Every June, FCI publishes its Annual Review, giving an overview of progress made by the world's biggest and most important factoring network. The Annual Review also presents FCI's annual figures and global factoring statistics. This extract explores CEE, SEE and the Middle East's Regional Updates, presented by Ms Betul Kurtulus, FCI Regional Director Central, Eastern and South-Eastern Europe and the Middle East.
Factoring volumes continued to grow in CEE & SEE, but we see a different growth in the Middle East region. The total transaction volume of the CEE & SEE region, which increased by 18% in 2021, reached an increase of 25.5% in 2022. On the other hand, turnover in the Middle East remained at the same level as the previous year. In CEE & SEE region countries that led this growth included Romania, Cyprus, Czech Republic, Slovakia, Romania, Greece, Bulgaria, Georgia, Lithuania, Serbia, and Turkey, with over 30% increase compared with the previous year. But Poland, Russia, Turkey, Greece, and Hungary are the five big countries dominating the landscape in CEE & SEE. Additionally, there are some countries where the increase is very promising compared with the previous year, like Ukraine, Lithuania, and Moldova. Moldova is small in terms of turnover, which is an increase. However, we have not seen a notable rise in the Middle East market.
Legal, Regulatory and Advocacy
FCI continued to support legal and regulatory reforms enabling factoring throughout 2022. We worked closely with EBRD and IFC World Bank to support the region’s infrastructure. Several developments and engagements took place with the region’s regulators and lawmakers. The Central Bank of Jordan has issued the ‘Finance Companies Bylaw’, which all finance companies (including factoring companies) will be subject to licensing and supervision by the Central Bank. Factoring law studies in Jordan, Palestine, Uzbekistan, and Ukraine, are in rapid development with the contributions of their central banks, ministries of finance, and investment banks. By the end of 2023, we will see the factoring law approved in a few countries. There are also significant developments in the legal infrastructure of government-supported digital solutions. Efforts are underway to increase the number of successful invoice registration centres, like Turkey, especially in CIS countries. Such government-supported digital solutions are vital for developing the receivable finance sector.
Promotion and Awareness
We held events and workshops with our business partners, promoting international factoring, reverse factoring, and Islamic international factoring. Our annual CEE conference was held in Q1, just after the invasion, with many members, observers, and regulators in attendance. Despite the war’s impacts, the region’s domestic and international factoring transactions performed well. We organised a workshop on best factoring industry practices in Moldova and a Regional Trade Finance and Factoring Conference for Banks and Corporates in Georgia with the EBRD. Following the EBRD TPF Trade Finance Forum in Istanbul, we hosted a conference on Resilience and Developments of Factoring to discuss the COVID crisis and how the war on Ukraine affected the foreign trade and factoring business in CEE and SEE regions. We also joined the UATFF Annual Trade Finance Conference in Ukraine. FCI participated in various partner events across the region, where we discussed our services with FCI members, potential members, and clients.
The preceding developments translated into five new members: four in the Middle East (Israel, Jordan, Oman and UAE) and one in SEE (Poland) joined FCI in 2022. We have new Islamic members activated in the region. We expect an increase in the turnover of FCI's product, ‘Islamic International Factoring’, especially in Turkey and the Middle East.
CEE countries passed the first winter of the Russia-Ukraine war better than expected. CEE countries purchased less natural gas from Russia while finding other energy sources. Following the invasion, it has been seen that CEE countries are more integrated with Europe than with Russia. In other words, the Russian exposure to the CEE countries was at a manageable height and manageable with well-planned monetary policies. During 2022 inflation peaked throughout CEE and SEE but is likely to miss targets in 2023-24 as rising energy prices could slow disinflation. But it is unlikely that inflation in the foreseeable future will return to the relatively low levels seen before the Covid-19 pandemic. The Middle East is positively differentiated from these problems due to rising energy prices. Therefore, there will be no economic problems for the region’s countries if the energy prices remain at these levels. The demand for open account transactions is increasing in the region.
The technological developments discussed in detail in almost all 2022 events are more important than economic development. Economic developments in all regions will depend on successfully integrating new technologies into the economic cycles. In the long term, they are the key to further growth and continued productivity. The importance of technology in Trade finance is vital to more efficient use of resources. Productivity in business has increased considerably in recent years, especially in developed markets, with a correspondingly positive impact on potential growth. In the long term, increased productivity will be needed to ensure more robust economic growth. Technological developments are the key to this and are thus the guarantors of the future of our business.
(Photo: © Sadik Boujaida)