Sunday, 26/05/2024
   

Factoring is an important product for the international trade

According to Dr. Nguyen Quoc Hung - Vice Chairman cum General Secretary of the Vietnam Banks Association (VNBA), factoring is an important product in the international trade, a convenient and effective source of finance for the private sector. The development of factoring will significantly improve the financial access for the private sector and small and medium enterprises in Vietnam.
Dr. Nguyen Quoc Hung - Vice Chairman and General Secretary of VNBA

Following the in-depth training workshop on factoring on April 8-9, 2024 in Ho Chi Minh City, VNBA coordinated with the International Finance Corporation (IFC, a member of the World Bank Group) to organize another workshop "Improving the legal framework on factoring in Vietnam" in Hanoi on April 11-12, 2024.

Attending the workshop were Dr. Nguyen Quoc Hung - Vice Chairman and General Secretary of VNBA; representative of the Department of Credit for Economic Sectors - the SBV’s unit directly drafted the Draft Circular regulating factoring in Vietnam; and the presence of more than 100 participants from credit institutions, financial companies that are VNBA members, and from foreign bank branches.

Factoring workshop
Factoring workshop

Speaking at the workshop, Dr. Nguyen Quoc Hung said that factoring is an important product in the  international trade, a convenient and effective source of finance for the private sector. In the difficult context of Covid-19 period, factoring still ran well, the non-payment rate (bad debt) of reverse factoring was only 0.18% - a safe rate compared to the average level worldwide. The development of factoring will significantly improve access to finance for the private sector and small and medium enterprises in Vietnam. In fact, the policy mechanism on factoring in Vietnam already exists but this product has not really developed and only just been applied by some banks for several years. The reasons why factoring has not really developed in Vietnam are: some shortcomings in the legal corridor for this product; high fee of using factoring; a risky business, especially risks from the buyer; Factoring are not attractive enough to customers...That’s why, the two workshops were organized to help credit institutions can design and use this important product safely and successfully when the Circular on factoring promulgated by SBV.

Dr. Nguyen Quoc Hung also stated hopes that during the two-day workshop, IFC experts will comprehensively share the experience in implementing factoring in other countries; At the same time, representatives from credit institutions will raise difficulties and problems, shortcomings… Then, experts and credit institutions have provided comments to improve the legal framework on factoring in Vietnam.

Representing for the Foreign Bank Working Group, Mr Kojimo Masao - General Director of MUFG (Chairman of the Foreign Bank Working Group) commented that factoring is an important operation. His working group is closely interested in payment activities in Vietnam and highly appreciated the efforts of the State Bank of Vietnam, listening to the wishes of banks and private businesses, allowing the application of international standardized services as factoring. He affirmed that, with international experience of practical implementation, the Foreign Working Group is committed to working closely with the State Bank of Vietnam to create a legal corridor for factoring in Vietnam.

Factoring workshop
Mr. Peter Brinsley, Director and Founder of Point Forward, IFC

Ms. Pham Thi Thanh Huyen (Program Manager for Financial Infrastructure Development in Vietnam and Cambodia, Financial Institutions Consulting Group, Asia and Pacific Region, IFC) also shared about Factoring in Capital Financing with guaranteed assets. She said that factoring is increasingly being presented via electronic platforms. However, the favorable environment for factoring in Vietnam should be improved. In terms of policy, authorities support factoring but have few specific measures. At present, there are three laws governing factoring: Amended Law on Credit Institutions; Civil Law and Bankruptcy Law.

Mr. Peter Brinsley, Director and Founder of Point Forward, IFC consultant introduced about factoring: Basic elements of factoring and its operating mechanism; Products of Factoring; Introduction to Risk Management in Factoring and Evaluation of possible risks; Data Analysis…

At the workshop, several representatives of credit institutions talked and discussed with IFC consultants about factoring applications, services related to factoring, debt classification, and risk provisioning, electronic factoring... The workshop would contribute much for the amendment and supplement of the Draft Circular regulating factoring.

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