ECGC plans factoring business foray

Export Credit Guarantee Corporation of India (ECGC) plans to foray into full fledged factoring business by the current financial year.

"This can be done by having a fully-owned subsidiary company or by entering into manifold alliances," said Christy Fernandes, chairman and managing director ECGC.

The corporation has hired Triangle Trade Finances as their consultants. According to the consultant, ECGC has the strength to set up a subsidiary for factoring business but this will take three years so the alternative is to tie up with a strategic partner.

However, this will deny the corporation to have the management control. So we are weighing the pros and cons, added Fernandes. The business will cover international trade and not domestic trade.

To set up a subsidiary, besides getting the board's approval, ECGC will also require the commerce ministry's approval. As on date, ECGC has 30 exports contracts for factoring business.

The corporation is also restructuring its existing maturity factoring scheme. The corporation is targetting a premium income of Rs 700 crore for 2006-07. It has entered into an MoU with National Small Industries Corporation (NSIC) to develop sector specific policies for SMEs.

NSIC would play an important role in expanding the utility of export credit risk insurance among the SMEs.

"34 per cent of exports come from SMEs. Their manufacturing base is different. Therefore we want to provide cover for each specific sector. We will build synergy between the two organisations. This will benefit 34 per cent of SME sector," said S Prabhakaran, executive director, ECGC.

ECGC is planning to set up an international training centre on credit insurance and has engaged National Insurance Academy as consultants.

The corporation aims to be a paperless organisation by 2012. "We will save on the transaction costs while its will make matters convenient for our clients."

Factoring business means selling of a company's accounts receivable, at a discount, to a factor, who then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts.