FCI and the European Bank for Reconstruction and Development (EBRD) have launched a new factoring initiative in Georgia and Armenia.

The partnership will see Georgia and Armenia using a unique cross-border trade finance technique pioneered by FCI – the global representative body for the factoring industry.  

In a press statement, FCI and EBRD said they have started working with Georgia’s TBC Bank and Armenia’s Armswissbank to promote factoring as a means of payment between trade clients.

So far, these factoring transactions have helped to support exports of food commodities from Georgia to Armenia for local production of confectionery.

Both banks are members of FCI – Armswissbank since 2008, TBC Bank since 2016 – and the factoring arrangements between them were made possible by the FCI’s cross-border factoring platform combined with EBRD guarantees.

Peter Mulroy, secretary general at FCI, said: “We are honoured to see two FCI members, Armswissbank and TBC Bank come together with the support of the EBRD to work out a unique cross-border factoring structure. 

“By combining a risk-mitigation guarantee under the EBRD’s TFP and the FCI’s two-factor platform, edifactoring.com, TBC Bank has enhanced protection against non-payment. 

“This innovative structure can be easily replicated by FCI members across the EBRD regions.”

Armswissbank and TBC Bank are also part of the EBRD’s Trade Facilitation Programme (TFP). 

The TFP was launched in 1999 to promote foreign trade to, from, and between the economies in which the EBRD invests.

Through the TFP, the EBRD provides guarantees to international confirming banks and short-term loans to selected banks and factoring companies for on-lending to local exporters, importers, and distributors.

Local factoring needs

In trade finance, factoring is seen as an important tool for small businesses that lack collateral, which can pose serious obstacles to growth.

By using factoring, small businesses can increase their competitiveness and contribute to the development of their local economy.

Anzhela Barseghyan, head of the corporate services department at Armswissbank, said that as the only FCI member in Armenia, the bank is pleased to be part of a new factoring milestone.

“The development of international factoring through our cooperation with FCI has always been one of the key priorities for our bank,” said Barseghyan.

“Thanks to fruitful collaboration with TBC Bank and the EBRD, we became the first bank in Armenia to introduce a new factoring solution that enables small businesses involved in international trade to use the same solutions for their cross-border business. 

“I am convinced that such innovative solutions will stimulate the development of international factoring in Armenia.”

The EBRD’s TFP currently includes more than 100 partner banks in 30 economies where the EBRD operates, and more than 800 confirming banks worldwide.

FCI is also growing. It now counts almost 400 members – made up of banks and factoring companies – in more than 90 countries.

Tamar Khizanishvili, head of the trade finance and factoring department at TBC Bank, said the partnership is a testament to what can be achieved through collaboration and a focus on innovation.

“This project brings together two very important areas for our bank: the promotion of exports and the development of trade relations between Georgia and neighbouring countries,” said Khizanishvili.

“As the largest bank in Georgia in terms of capital, we will continue to support and implement innovative projects that are important for the development of the Georgian economy.”