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EBRD facilitates Bank of Georgia’s first factoring transaction
Bank of Georgia has become the first bank to conclude a factoring transaction
in Georgia. Under the EBRD’s Trade Facilitation Programme (TFP) the bank
signed a factoring agreement with Magoili Ltd worth $200,000, covering the
supply of raw materials for road construction. This will allow Magoili to
immediately get funds for its deliveries instead of waiting for payments from
its clients.
Through factoring, Bank of Georgia provides its corporate clients an
additional way to obtain funding without having to mortgage property.
Factoring, which is the activity of purchase, administration and collection of
short-term accounts receivable by a bank, is a fast and flexible method of
improving a company’s cash flow and providing working capital for the company.
With factoring, companies get immediate access to cash that is normally tied
up for 30, 60 or 90 days in accounts receivable invoices. With the use of
factoring services, a business can take advantage of growth opportunities,
reduce debt and solve problems associated with the collection of the accounts
receivable.
The EBRD has included factoring as a new product into TFP in order to further
transfer know-how and innovative trade finance solutions to its countries of
operations. Through TFP the EBRD provides also guarantees to international
confirming banks and factoring companies, taking the political and commercial
payment risk of international trade transactions undertaken by banks in the
countries of operations (the issuing banks). In addition, the EBRD grants
short-term loan facilities to banks and factoring companies for the purpose of
funding sub-loans to their clients.
Established in 1999, the programme has grown rapidly. As of July 2007, TFP has
facilitated more than 6,250 trade deals worth nearly €3.6 billion, including
436 transactions in Georgia worth €200 million.
To support this new activity, Bank of Georgia benefited from consultancy
services financed by the EU and provided by Ben Hosh, a partner of Triangle
Trade Finance with long-standing experience in the trade finance industry. In
five missions to Georgia over the past year he helped to establish factoring
services at three local banks.
“It is exciting to see Bank of Georgia introduce factoring and to take its
place in the rapidly expanding global factoring community which reached a
total world volume of €1.1 trillion in 2006. I am confident that this is the
first of many such transactions that will take place to support the growing
SME sector in Georgia”, Mr Hosh said about the agreement between Bank of
Georgia and Magoili. “This is another milestone in the long-standing
cooperation between Bank of Georgia and the EBRD”, added Rudolf Putz, Head of
TFP at the EBRD.
“This contract is the first case of delivering factoring service in Georgia.
We are delighted that Bank of Georgia has started to offer its clients this
service as will allow companies to get funding for working capital”, said
Ramaz Kukuladze, Deputy Chief Executive Officer of Bank of Georgia.
Bank of Georgia was the first Georgian Bank to become an issuing bank under
TFP in 1999 and has since used TFP facilities for financing almost 300 foreign
trade transactions worth €135 million.
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