say economic or political
conditions in the importer’s country. These are sovereign risks.
In addition, differences in language, local laws, etc., add to the
challenges faced by the exporter. There are no easy solutions.
Opting to use services of an export factor, however, can be of
immense help to an exporter. In this regard, the General Rules
for International Factoring (GRIF) to which members of Fac-
tors Chain International (FCI) adhere, ensure that in case of
buyer insolvency, the exporter receives payment of his factored
invoices under a guarantee mechanism. Thus, other than in
case of commercial disputes, an exporter would have his or her
receivables secured.
TDB: What advantages does SBIGFL offer its clients?
TB: SBIGFL is a pioneer in Indian factoring services. Being an
SBI Group company, its clients stand to benefit from its culture
of good corporate governance, transparency in dealings and
robust policies approved by a knowledgeable and experienced
board. All these translate into a responsive and fair partner for
sellers of goods and services in India. SBIGFL enjoys highest
external credit rating (AAA for long term borrowings and A1+
for its CP program). This translates into better pricing.
TUSHAR BUCH, MD & CEO, SBI GLOBAL FACTORS LIMITED (SBIGFL)
“CONTRARY TO POPULAR BELIEF,
EXPORT FACTORING IS COST EFFECTIVE”
InterviewbyAnishaaKumar

process and credit guarantee (irrespec-
tive of the buyer’s repayment time).
In simple terms, factoring is a means
for a seller to raise short-term finance by
selling its receivables to a third party (re-
ferred to as a factor) at a certain discount
in return for immediate liquid cash. The
credit is usually for a period of 90-120
days. The transaction is conducted based
on the assignment of the seller’s receiv-
ables. The sale can be both domestic as
well as international. In domestic factor-
ing, there are three parties involved in
the transaction – namely the buyer, seller
and the intermediary (the factor) while
in international factoring there is a seller,
an import factor, an export factor and a
buyer. While the export factor is located
in the seller’s country, the import factor
is based in the country of the buyer.
Today, importers and exporters across
the globe are increasingly turning to fac-
toring because of the many benefits it of-
fers, says Vaibhavi Thakkar, Co-Found-
er and CEO, Blend Financial Services
Ltd., a company that provides factoring
services in many parts of the globe. She
explains, “Importers are increasingly be-
ing reluctant to open letters of credit as
they are required to provide margin and
security to their banks and exporters
are wary of exporting on open account
terms for obvious reasons. But, at times,
in order to get the order and keep their
operations going, exporters are forced to
trade on open account exposing them to
payment risks. In letters of credit, several
banks need to get involved making the
transaction cumbersome and costly.”
Other trade finance methods also
have their share of disadvantages says
Thakkar. “With factoring, on one hand
the importer does not have to open a let-
ter of credit and the exporter is also able
to cover his payment risk as well as have
cash flow. On the other hand, purchase
order financing is not easily available
and is not really an alternative to factor-
ing, and export credit insurance, even if
available, will not resolve the cash flow
issues,” she explains.
What's more? Factoring is today a well
accepted method of open account re-
ceivables financing across the globe and
is regulated by a stringent set of rules and
procedures. Factors Chain International
(FCI), the global association of indepen-
dent factoring members, helps members
operate by co-developing a standard set
of best practices to follow the rules and
regulations.
PROCESS-DRIVEN
FCI is an international body headquar-
tered in Amsterdam. Set up in 1968, it is
today a network of factoring members
from around the world. More than 90%
of factoring organisations from across
the world are members of FCI. India
currently has seven major institutions
that are members of FCI.
So how does factoring works? When
it comes to export factoring, factors un-
der FCI provide for a two-factor process.
Let us take an example, say a domestic
company A is involved in manufacturing
of porcelain mugs (with an order worth
$100,000) for company B based out of
Europe. If both the buyer and the seller
agree on using factoring, then the seller
approaches one of the factors based out
of his country. This will be the export
factor. The seller contacts the export
factor, fills the required documents and
provides the details of the buyer and the
receivables to the export factor.
The export factor then contacts his
corresponding import factor in the
Domestic factoring International factoring
Source: TDB Intelligence Unit and FCI Annual Reports; figures in € million
6,000
5,000
4,000
3,000
2,000
1,000
0
CY13 CY14 CY15 CY16
Factoring turnover reported by India over the years
Domestic factoring has always been the dominant instrument
Factoring services in India
International factoring is yet to gain
acceptance in India
Domestic factoring International factoring
Source: TDB Intelligence Unit & FCI; break-up for CY2016
10%
90%
01 Exporter receives purchase order
02 Exporter sends importer’s information
for credit approval.
03 Export factor checks the importer’s
credit worthiness through FCI partner
04 Import factor evaluates the importer
and approves a credit limit
05 Exporter makes shipment to importer
06 Exporter submits invoice details and
supporting documents
07 Export factor makes cash advance up
to 90 of factored invoices.
08 Collections are carried out by the Import
Factor
09 Import factor remits funds to Export
factor
10 Export factor remit 10% remaining
balance to exporter’s account less
any charges
EXPORT FACTORING:
PROCESS FLOW
Exporter 1
5
3
4
2107 86
Export
Factor
Importer
Import
Factor
99
Source: SBI Global Factor Ltd

TDB: What are the advantages of availing factoring services
from IFCI Factors Ltd.?
Amit Kaul (AK): To start with, we have partners in almost 150
countries (we however do not have partners in Africa and a
few Middle Eastern countries) and we deal with almost 400
companies. This helps us get the credit cover decisions very
quickly and we understand all the legal systems followed by the
Factoring Chain International (FCI). We also have many FCI
certified employees and experts, who can provide customised
solutions to our consumers and help get quick services from
our export factors. In addition, we are a 100% subsidiary of
IFCI Limited, the oldest development finance institution in In-
dia. I can confidently say that in this niche financial product
none of our competitors have the expertise and connections
like we have.
TDB: Why should an Indian exporter consider factoring
services?
Amit Kaul (AK): Of late, buyers in many countries want to
do away with the traditional way of doing business and opt for
factoring – though I must say that factoring is still in a nascent
stage in India. With factoring, exporters will get funding im-
mediately on their post-shipment sales. If we factor the export
receivables of a company in India, the import factor guaran-
tees payment even when the buyer fails to make the payment.
So, the exporters have the comfort that all their proceeds are
credit covered and credit guaranteed. The next advantage is
that the export bills are instantaneously converted into liquid
cash. Also, on the due date, collection of the payments from the
buyer are the responsibility of the import factor.
TDB: Is it true that export factoring is more advantageous
for established exporters than SMEs or first-time exporters?
AK: On the contrary, I feel that factoring is more advantageous
for SMEs or first-time exporters because of the challenges they
face in securing funding. The big exporters can avail the fund-
ing against collaterals, while SMEs are unable to procure such
funding. So, factoring institutions provide funding for these
exporters without collaterals or security. Or, in case they sell
to a first-time buyer who has no payment history, there is a
guarantee that they will receive the payment. Thus, factoring
institutions give SMEs a sense of security.
TDB: For an exporter, what advantages does factoring pro-
vide in case an importer fails to pay for the consignment?
AK: In such cases, the interest will have to be borne by the ex-
porter. But, in the case of payment delay, the import factor will
follow up and make sure the payment is received. If it is not
received within 60 days after the due date, the import factor
will make the payment as a part of the credit guarantee. When
there is a late payment a penal interest rate is charged. When
the delay goes beyond the limit, then the payment has to be
borne by the import factor.
TDB: There is a perception among MSMEs that the docu-
mentation process is complicated. What is IFCI Factors do-
ing to reach out to this sector?
AK: We have been working with Google to target clients in the
SME sector. Alongside, we are working with the Government
of India that has introduced a scheme through a company they
have floated called National Credit Guarantee Trustee Com-
pany Ltd. (NCGTC). This company will give credit guarantee
for all export and domestic receivables up to 66% of the total
funded amount. We have also simplified the legal forms for our
SME clients. But, we must remember that 90% of our SME cli-
ents are being funded without any guarantee, whatsoever. We
have always been working with SMEs and we want them to be
a part of India's economic growth.
TDB: Awareness about factoring amongst exporters has
been minimal. What is being done in this regard?
AK: Five years ago, only about 5-10% of our exporters were
aware of factoring, which have now increased to 30-35%. How-
ever, still very few exporters are using the service. The govern-
ment has been supportive. IFCI Factors is tying up with asso-
ciations like ASSOCHAM and FICCI to reach out to SMEs.
There is a huge potential for the product but it will take another
one or two years to raise it to the level we want it to be. I am
very optimistic about export factoring.
I would also want to point out that earlier many exporters
would manipulate the bills and double the funding and that
was a problem for factors. However, the factoring law intro-
duced a centralised registry for registering all invoices, which
were being factored by any company and that ensured that no
double financing happens in this arena.
TDB:Factoringcanbebothwithorwithoutrecourse.Which
is more popular in India?
AK: When RBI started giving licenses, they were giving licens-
es only for export factoring with recourse. Of late, they have
permitted companies to go ahead and do non-recourse factor-
ing. Currently, 90-95% of all the export factoring in India is still
with recourse on the client and will continue to be so till Indian
factoring laws become more stringent.
AMIT KAUL, SENIOR VICE PRESIDENT – IT, INTERNATIONAL FACTORING & HR, IFCI FACTORS LTD.
“FACTORING IS MORE ADVANTAGEOUS
FOR SMES AND FIRST TIME EXPORTERS”

country of the importer and requests an
approval. The import factor does a due
diligence on the buyer and sends an ap-
proval. Once an approval is received, the
export factor advises the seller to start
processing the order. The exporter then
ships the goods and provides the export
factor with the receivables documents.
The export factor provides 80-90% of
the total receivables in the form of liquid
cash. Once the pre-decided lending peri-
od (usually in the range of 90 days to 150
days) comes to an end, the import factor
will contact the importer (buyer) and
follow up on the receivables. The mon-
ey is then passed on to the export factor
who releases the balance amount to the
seller after deducting the fees and inter-
est rates that are predetermined based on
the duration of the service. Sounds sen-
sible, logical and fairly straightforward.
And that's precisely why it's even harder
to imagine that factoring hasn't still tak-
en off in India.
A NASCENT MARKET
Under RBI’s Kalyanasundaram Commit-
tee, the feasibility of factoring in India
was discussed for the first time in 1989.
And it was only in 1991 that RBI start-
ed giving out licenses for factoring with
State Bank of India Global Factors Ltd.
(SBIGFL) becoming the first licensée.
Until 2011, the absence of laws for
factoring made the process difficult for
factoring companies and kept many
exporters away from adopting the fac-
toring route. The Factoring Regulation
Act, 2011, which was finally approved
in January 2012, for the first time set out
rules that governed the factoring indus-
try. Under the factoring act, non bank-
ing financial institutions (NBFCs) were
allowed to provide factoring facilities.
The factoring law also helped streamline
the process and tackle (to a large extent)
the problem of non-performing assets
(NPAs) and double financing.
Still, compared to the rest of the
world, India's volumes when it comes to
factoring is nothing worth writing home
about. According to FCI data, India’s to-
tal turnover from factoring in CY2015
was €3,700 million (€2,500 million from
domestic factoring and €1,200 million
from international factoring). This in-
creased 4.9% to reach €3,881 (€3,493
million from domestic factoring and
€388 million from international factor-
ing, respectively) in CY2016. What is of
particular concern here is that interna-
tional factoring numbers have crashed.
So, what ails the industry? Vikas Jha,
Senior Vice President and Head – Prod-
uct Management, DBS Bank Ltd., says,
“Most exporters and sellers still treat fac-
toring as an additional working capital
finance channel and hence given the op-
erational intensiveness of factoring vis-
à-vis a normal short-term loan, export-
ers prefer the latter. In other markets,
factoring has been offered for decades
and hence knowledge and awareness lev-
els are far higher.” However, Kailashku-
mar Varodia, Chief Financial Officer of
Receivables Exchange of India Limited
(RXIL), feels that this has a lot to do with
the laws governing financing. “Globally,
cash credit or overdraft facility are not
easily available. Post-shipment finance
happens through factoring and their
legal system is strong to back such a fa-
cility. In India, cash credit and overdraft
facility is more acceptable to a borrower
as well as to bankers.” Even debtors, he
says, are not keen to accept the assign-
ment and are not ready to pay directly to
factors. There are other issues too. “Some
are worried about double financing,
even though that cannot happen under
the present regulations. Many people are
just not aware about factoring,” he adds.
Ravi Valecha, Head of Business, Prod-
uct and International Factoring at India
Factoring and Finance Solutions, feels
that the lack of understanding has a lot
to do with the limited number of play-
ers in factoring. He says, “There are no
significant players in the market. And
even those under operations function on
a very small scale. So, unlike the banking
industry, which everybody understands,
people are yet to catch up with the con-
cept of factoring because of the lack of
awareness.”
Within factoring, the numbers also
hint an incline towards domestic factor-
ing rather than export factoring. What is
behind this trend?
This has more to do with a lack of op-
tions. Valecha agreeingly states, “We see
FACTORING
MITIGATES THE
RISK OF PAYMENT
DELAYS AND
DEFAULTS
MSMEs across the globe, especially in Europe and China, have em-
braced factoring as an ideal working capital management solution.
Factoring is a comprehensive financial solution that provides receiv-
ables management services along side short-term capital.

a likewise demand for both export fac-
toring and domestic factoring. The low-
er numbers for India's export factoring
are because we have fewer players. So, if
there are fewer providers, how will the
number of customers go up?” A factoid
here − as against 7 factoring institutions
in India there are 190 in Germany!
THE FACTORING WORLD
The state of affairs outside India though
is completely different, with factoring
Export factoring Import factoring
Source: TDB Intelligence Unit and FCI; figures in € billion
Export and import factoring: Global scenario
Unlike India, export factoring has been the most popular factoring service world over
300
250
200
150
100
50
0
CY10 CY11 CY12 CY13 CY14 CY15 CY16
TDB: Why do you think it’s taking time for export factoring
to pick up speed in India?
Vaibhavi Thakkar (VT): There are many reasons that are stop-
ping export factoring from gaining popularity – notably, the
easy availability of cash credit/overdraft facility from banks
without much hassles on the documentation front. Anoth-
er major reason has been non-cooperation or refusal to sign
'Notice of Assignments' by buyers who usually are mid to large
corporates. Also, losses incurred by Indian factors on account
of ‘accommodation’ transactions led to the loss of appetite for
aggressive growth. As for Blend, we actively promote the offer-
ings of all financial institutions that cater to Indian exporters.
We also engage with exporters and create awareness on the
multiple benefits of availing export factoring facilities.
TDB: What can India learn from other Asian countries like
China where markets for factoring has grown significantly?
VT: Factoring is performing very well in China, particular-
ly after the Accounts Receivables Law was passed in 2007.
Countries like Japan and South Korea also have high factoring
volumes. In fact, in China, the Commerce Ministry initiated
policies aimed at developing factoring companies with a focus
on the SME sector and that has paid rich dividends. India can
learn how a good legislative framework can facilitate factoring.
Factoring can help in developing the SME sector which is a key
driver of India's economy.
TDB: Blend also operates in Africa. Has factoring gained ac-
ceptance in Africa?
VT: There is a very low penetration of factoring in Africa. This
is due to several reasons including lack of awareness about
the factoring product, near absence of a legal and regulatory
framework, and infrastructural issues. However, we are tire-
lessly working along with other institutions to improve this
scenario significantly. We expect that Africa will witness good
growth rates in factoring in the near future.
TDB: There is a perception that factoring is more advanta-
geous for established exporters than smaller or first-time
exporters. What are your thoughts?
VT: In factoring, transaction history does play a significant
role. Hence, the observation is largely correct as far as witness-
ing regular orders is concerned. However, the requirement of
the order being large does not hold much water. If the factor is
confident of the buyer (importer), depending on the factor's
specific product structure, factoring can be availed by startups
with limited vintage and small order sizes as well.
TDB: We understand that factoring is more expensive than a
bank loan. Why should an exporter opt for factoring?
VT: A bank loan will normally not come without adequate
security or collateral, which is a challenge for SMEs. Though
costs may vary from one factoring company to another, still
as the exporter will have a natural hedge, the funding normal-
ly would be much easier. In addition, it gives the exporter an
opportunity to grow the volumes of his or her business, signifi-
cantly. Also, a major advantage of factoring is that it does not
generate loan on the firm’s balance sheet thus there are no loans
to repay. Exporters are also assured that in case of a non-com-
pliance, they are fully covered to the extent the invoice has been
factored as the payment would be made by domestic factor and
the import factor, respectively.
VAIBHAVI THAKKAR, CO-FOUNDER & CEO, BLEND FINANCIAL SERVICES LTD.
“TRANSACTION HISTORY PLAYS A
SIGNIFICANT ROLE IN FACTORING”
InterviewbyAndresM.Molier

gaining wide-spread acceptance across
continents (with the possible exception
of Africa). Overall, China and Europe
continue to be the largest in terms of
turnover from factoring – both do-
mestic and international. According to
data from FCI’s 2016 Annual Review,
in CY2015, the factoring turnover from
China was as high as €226.60 billion for
the domestic market and €126.28 billion
for the international market (both export
and import). Europe too saw an impres-
sive 6.4% overall growth to reach €1,557
billion in CY2015 from €1,463 billion in
CY2014. Unfortunately, despite the pos-
itive trends in Europe, Asia and America
saw a decline by 8% and 6%, respectively.
This decline has been attributed to de-
cline in sales, retail prices and commod-
ity prices. Another region that has seen
a steady growth has been Latin Ameri-
ca, with countries like Brazil, Argentina,
Mexico and Chile contributing big time
to this growth. Interestingly, like in In-
dia, the world over, domestic factoring
accounts for 78% of the total business.
SECURITY AND SPEED
So, what are the factors behind the
growth of factoring as a financial solu-
tion? Talking about the benefits of fac-
toring, Varodia of RXIL says, “Under
exporting factoring, the transactions are
on open account terms so there is no let-
ter of credit or bill of exchange involved.
Through this, the cost of issuance of LoC
TDB: Is factoring a suitable option for MSMEs? How easy is
to apply for ECGC Ltd.'s factoring services?
V. Dharmarajan (VD): ECGC’s factoring scheme is intend-
ed to benefit the exporters classified in the Micro, Small and
Medium Enterprises (MSME) category as defined in MSMED
Act 2006 – mainly medium and small manufacturing exporters
who are not in a position to afford collateral security. The doc-
umentation process is simple, transparent and MSME friendly.
TDB: What are the advantages of export factoring?
VD: If you look at the non-recourse export factoring service
in particular, it usually involves taking over the complete man-
agement of the business accounts receivable, including admin-
istration, confirmation, collection of invoices, and maintaining
records of all transactions between the seller and the buyer. It’s
a seamless and comprehensive service.
Thanks to our non-recourse export factoring, exporters can
have immediate cash-flow access of up to 85% of the value of
debtor invoices, which can be used as working capital without
requirements of collateral. ECGC provides a seamless transac-
tion interface between the exporter and the buyer as an out-
sourced debtor administration thus saving associated costs.
In addition, with this type of factoring the exporter can in-
crease sales by offering to sell on credit, which the business may
have been unable to fund otherwise, by taking advantage of
creditor discount terms. It also helps them improve their credit
rating by paying creditors promptly and enhance his/her ability
to capitalise on larger orders. The exporter also has an option to
free up property from being tied up as security.
TDB: Many organisations that offer export factoring are
struggling mainly due to the lack of awareness. What is
ECGC doing in this regard?
VD: ECGC markets its schemes through its wide network of
branch offices. ECGC’s documentation process is very simple
and easy to understand. Moreover, the exporters receive educa-
tion on the nuances of ECGC’s factoring scheme. All the que-
ries of the exporters are addressed. Transparency and clarity is
maintained throughout the process.
TDB: How can one apply for ECGC factoring services?
VD: ECGC enters into an agreement with the exporters to
purchase the export receivables without recourse and assumes
credit risk. If the buyer defaults, the payments for undisputed
liability will be made by ECGC. Interested exporters may fill in
the application form with the requisite documents and fee and
submit those to ECGC.
Our current factoring scheme is basically intended for the
MSME sector. Once the requisite documents and fee are sub-
mitted, client assessment and buyer assessment is done by
ECGC and/or our appointed Credit rating agencies. However,
some commodities which are not amenable to factoring, such
as gems and jewellery, are excluded.

TDB: ECGC is a member of FCI. What role does FCI play in
promoting factoring services?
VD: FCI was founded to promote the potential for cross-bor-
der factoring and introduce the concept of factoring in coun-
tries where it is not available. The organisation works to devel-
op a framework for international factoring that would allow
factoring companies located in the country of the exporter and
the importer to work together.
V. DHARMARAJAN, EXECUTIVE DIRECTOR, ECGC LTD.
“FACTORING HELPS MSME EXPORTERS
CAPITALISE ON LARGER ORDERS”
InterviewbyNiladriS.Nath

may be saved.” The two-factor export
factoring system offered by FCI also has
its advantages as an import factor cover
is available on the overseas buyer. This
means the risk of credit default gets cov-
ered and the seller is not required to take
credit insurance. Amit Kaul, Senior Vice
President – IT, International Factoring
and HR at IFCI Factors, concurs. “On
the due date, the responsibility of the col-
lection of dues from the buyer is on the
import factor. The import factor ensures
that the payment comes to us on the due
date. Since import factors are based out
of the same location as the buyer, speak
the same language and are aware of the
regulations in the buyer's country, we are
not worried about a payment default. In
fact, everything is taken care of in the
country of importer by the factoring
company who is our partner, as the fac-
tor is a member of FCI” he explains.
The other main advantage of factor-
ing over other export financing options,
according to Varodia, is that finance is
available in invoice currency and interest
is charged based on London Inter Bank
Offered Rate (LIBOR) which is cheap-
er compared to rupee funding. “Under
export factoring, the interest charged is
LIBOR-based (depending upon invoice
currency). For example, if the client
takes a bank loan in rupee terms from
a traditional bank the interest rate will
range from 10 to 12%. However, inter-
est rate for export factoring ranges from
TDB: According to you, why have factoring services not
picked up in India yet?
Vikas Jha (VJ): Lack of product awareness is the key reason for
restricted growth. Most exporters/ sellers still treat factoring
as an additional working capital finance channel and, hence,
given the operational intensiveness of factoring vis-à-vis a nor-
mal short-term loan, exporters/ sellers prefer the latter. In oth-
er markets, factoring has been offered for decades and hence
the knowledge and awareness levels are far higher. Also, the
Factoring Regulation Act was passed by Government of India
only in 2012, so we’re still a young industry.
TDB: How beneficial is factoring for MSMEs?
VJ: Factoring can be equally used by both large exporters as
well as MSME exporters. From an MSME perspective, this
would help them in getting cash faster and in making working
capital management more efficient. Given that factors finance
on the basis the underlying transaction, due diligence on past
track record with respect to receivables is key. Banks/ factors
prefer debtors with a good past track record. Further, factoring
is operationally more intensive than a short-term loan. So, if
the deal sizes are very small, the operating cost could become
high. RBI has promoted the receivables exchange (TReDS)
which aims to digitalise the operational flow and would help in
reducing the operational cost associated with factoring trans-
action for MSME supplier with small ticket deal sizes.
TDB: Is it true that the documentation process for factoring
is tedious, especially for MSMEs?
VJ: The exporter needs to share details of the transaction; debt-
or, sales contract, payment terms and their track record. This
would enable us to understand the transaction flow and help us
propose a suitable solution to them. The focus of the factor is
on understanding the receivable track record, performance of
the seller and industry in which they operate and once the cre-
dentials are established, approvals are fast and are comparable
with a loan approval process.
And while there are no restrictions on the goods that we can
cover under our factoring solution, higher dilution ratio, sales
to individual/ group companies, consignment sales are not
preferred. The primary documents required are receivable pur-
chase agreement and Notice of Assignment served by sellers
bank to the debtor.
TDB: Are there any challenges that an exporter can face with
regards to export factoring?
VJ: Currently, there are two key challenges. First, the credit
limits on all or a majority of debtors along with cost of such
credit cover is dependent on debtor location, debtor credit rat-
ing, debtor country and debtor country rating. Second, sales
contract with a ban on assignment is a challenge. Given that
factoring is based on assignment of receivables, it would then
require consent from the debtor. This increases the turnaround
time for execution of export factoring transactions.
TDB: What are the advantages of export factoring over ex-
port forfaiting?
VJ: At the concept level both are similar but the structuring is
different. Factoring can be with or without recourse to seller
while forfaiting is always without recourse. The seller can avail
of collections, ledger management apart from credit protection
and liquidity in case of factoring.
VIKAS JHA, SR.VP & HEAD – PRODUCT MANAGEMENT (TRADE & SUPPLY CHAIN), DBS BANK LTD.
“LACK OF AWARENESS IS RESTRICTING
THE GROWTH OF FACTORING SERVICES”

LIBOR plus 200 basis points to LIBOR
plus 500 basis points (2-5%), which is
definitely cheaper than what traditional
banks offer,” explains Varodia.
Despite this, exporters perceive that
factoring is more expensive than a bank
loan. Obviously, because there is a com-
munication gap between factors and
exporters, and the duty of educating
exporters on why factoring can be more
cost effective falls squarely on the shoul-
ders of India's factoring institutions!
dia face problems of inadequate finance.
It adds that in the case of MSMEs, there
is a requirement for the quick conver-
sion of trade receivables into cash. And
that factoring comes as a solution to this
problem of Indian MSMEs.
Another element that differentiates
factoring from other forms of credit is
that orders can be finalised on an open
account basis, an arrangement which
is usually not possible to get into for a
smaller organisation in other forms of
Also, with factoring the immedi-
ate availability of liquid cash proves to
be of great advantage to an exporter
as the funds (up to 90% of receivables)
are available as soon as the discounting
takes place. Its utility, according to many,
can be beneficial, especially for MSMEs
that find it difficult to raise banking fi-
nance. In fact, RBI's concept paper on
trade receivables and credit exchange
for financing micro, medium and small
enterprises highlights that MSMEs in In-
TDB: Would you agree that lack of awareness is responsible
for the slow growth of factoring services in India? What is
Yes Bank doing in this regard?
Asit Oberoi (AO): In a way, yes! But, factoring professionals
and trade associations are making sincere efforts and represen-
tations to create awareness about factoring. The enactment of
the Factoring Regulation Act has potentially removed the ma-
jor impediments that the factoring sector faced in the country.
However, there are also other issues like availability of credit
insurance in factoring business that can give the impetus to the
growth of factoring business in India.
Recent step taken by the regulator to set up Trade Receivable
Discounting System (TReDS) is a welcome move for domes-
tic factoring. Alongside, Yes Bank is one of the strategic stake-
holders in Receivables Exchange of India Ltd. (RXIL), which is
co-promoted by National Stock Exchange of India Ltd. (NSE)
and Small Industries Development Bank of India (SIDBI), and
operates the TReDS platform. With these enablers in place and
given the size of the economy, India is poised to become one of
the largest markets for factoring in Asia.
TDB: Is it correct to say that export factoring favours the
established exporters over MSMEs?
AO: Large or established exporters have an edge in terms of
overseas market intelligence and mature treasury operations.
But, there is an increasing trend towards catering to the MSME
segment with banks offering factoring, which was earlier of-
fered mostly by NBFC factors.
Standard documentation is required for factoring across all
segments. But with the increased awareness of the legal frame-
work, more participation across Banks/ NBFCs, and invest-
ments in technology, more MSMEs are opting for factoring.
And to provide the impetus to the MSME segment, Yes Bank
has been focused on providing working capital solutions to
meet their composite financing needs and is also taking initia-
tives to create awareness on factoring services and its benefits.
TDB: What all should an exporter be aware of before opting
for factoring services?
AO: Financing costs would primarily involve foreign curren-
cy lending cost and credit cost or underwriting cost charged
by the import factor. And usually, there is a premium charged
for offering non-recourse factoring versus a traditional bank
loan. I must mention that factoring, as a product, meets the
requirements of an exporter to avail open account financing
on a continuous basis and combines credit risk protection and
collection services. Factoring solution is best suited to clients
who offer open account payment terms to their buyers as it
provides an alternate source of borrowing. The location cov-
erage is primarily driven by the Bank’s credit appetite in the
geographical location through its correspondent bank tie-ups.
Further, banks do not cover regions covered under sanctions.
TDB: How does factoring protect an exporter in case of
non-compliance with payment terms by an importer?
AO: Factoring covers payment risk of the overseas importer.
In the event of a non-compliance by the importer, the export-
er’s liability or obligation would be governed as per the terms
and conditions of the factoring facility agreement, which may
stipulate financial recourse. It is pertinent to note that perfor-
mance risk is always borne by the exporter. But, these risks can
be offset by availing non-recourse financing.
ASIT OBEROI, GROUP PRESIDENT & GLOBAL HEAD, TRANSACTION BANKING GROUP, YES BANK
“FACTORING CAN BE A COMPLETE
FINANCIAL SOLUTION FOR EXPORTERS"
InterviewbyNiladriS.Nath

financing. This helps MSMEs offer flex-
ible payment options to its prospective
buyers. And not just that. As per Tushar
Buch, MD & CEO of State Bank of India
Global Factors Ltd. (SBIGFL), under ex-
port factoring, the exporter also benefits
from the knowledge he/she gains about
the buyer’s credit history – and the buy-
er’s credit assessment is done by the im-
port factor based out of the buyer’s coun-
try rather than a credit agency stationed
in the seller’s country.
THE PRICE TAG
For any financial credit service, an im-
portant deciding factor for exporters and
importers is the cost, and rightly so. Of-
ten an argument against export factoring
has been “high costs"; some considering
it to be as or sometimes even more ex-
pensive than a bank loan. But, "before
comparing it to other means for raising
working capital, understanding that fac-
toring does not replace existing working
capital financing solutions is important,"
says Varodia. Factoring, he says, is not a
replacement but rather a supplement or
support to the existing working capital
financing solutions for exporters.
Buch too believes that factoring is
much more than just a trade financing
option. "It involves providing collection
and receivables management service,
due diligence on the buyer and taking
a vigilant look at the transaction struc-
ture," he adds. Interestingly, the cost of
these value-added services makes fac-
TDB: How is factoring as a business performing in India vis-
à-vis other Asian countries?
Lee Kheng Leong (LKL): I would say that in India interna-
tional factoring is still at its infancy. India’s international factor-
ing volume of €388 million in 2016 is low compared to the top
Asian factoring countries of China, Taiwan, Hong Kong and
Singapore. And, as such, I see it as a potential not fully tapped
rather than a problem.
TDB: What can India learn from countries where factoring
is growing fast?
LKL: Export factoring business comes primarily from SME
exporters who are selling on open accounts and need export
factors to mitigate the risk of non-payment, finance working
capital requirement, as well as need a method to collect receiv-
ables. Typically, in most of the countries where factoring has
been successful, the export factors educates the exporters on
the need to sell on open accounts to secure sales. Once the ex-
porters are convinced about its benefits, there will be growth.
TDB: How would you rate the performance of export factor-
ing service providers in India? What kind of assistance does
FCI provide to bolster their performance?
LKL: In India, the State Bank of India (SBI) Global Factors Ltd.
and India Factoring and Finance Solution Pvt. Ltd. have just
become full members of FCI as they have met the minimum
volume of export factoring. Also, Development Bank of Sin-
gapore (DBS) and Standard Chartered Bank (SCB) are doing
quite well. SCB is a full member of FCI, and recently RBI has
agreed to allow the bank to do export factoring. This will create
a conducive environment for international factoring in India
and help the sector grow.
FCI will continue to provide assistance to all countries in-
cluding India as this is part of our mission. Members can take
up our factoring courses to acquire the necessary factoring ex-
pertise. Recently, we participated in the ASSOCHAM Global
Factoring summit in Mumbai. Next year too we will be organ-
ising an export factoring promotion conference.
TDB: The growth of factoring has been slow in India. What
are the factors that are stopping it from growing in India?
LKL: I think this will change. But, yes, traditionally, most com-
panies are comfortable in selling on letters of credit, and this
is the same for the Indian exporters. However, more and more
buyers are asking for open account terms and Indian exporters
have to accede to the importers’ demand otherwise they will
lose out to the other competitors in Asia.
One of the problems exporter faced in selling on open ac-
count is the availability of export factors. This is no longer a
problem in India as there are now seven FCI members provid-
ing export factoring services and we expect more Indian banks
to join FCI in the coming years.
TDB: How do you foresee the future of export factoring as
an industry in India?
LKL: By virtue of the size of the Indian economy, which is the
third largest in Asia, there is no reason why your factoring vol-
ume cannot rival any of the top factoring countries in Asia.
In fact, I have always said that India is a sleeping giant which
will awaken soon. What is required now is a concerted effort to
promote international factoring in India. This could be done by
way of workshops, seminars and conferences.
LEE KHENG LEONG, ASIA CHAPTER DIRECTOR, FACTORS CHAIN INTERNATIONAL (FCI)
“FACTORING IN INDIA IS A SLEEPING
GIANT WHICH WILL AWAKEN SOON”

toring costs appear to be on the higher
side when compared to a bank loan.
However, due to a much leaner structure
and better operational efficiency, oper-
ating expenses of a factoring organisa-
tion tends to be lower and can partially
offset the higher cost of funds.
POISED FOR TAKE-OFF
It is obvious that factoring as a trade fi-
nance option has many advantages and
is cost-effective. While large companies
may be able to work out cheaper options
through foreign currency debt instru-
ments and therefore may not warm up to
factoring, it is baffling that MSMEs who
are unable to access funding through tra-
ditional channels have not yet embraced
factoring.
Both parties are equally at fault. Actu-
ally, all three.
MSMEs are averse to trying out a new
option, one that could mitigate risk of
delays and defaults in payments. India's
factors on the other hand, have not pro-
moted their services among the segment
that could most benefit from their ser-
vices. Since regulations governing fac-
toring came into effect only in 2012, the
government also must take a share of
the blame. But things are slowly chang-
ing for the better. Products are now be-
ing structured specifically for MSMEs
and trade bodies like FICCI and AS-
SOCHAM, in conjunction with factors,
are holding workshops and seminars to
TDB: Despite being a popular financing option globally, fac-
toring has not found much acceptance in India. Why?
Kailashkumar Varodia (KV): In India, though factoring ser-
vices were started in 1991, the Factoring Regulation Act was
introduced only in 2011. In addition, globally, cash credit and
overdraft facilities are not easily available and hence the finance
happens through factoring. Also their legal system is strong to
back such a facility. However, in India, cash credit and over-
draft facilities are more acceptable to the borrower. Debtors
do not easily accept the assignment and are not ready to pay
directly to factors. Even the banks have apprehensions about
factoring and consider it as a competitor. On top of that, many
are unaware of the services.
TDB: Is there any restriction on the types of goods financed
under factoring?
KV: As such, there is no restriction or criteria on the type of
goods or segment. But, export factor will not be able to finance
against the goods sold on a consignment basis and goods sold
to associates or subsidiary of the seller. Sellers can approach
factors like SBI Global Factors, India Factoring and IFCI Factor
for their individual export factoring limit. The documentation
is similar to that of the banks and it takes nearly 3-4 weeks to
complete the sanction process. Disbursement against particu-
lar invoices will happen on the same day, or the next day if the
documents are submitted during the later part of the day.
TDB: Why should an exporter opt for factoring when it is
considered more expensive than a bank loan?
KV: I agree that factoring is little more expensive compared to
bank finance. But, one must understand that factoring is not
a product to replace bank finance, rather it is a support/ sup-
plementary to the existing working capital. However, in some
cases, it might be cheaper than bank finance. For instance, if
the client has limits, in rupee terms, from their existing bank-
ers, the interest rate will range from 10-12%. But under export
factoring, since the interest charge are LIBOR-based, the inter-
est rate for export factoring range from LIBOR plus 200 basis
points to 500 basis points, which is cheaper compared to rupee
funding. Export factoring is post-shipment finance which will
give three type of services: finance, cover and follow-up (man-
agement of receivable) by the factor. So, export factoring is
more suitable for the continuous business relationship of buyer
and seller on open account terms.
TDB: Critics say factoring is more beneficial for established
exporters and that the process can be tedious for MSMEs?
KV: Yes, compared to a first-time exporter, an established ex-
porter will have more advantages. This is because the factors
analyse the payment performance of the buyer. Thus, in the
case of a new buyer, this can prove to be a challenge as there is
no prior information available.
To answer your second question, the process is not tedious.
But it's a little detailed as financing is against invoices and the
export factor is not taking any collateral for such a facility. Also,
manyatimes,delayhappensduetonon-receiptoftheinsurance
cover on time or delay in acceptance of assignment by the buy-
er. But in such cases, talks can be initiated with FCI for a quick
responsetocoverarequestfromtheexportfactor.And,itisalso
possible for the factor to simplify the documentation process
for MSMEs without deviating from their regulations, processes
and procedures.
KAILASHKUMAR VARODIA, CFO, RECEIVABLES EXCHANGE OF INDIA LIMITED (RXIL)
“FACTORING, IN SOME CASES, CAN BE
CHEAPER THAN BANK FINANCE”

spread awareness.
FCI too has been providing its share of
assistance. "We help our Indian members
to send their employees to receive certifi-
cations. We have participated in the AS-
SOCHAM Global Factoring summit in
Mumbai. Next year, we are organising an
export factoring promotion conference,”
shares Lee Kheng Leong, Asia Chap-
ter Director of FCI. The conference, he
adds, "aims to create awareness amongst
exporters on the use of export factoring
to enable them to sell on open account
terms without risks associated with open
account sales.”
Factoring is a great tool at the disposal
of exporters, and one that can help im-
prove their cash flows and manage their
working capital better. It not only allows
an exporter to ship risk-free on open
account terms to an overseas buyer, but
also helps in collection of receivables
through an import factor based out of
the buyer’s country. It is high time that
Indian exporters, particularly MSMEs,
embrace it wholeheartedly.
One must remember that in today's
fast-moving world of international trade,
buyers are not interested in a deal that
puts the financial burden on their shoul-
ders (as has been the case with tradition-
al financing options like LCs). The soon-
er an exporter realises this, the better it
is for his business. After all, no business
can afford to lose a deal to its competitor!
Need we say more?
TDB: What advantages does export factoring have over con-
ventional export credit options?
Ravi Valecha (RV): Usually, exporters depend on banks for
export finance, which comes with a recourse facility. However,
when it comes to export factoring, its main advantage is that
it offers a total product suite that provides multiple benefits –
the main being a non-recourse facility on an unsecured prod-
uct. In an usual banking scenario, the exporter has to take an
ECGC cover to protect against the buyer’s default, which is a
different organisation. So, exporters have to deal with two dif-
ferent organisations. But as a bundled offering, factoring offers
collection service in case of a non-payment – which is not the
case with the banks. Also, factoring offers credit protection in
the buyer’s country. So, there are many advantages of factoring.
TDB: We understand exporters have shied away from fac-
toring because it is more expensive than bank finance. What
makes factoring an expensive financing option?
RV: Obviously, the cost of factoring is higher than bank financ-
ing. But the bank does not provide credit protection, collection
facility or unsecured finance. If we were to provide like-to-like
finance, then there would be a case for comparison. But, there
are at least five to six differences on top of the finance option
that the banks offer. So, factors demand a little premium.
TDB: Are there sectors that factoring does not cover?
RV: Well, from a sector’s point of view, there are some dos and
don’ts. For instance, gems and jewellery sector is not covered
because of the underlying value which requires a certain level
of expertise – it’s hard for the institution to evaluate the value
of their goods. And, globally, there are only a few banks that
offer finance to gems and jewellery sector. But, if we pick men’s
shirt, it’s easier to estimate its value and factoring becomes easy.
TDB: There are some non-FCI institutions that offer factor-
ing services. Are there any advantages of seeking a service
from an institution that comes under FCI?
RV: Just like the International Chamber of Commerce’s (ICC)
banking division is responsible for laying down rules and reg-
ulations for international trade, Factors Chain International
(FCI) regulates all the factoring of open account transactions.
So, when you are involved in factoring under FCI, you are op-
erating in a regulated environment. And if you factor outside
FCI, then it’s like taking services from an unregulated setup.
TDB: What reasons would you attribute to the slow growth
of export factoring in India?
RV: There are no significant players in Indian market. And
even those under operations function on a very small scale. So,
unlike the banking industry, which everybody understands,
people are yet to catch up with the concept of factoring because
of the lack of awareness.
TDB: How would you sum up the benefits of factoring for
Indian exporters?
RV: I would like to conclude with an example. When you a
have question about investments, you reach out to an invest-
ment consultant or a private banker. In the same way, for re-
ceivables, you will need to reach out to an expert – and not a
banker. Banks treat finance against receivables and stock in the
same manner, while they are actually two different things. And
be assured that we will do our best to guide you
RAVI VALECHA, HEAD OF BUSINESS, PRODUCT & FI NETWORK, INDIA FACTORING & FINANCE SOLUTIONS
“YOU CANNOT COMPARE FACTORING
WITH CONVENTIONAL BANK FINANCING”

SPOTLIGHT MOROCCO
TDB INTELLIGENCE UNIT
CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16
IN A MOOD FOR
RECONSTRUCTION
Located in North Africa, the Kingdom of Morocco is a powerhouse when it comes
to trade in fertlisers. What's more? It's the only African nation that has FTAs with 55
countries and is known as a trade-friendly economy. The country is now banking on its
growing industrial might to widen its exports basket and become a mature economy.
Source: TDB Intelligence Unit & UN Comtrade; figure in $ billion; break-up for CY2016
MOROCCO’S MERCHANDISE TRADE Morocco has always been an
import-dependent country. The
country’s trade deficit showed
signs of decline in CY2015 only to
rise again in CY2016. Last year,
despite exports growing 3.66%
y-o-y, the country's trade deficit
widened further as imports
increased by 11.01% y-o-y.
Source: TDB Intelligence Unit
& UN Comtrade; figures in $ billion
50
40
30
20
10
0
Morocco's exports to the world
Morocco's imports from the world
I: MOROCCO'S IMPORTS E: MOROCCO'S EXPORTS
MOROCCO’S
LARGEST TRADING
PARTNERS
Spain and France have been Morocco’s
largest sourcing destinations. However,
the country's imports from China,
Germany and Portugal have been
constantly on the rise over the last few
years. Morocco's proximity to Europe
has meant that most of its large trading
partners are in Europe. In recent
years, India has also become one of its
significant trade partners owing to its
imports of phosphates and fertilisers.
Image: Located in Casablanca, Morocco,
Hassan II Mosque is the 13th
largest
mosque in the world.
SPAIN
I: 6.55
E: 5.33
FRANCE
I: 5.51
E: 4.82
TURKEY
I: 1.85
E: 0.75
CHINA
I: 03.8
E: 0.22
US
I: 2.65
E: 0.79
UK
I: 0.79
E: 0.66
ITALY
I: 2.26
E: 1.06
INDIA
I: 0.63
E: 0.75
GERMANY
I: 2.45
E: 0.62
PORTUGAL
I: 1.22
E: 0.31

MOROCCO’S IMPORTS FROM INDIAMOROCCO’S EXPORTS TO INDIA
Moroccan economy has always been dependent on exports of chemical
fertilisers and phosphates. However, in the recent years, exports of motor
vehicles, insulated wire & cables, garments and seafood have also been
contributing significantly to its export earnings.
Morocco mostly exports phosphoric acid and phosphates to India. In
FY2017, Morocco’s exports of the said products to India saw a drop of
26.13% y-o-y with Jordanian and Senegalese exporters of chemical
fertilisers giving tough competition to their Moroccan counterparts.
Motor vehicles and accessories, electrical apparatus, pharmaceuticals,
synthetic fibres and cotton comprise the largest portion of Morocco’s
imports from India. Further, insecticides, fungicides and disinfectants are
also imported by Morocco from India in large volumes.
Morocco’s imports rose in CY2016 fuelled by a demand for petroleum
products to support its burgeoning industrial sector. Morocco is also a big
importer of motor vehicles & tractors, electrical apparatus, iron and steel
products and structures and cereals.
MOROCCO-INDIA
MERCHANDISE
TRADE
Despite several trade agreements between
Morocco and India, the full potential of
trade between the duo is yet to be realised.
Morocco though has maintained a trade
surplus position with India over the last
decade, mostly due to India's dependence
on Morocco for phosphates and fertlisers
to support Indian agriculture sector. Source: TDB Intelligence Unit & Ministry of Commerce, GoI; figures in $ million
Source: TDB Intelligence Unit & Ministry of Commerce, GoI; break-up for FY2017 Source: TDB Intelligence Unit & Ministry of Commerce, GoI; break-up for FY2017
Source: TDB Intelligence Unit & UN Comtrade; break-up for CY2016 Source: TDB Intelligence Unit & UN Comtrade; break-up for CY2016
MOROCCO’S EXPORTS TO WORLD
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
India's exports to Morocco India's imports from Morocco
Iron or non-alloy
steel products
Iron or steel
structures
Powered
aircraft & parts
Phosphoric Acid
Natural calcium
phosphates
Mineral &
Chemical fertilisers
Other
68%07% 18% 07%
4% 7%
4%
5%
53%
8%
8%
11%
Organic chemicals Pharma products Cotton yarn Synthetic & artificial
filament yarn Insecticides, fungicides, disinfectants Electrical & engineering
machinery Motor vehicles & accessories Other
Motor vehicles & parts Mineral or chemical fertilisers
Clothing & apparel Seafood products Phosphates & phosphinates
Vegetables & agro products Other Electrical items
60
50
40
30
20
10
0
37% 16%
14% 10%
9% 5%
5% 4%
Other59%
Petroleum
oils & gas11%
Motor vehicles &
their accessories
10%
Cereals5%
3%
3%
2%7%
Electrical
apparatus
& accessories
MOROCCO’S IMPORTS FROM WORLD

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