report from the First International Factoring Congress
First International Factoring Congress was held in Warsaw on 16 September 2010. The event, organized by the
Polish Factors Association (PFA), was attended by about 150 home and international experts, including representatives of the major international factoring federations. Presentations and discussions during the
Congress focused on the analysis of current market trends, security of trade in Poland and worldwide, as well as the innovative factoring products.
Time for factoring
"Factoring is a service commonly used," - said Erik Timmermans, Secretary General of the International Factors
Group. "Through education, business activities and enriching the standard bank offer by factoring, its popularity will continue to grow. Polish factoring market will maintain the growth measured by double-digit for many years."
Factoring is a popular financial instrument. The number of companies that consume the product (ca 5.6 thousand entities) evidence the growth of Polish market. It increased by about 14% in 2009. Within the last two years, the companies associated in PFA achieved an impressive 60% increase in turnover. Only in the first half of 2010 the turnover of factoring companies of PFA, exceeded PLN 19 bn. This is an increase of 34.6% year on year! "The results for the whole 2010 will largely depend on the turnover in the last quarter. I believe that real growth in turnover across the industry will be around 25-30% "- predicts Mirosław Jakowiecki, Chairman of the PFA’s
Executive Committee.
Industry’s opportunities
According to the panellists participating in the Congress, the chance for the industry's economic recovery is observed. After the financial crisis the economy growth is certainty for 2010. "Companies are looking for capital to feed the development activities after the crisis, so now is the best time for factoring growth" - said Kate Sharp.
The potential for factoring growth in Poland is expressed by the fact, that only 2% of the 300 thousand companies utilise the factoring services. Factoring in Poland, however, has a low penetration rate. "In the developed financial markets, that ratio reaches 6 -7% of GDP. In Poland the rate is significantly lower, what means, that we still have tens of years of growth of the industry "- said Mirosław Jakowiecki.
According to John Gielen, President of the EU Federation, an important element in ensuring long-term development of factoring a supportive is in legal environment. "Polish Factors Association is one of the best organized trade associations in Europe. This is a very good omen for the future, because only a united industry can effectively influence the legislative process, both at national and pan European level, providing good conditions for the functioning of law "- said Gielen.
Another factor contributing to the development of the industry is progressing computerization of operational activities by the Factors. Application of information systems can increase both the effectiveness of the operation and security of factoring transactions."The introduction of an electronic invoice goes to a higher level of security. Today, factors finance the clients on the basis of invoices, copied or scanned. Based on an electronic documents they will be able to reduce the risk of fraud "- noted Josep Selles, representing the Factors Chain
International.
Barriers of growth
According to the panellists, a fundamental barrier of growth is the low level of awareness among entrepreneurs and the consequent low demand for factoring services. "Factoring is a complex product. Difficulty in understanding the core business of it make that businesses are less likely to use it, "- noted Roberto Weckop of Eurofactor,
Germany. Only the collective efforts of the entire industry can bring real effects measured by the further development of the market. Therefore the key to the success is in educational activities that shall be dedicated not only to the existing and prospect Clients but also to the entire financial services’ industry and factoring companies.
A major challenge for factors is also the threat of recurrence of the economic slowdown and the financial crisis. As to the experiences of 2009, a weaker companies’ activities turn onto a slowdown of factoring development, accumulating level of risk and ends by tight criteria that reduce the funds’ availability. The decline in turnover on the Polish market in 2009 was also caused by the strict criteria for granting the funds and conservative policy of insurance companies. Therefore all of factors have to cooperate with insuring companies so that insurers should better understand factoring business.
Prospective products
Factoring is defined in the world as approximately 200 different types of financing services dedicated to the companies that sell their receivables. In fact, it is difficult to determine whether recourse factoring or non

recourse factoring shall be more popular. On the one hand, non recourse factoring is much more attractive for
Polish entrepreneurs. On the other hand, the basic need of entrepreneurs is funding, this is why the recourse factoring is still welcome.
The industry worldwide evidences a dynamic development of the invoice discounting within which the client receives only the funding, and is largely responsible for the management of receivables. That financial solution has generated 32% of the world factoring turnover in 2009 gaining particular popularity in Western Europe. In Poland, the service is not recorded as factoring yet, so in the long run it can gain a significant position in the market.
In the context of factoring services we see the tremendous growth of popularity of asset based lending. However this service is a rare one in Poland.
The popularity of export factoring shall increase in Poland. Exporters' need to finance their receivables by factoring mainly because of the increasing volume of international trade. As the Polish market integrates with EU markets, this service will find some thousands of clients.
The wide array of different types of factoring services is available on the Polish market now. The panellists presented different types of factoring: the restructuring, the reverse, the municipality ones and others. "The range of factoring products in Poland is wide, so the factors can fully satisfy customers' needs" - noted Andrzej Żbikowski,
Vice-Chairman of the PFA’s Executive Committee.
The development of the sector by consolidation within the PFA may be faster
"The organization of the Congress reaffirms the leading role of the Polish Factors’ Association in the popularization of factoring. The conference was also an excellent opportunity for expansion of PFA by a fact, the representatives of all companies and banks that provide factoring service in Poland were present at the Congress. Our ambition is to consolidate the factoring market in Poland as the whole. We want to help to improve the quality of our services to standardise the factoring services and to enhance the credibility of published data on the industry. We plan to launch the International Factoring Congress on a permanent basis to the financial industry calendar of events in
Poland "- said Mirosław Jakowiecki.
International Factoring Congress in Warsaw was the first such event organized in Poland. More than 150 experts participated in the Congress, among them were about 20 international guests, including representatives of
International Factors Group and Factors Chain International and the EU Federation. The prominent economist, prof.
Krzysztof Rybinski draw the impressive picture of the general economic situation in Poland. “The Polish crew” of
Congress’ participants was dominated by representatives of leading banks and factoring companies.
Congress was a perfect occasion to make the “doers” and scientists of factoring busy discussing. As there were the representatives of leading schools of economics, the Association announced the Award in a contest for the "Golden
Pen of PFA" The jury awarded Agnieszka Dabrowska’s paper - “Factoring – a liquidity management tool." as the best thesis dedicated to factoring in 2010.
With the Congress’ occasion, "Factoring in Poland 2010. Analysis. Market. Perspectives", the book by Dr Katarzyna
Kreczmańska-Gigol was published by Difin House.
Tomasz Biernat, MA, MBA
Pekao Faktoring information on the First International Factoring Congress also on the website www.kongresfaktoringu.pl.