Factoring, which is an indispensable part of the global economy, is described as a financial instrument including the services of guarentee (that is to say undertaking the borrower’s failure to make the payment), collection and financing by assigning the short term domestic and foreign commercial debtees. As the only financial instrument that provides these three services at the same time, factoring funds the reel sector and supports the trade finance by ensuring a rapid cash flow. Factoring, which turns the wheels of the factoring commerce with its dynamic structure, provides a significant amount of finance for the small and medium scale companies facing with resource shortage. We talked to Zafer Ataman, Chairman of Faktoring Association, about factoring, which the textile sector, dominated by the SMEs, frequently appeals to.
Reminding that the factoring activities geban in 1988 in Turkey, Ataman said that the sector lacked an infrastructure until it was regulated after the decree issued in 1994. Ataman added that after the regulation, the sector was included in the Treasury and in BRSA in 2006. Ataman continued by saying; “The bill relating the Financial Leasing, Factoring and Financing Companies, prepared by BRSA in consultation with the association, was sent to the Parliament in 2009. The sector expect the bill to be updated and enacted,” said Ataman.
2011, the Year of Recognizing the Factoring Sector
Atakan complained about the wrong perception about the sector, which resulted from the period between 1988-1994 when activities were carried out without any legal regulation and from the activities of the companies that have nothing to do with the factoring sector. Atakan added that they established the Faktoring Association in order to struggle against this perception and to gather the factoring companies under the same roof. Underlining that 63 sector companies out of 73, certified by the BRSA, have already become the members of the association, Arakan remarked that compared to the previous periods, a more positive perception occurred as a result of their efforts in 2010 to create an awareness about the sector. “In light of this data, our association took important steps. We prepared a collection of ethical principles, signed by all of our members. We’ve regarded introducing the range of factoring services in the right way, as an institutional task and have chosen 2011 as the year of introducing the sector. We take all the steps carefully to introduce factoring to the public opinion, companies and to our stakeholders in the right way and to help the sector obtain a legal framework.”
Zafer Atakan argued that as a result of the rapid economic growth, the Turkish factoring sector reached a trading volume of $ 52 billion (77 billion YTR ), ( 5 milyar doları yurtdışı olmak üzere ) at the end of 2010 and consequently the factoring sector has become an important sub-sector within the financial market. Atakan continued his words by saying; “According to the September 2011 third quarter report announced by BRSA, the asset size of the sector that serves to more than 60 thousand customers, increased by 14 percent compared to the same period last year. Consequently it provided 14 billion YTR worth of finance for the real sector. However the effects of the crisis was felt in the tunrovers and the total industry turnover remained almost the same while its distribution was changed. The domestic turnover was recorded to be 44,5 billion YTR and the foreign turnover reached to 8,5 billion YTR. Currently the factoring companies are active as company headquarters, branches and represenntatives at 305 points in 21 towns. We expect that with the increase in the number of these points, the number of the SMEs, our customers consisted mainly of, will also increase in the following period.”
Atakan emphasized that the factoring sector has gained a significant development in the recent years and as of September 2011, it gained a turnover of 52 billion YTR, which they estimate to reach 80-85 billon YTR by the end of the year. Stating that factoring has two dimensions, which are international and domestic, Atakan remarked that the Turkish factoring sector, which had 14.5 billion YTR used by the market and funded an export volume of 3.5 billion Dollars, has taken the second place after China. Atakan emphasized that the global factoring sector has displayed a growth of 12 percent since 1990s whereas it achieved a growth of 44 percent in Turkey.
Import Based Trade was a Heavy Blow on the Textile Industry
Atakan stated that the Turkish industrial sector moved away from the investments and was neglected due to the monetary policy and the inflationary growth. Atakan added that the import based trade breaks the domestic industry’s back. Underlining that the textile industry has also been affected by this system, Atakan said that the industrial companies operating in the sectors of food, automotive, iron-steel and chemical products, which managed to overcome this situation, have covered a significant distance.
Emphasizing that the textile sector is in a continuous change, Atakan argued that this sector which used to operate with the principle of integration in the late 80s, went through a commercial structure in parallel with the economic developments. “The sector continued the manufacturing through the small scale companies while performing the global exports via the large foundations. This situation increased the financial fragility of the sector while the exchange rate policy imposed another handicap on the sector,” said Atakan and added that textile is an indispensable sector for Turkey and it significantly contributes to the exports. Atakan also remarked that they expect that in the following period, the production oriented investments will increase and the sector will see better days. Atakan argued that the government policies should support this development.
About the manufacturers and industrialists, who used credits in the period of economic crisis and were faced with a difficult situation when called for repayment, Zafer Atakan made the following statements; “We are also affected by the shrinkage in the market. The factoring activities are short term financial resources and the collection of pre-payments can be done only through the return of the costs. Therefore even if we do not recollect the resources we provide for the market, problems may occur in supplying new resources. After all, 75 percent of the factoring companies’ liabilities consist of bank credits. The shrinkage in the banking sector inevitably affects us too.” Atakan emphasized that in marketing and financing, the factoring companies significantly supported the SME exporting companies, which lacked a strong financial account and a guarantee structure due to the conservative policies of the banks about providing credits.
Credits should be Used After a Well Analysis is Done
Stating that the manufacturers should analyze their assets and requirements before applying for the factoring solutions, Atakan remarked that the received funds should be used to meet the manufacturers’ needs in working capital. “The manufacturers can reduce the costs by taking advantage of prepayments especially in raw material and semifinished product purchases. Carrying out factoring for the financing of an investment may cause a wrong structuring in the financing of it. After analying the requirements, the manufacturers may apply to a factoring company, which they can chose from the list in our web site, and discuss the solutions that may be provided for them.” said Atakan.
