Factoring Egypt

completed

The proposed project involves establishing a non-bank finance institution (the company) that will provide factoring and forfaiting (exclusively for trading purpose) services for export-oriented businesses in Egypt. The initial capitalization of the company is expected to be $5 million and will be expanded to $15 million by the end of its fourth year. The sponsors of this project include First International Merchant Bank (FIMBank) as a 40% equity investor, Commercial International Bank Egypt S.A.E. (CIB) as a 40% equity investor, and IFC holding the remaining 20% of the company’s shares. FIMBank will play the key role as technical partner capitalizing on its international expertise in factoring. CIB will bring its local market expertise and client base into the new venture by leveraging on its existing market presence. The company plans to start its operations with international factoring representing between 50-60% of the total business volume, and the rest divided between local factoring and small-ticket forfaiting. Initially, the company will fund itself through equity, going forward other funding sources will be sourced at the local level. The project would create Egypt’s first factoring company and is expected to cater to the needs of Egyptian exporters who currently require additional liquidity to fund their growing business needs. With 38% of Egyptian exports flowing to the United States and Europe (countries with significant factoring activity), Egypt’s export-oriented firms would be ideal for export factoring, given the exporters’ short-term financing requirements and the relatively lower importer risk. The company would aim to be a one-stop-shop for exporters in Egypt and is expected to have a strong positive impact by enhancing the level of credit being made available to exporters in Egypt.