Thrust on adopting int\\\'l factoring as an alternative business tool

Adopting international factoring may help the country to achieve the export target, increase growth and solve the problem of lack of working capital, said speakers at a round table discussion in the capital Saturday.
They said the country needs to adopt and implement international factoring as an alternative tool in the businesses instead of the letters of credit (L/Cs).
Their observations came at the round table titled "Factoring: A Better Alternative to Letter of Credit" at the auditorium of Dhaka Chamber of Commerce and Industry (DCCI) on the day.
DCCI and Bangladesh Institute of Bank Management (BIBM) jointly organised the event.
President of DCCI Mohammad Shahjahan Khan delivered the address of welcome. Secretary of Bank and Financial Institutions Division of the Ministry of Finance Dr M Aslam Alam was present as the chief guest while Director General (DG) of BIBM Dr Toufic Ahmad Choudhury also attended it as the special guest.
The participants strongly suggested resolving the problems related with the LCs, introduce factory insurance and electronic register system, formulate guidelines on factory and institutional capacity building.   
They said factoring is a new form of transaction in businesses. Now factoring continues to be a viable alternative to traditional financing.
Nearly every business with credit worthy customers could take advantage of factoring, to obtain cash quickly, have the ability to sell invoices to a factoring company again and again, and ensure that they have the funds to keep the company operating, and grow business.
Factoring provides exporters with almost 100 per cent protection against the importer's inability to make payment. This international trade payment and financing mechanism is now popular among both exporters and importers.
"Factoring actually goes a long way to help the borrowers to improve their financial discipline and to serve as a catalyst for expansion and growth of industrial and business units. This financial instrument 'factoring' becomes familiar and good choice for the businessmen in Bangladesh," said Md Mohammad Shahjahan Khan.
He said the factoring would facilitate the economic growth and financial discipline in the country. It could also help flourish the SMEs (small and medium enterprises) in the country.    
Mr Khan said about 90 per cent of the business enterprises of the country consist of SMEs. The SMEs contribute about 25 per cent to the GDP (gross domestic product). But due to lack of working capital the sector (SMEs) could not flourish properly.
"If Bangladesh wants to ensure higher economic growth, then growth in SMEs is a must. To ensure the growth of the economy and solve the problem of lack of working capital, factoring is a better option," he said.   
He emphasised the need for introducing international factoring on an experimental basis at the initial stage and expanding the practice of this financial service progressively in the country.
He suggested capacity building through imparting training on this financial service to stakeholders like exporters, importers, bankers, regulators and policymakers by involving trade bodies, commercial banks and Bangladesh Bank (BB).
Dr M Aslam Alam laid emphasis on strengthening internal factoring system as it could help remove problems in the way of introducing international factoring. He called upon the businessmen to come forward for the expansion of factoring. He assured all sorts of government supports for factoring.   
Dr Toufic Ahmad Choudhury said the developed countries widely follow factoring system that reduces their cost of doing business. He said that businessmen will be highly benefited if the factoring system is introduced in the country. He called upon the businessmen of the country to take the lead role for using factoring massively.    
Prof Prashanta Kumar Banerjee said international factoring is yet to be fully introduced in the country though internal factoring is going on in a limited scale. He said the amount of international factoring in Bangladesh was 24.13 million Euros in 2012.  He said factoring could protect importers from harassment and reduce the cost of doing business. He suggested formulating an effective guideline in this connection.
Chairman of Janata Bank Ltd SA Chowdhury, Convener of DCCI MS Siddiqui and General Manager of Bangladesh Bank Md Masud Biswas spoke on the occasion as panel discussants.
DCCI Vice President Kh Shahidul Islam gave vote thanks.  DCCI former President MH Rahman, MA Momen, former Senior Vice President MS Shekil Chowdhury, former Vice President M Abu Hurairah, Director Abdus Salam, Convener Ikram Dhali, former Director Kamrul Islam FCA and representative of Islamic Bank Bangladesh Ltd Mahmudur Rahman, among others, were present.

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