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The 11th Asia-Europe Business Forum (AEBF 11) Seize the trend, Time for Action and Public-Private Partnership Intervention by Margrith Lütschg-Emmenegger.

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Presentation on theme: "The 11th Asia-Europe Business Forum (AEBF 11) Seize the trend, Time for Action and Public-Private Partnership Intervention by Margrith Lütschg-Emmenegger."— Presentation transcript:

1 The 11th Asia-Europe Business Forum (AEBF 11) Seize the trend, Time for Action and Public-Private Partnership Intervention by Margrith Lütschg-Emmenegger President 21st – 23rd October 2008 China World Hotel Beijing, P.R. China

2 CONCURRENT SESSION III: SME DEVELOPMENT WORKING GROUP Table of Contents 1.FIMBank Corporate History in Brief 2.SME – Financial Crises – Evaluation and Consequences 3.Some Potential Solutions – Trade Finance and Products 4.Which Products and Why 5.What it can mean for China 6.Way Forward – Actions Needed

3 100% 38.5% 40% 100%

4 Rights issue US$25m FIMBank established in Malta by leading Middle East businessmen Setting up of FIM Business Solutions IFC joins as a shareholder and long term partner Acquisition of LFC Global reach Forfaiting expertise Increase in capital US$15m Initial licence DIFC Dubai for MENAFACTORS Acquisition of GTF Factoring India FIMBank is listed on the Malta Stock Exchange Debut in the International Capital Market Syndicated loan US$30m Hired key management from WestLB (leader in trade finance) Opening of LFC office in Singapore Rights issue US$15m Setting up EGYPTFACTORS Mar 01 Feb 03 Sep 01 Dec 04 Nov 05 Jun 05 Dec 06 Oct 03 Dec 07 Jun 05 Nov 03 Dec 05 Oct 06 Selling Equity in GTF India March 08 FIMBanks Corporate History


6 FIMBank Group s Core Mission FIMBank Focus Trade-related Business Trade will never stop Trade drives economies

7 7 FIMBanks Core Products We provide TRADE FINANCE, i.e. the following products: Support Services International Fund Transfers FX, Forward Contracts, Currency Options and Swaps Issuance of Guarantees Core Competencies Trade Finance Pre-demolition Ship Finance Syndications / Risk Participations Forfaiting Factoring

8 8 Istanbul Sao Paulo New York Cairo Mumbai Malta Moscow Dubai UK GMT Malta GMT +1 Singapore GMT +7 US West GMT -9 US East GMT -5 Sydney GMT +9 FIMBank Group – Overseas Network LFC FIMBank Joint Ventures Joint Venture and FIMBank LFC and FIMBank Singapore London

9 Group Key Performance Ratios Key Performance RatiosJun-08Dec-07Dec-06 Operating Income/Total Assets5.1%4.5%4.7% ROAA4.7%2.0%0.8% ROAE31.6%13.0%5.1% Impaired Loans/Gross Loans2.6%4.0%4.5% Loan Loss Reserves/Impaired Loans109.7%102.0%94.2% Group Solvency Ratio21.2%35.4%27.1%

10 Group Solvency Ratio Basel II impacted ratios (as from March 2008), however capitalization remains well above regulatory threshold

11 Group Liquidity Ratio FIMBanks liquidity ratio (monitored daily) consistently above the regulatory minimum, with an upward trend in the last two months (despite global liquidity crunch)

12 SMEs are in (almost) all countries the main Drivers of the Economy; SMEs will be the first to suffer from the lack of liquidity; Larger financial institutions – in crises and in normal circumstances – have found/find it difficult to service the SME sector; Trade (domestic and international) will continue to drive the global economies for many centuries to come:; Trade Finance is not synthetic business but real and true – hard work and honest; There are certain products that support trade finance for SMEs particularly strong and well Financial Crises and SME s

13 13 Products: Forfaiting Discounting of international trade receivables on a without recourse basis In essence, a form of supplier credit Negotiable documents: Accepted Bills of Exchanges by Importer/Buyer Promissory Notes issued by Importer/Buyer Letters of Credit Book receivables with separate guarantee Tradable assets: After discounting the debt instruments, the forfaiter can hold them to maturity or trade them in the secondary market

14 14 Products: Forfaiting Offered within the FIMBank Group through our 100 % Subsidiary Acquired in 2003 Market Leader – Best Forfaiting House Award in 2005, 2007 and 2008

15 15 Products: Factoring Financing of Open Account sales/invoices on a continuous basis Tenors: usually days (max. 180 days) Usually covering exports from Emerging Markets (performance risk) to Developed Markets (payment risk) Notice of assignment is given by debtor/buyer Factor assumes at least two of the following functions: Credit Protection Financing/Prepayment Collection Credit Management Sales ledger administration and analysis

16 16 Products: Factoring Blueprint for Factoring within FIMBank Joint Venture with Export Import Bank of India, International Finance Corporation (World Bank) Bank of Maharashtra – FIMBank 40 % acquired in 2004; SOLD in 2008 – NOT Strategy but good profit opportunity; Case Study ! Followed by : in 2007 and in 2008

17 Global Factoring Growth Rates Domestic Factoring $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1, Global Volumes (US$ billion) CAGR: 17% 2006 International Factoring $0 $20 $40 $60 $80 $100 $120 $140 $ Global Volumes (US$ billion) CAGR: 32% Source: FCI Factoring is the fastest-growing product in global trade finance Source: FCI

18 Market size: US$1 trillion Ongoing arrangement Open Account Sale Provides other than financing services Used for offering short-term credit to regular buyers (up to 180 days) Both with and without recourse For domestic and export receivables No minimum size Cross-border trend = EMERGING DEVELOPED Market size: US$80 billion (est.) Single transaction based L/C or Bank Acceptance Required Primarily a Financing Service For medium/long-term transactions which could be one-off (90 days to 7 years) Without recourse Usually for export receivables Transactions should be minimum US$100,000 Cross border trend = DEVELOPED EMERGING FACTORING FORFAITING Similar but different – highly complimentary FASTEST GROWING TRADE FINANCE PRODUCT MORE STABLE MATURE PRODUCT The Products Compared

19 Pre-Post shipment Financial Risk Security/Collateral driven Price effective for good Balance Sheet With recourse FACTORING and FORFAITING: By experience – does not work at its best within a Banking Environment but much better in a separate independent Company. Post shipment Performance and Debtor Payment Risk Cash flow/Portfolio/Buyer driven Value proposition for all clients (including SMEs) Without/Limited (performance) recourse Trade/Bank FinanceFactoring/Forfaiting The Products Compared vs Bank Trade Finance

20 These products can support SMEs to facilitate trade (domestic and international) Access to trade finance NOT based on balance sheet/size but performance, track record, quality of product and buyers Less risk – better conditions Less cost – better cash flow Concurrent Session IV: Trade and Investment Facilitation Working Group Consequences for SME s in CHINA

21 IMPORTANT Products must be offered professionally – NOT as a pure banking product Non-Banking-Financial-Institution proven to be the best format to offer these products most successfully and beneficial CHINA does NOT YET have the right environment to offer these products optimal to the Chinese SMEs which need the help urgently to master the crises ! Jointly we should be able to cooperate with the authorities to adjust to the market needs so that SMEs can get access to these products professionally and easily and accelerated. Consequences for SME s in CHINA

22 We cannot change the direction of the wind, however we can adjust our sails! Thank you for your attention

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