What is the history of factoring?
Trade Finance Global spoke to the team at FCI, (previously Factors Chain International) about the history of factoring and how FCI came about to be what is now an active global association across 90 countries and with nearly 400 members.
Where did factoring come from?
The first foundation stones towards the creation of modern day factoring were laid in ancient Mesopotamia, around 5,000 years ago. Not long after that, in ancient Egypt and Greece, debts were acknowledged in writing and recorded on papyrus. But it wasn’t until the Roman era, when the first debt collection specialists appeared, they received a commission of up to 1% of the money collected from the debtor. The Romans spread that concept throughout Europe as their Empire grew. The term ‘Factoring’ actually comes from the Latin word, ‘Facere’.
An image of an Economic tablet from Susa
Nearly one thousand years after the fall of the Roman Empire this early concept of factoring kept developing and the first factoring “communities” appeared in England and France, starting in the 13th and 14th centuries respectively. The “factors” of Blackwell Hall in the City of London operated as agents for the woolen trade and in France, Jacques Couer, King Charles VII’s Finance Minister led his 300 “facteurs” to far-off lands to trade.
The concept of factoring arrived together with the Pilgrims from the Mayflower’s voyage in the 17th Century, when the era of common law factoring began in America. This practice was later elevated, when Del Credere factoring was introduced in the early 19th century, commencing the era of modern factoring and creating independent factoring companies, untethered to any single industrial.
Factoring returned to Europe after the World War II. In the early 1960s first harbingers of FCI appeared, as a group of banks and independent factors from Sweden, Denmark, Finland, Norway, United Kingdom and the United States created a loose federation, initially called FACTORS CHAIN.
Four years later, in 1968, it was transformed into Factors Chain International, known today as FCI, when this initial group of six factors met first in Germany and later in Sweden, where the very first and official annual meeting of FCI was held, founded by 15 companies from 12 different countries.
Today FCI is a global association representing nearly 400 members in 90 countries. The members contribute nearly 90% of all global cross border factoring activity. FCI has a strong and vast volunteer army, ready to support the industry, including the members of the technical and executive committees, and our global ambassadors who participate in the development and implementation of strategies and execute for the betterment of the industry.
50 years after its original appearance on the market, FCI is witnessing the dawn of a golden era for the receivables finance industry. Governments, central banks and regulators from around the world view factoring as a safe and secure method of financing trade and an instrumental tool to support the growth of SMEs.
Whether it is the trading network, education, promotion, advocacy, legal and arbitration services, or just helping to spread the seeds of factoring to the far corners of the world, FCI is there, working for you.