Exim Bank, West LB, IFC set up JV

Our Banking Bureau

Mumbai, Sept 20: The Export-Import Bank (Exim Bank), Westdeutsche Landesbank (West LB) and International Finance Corporation (IFC) have joined hands to launch Global Trade Finance Pvt Ltd (GTF) on Thursday for undertaking export factoring.

West LB has 40 per cent stake while Exim Bank and IFC have 35 per cent and 25 per cent in the joint venture which has been registered as a non-banking finance company with the Reserve Bank of India.
“Though the timing for us to launch our venture is a bit unfortunate, we hope to do well even under the current market condition,” said GTF’s managing director Veena Mankar.

“In the first year itself we expect a turnover of around $200 million and break-even level of profits,” Ms Mankar said.

“A few area that we plan to tap is textile, stones, pharma and we gradually are also looking at the software industry,” Ms Mankar said.
GTF’s objective is to promote market driven export-financing solutions for small and medium sized Indian exporters (SMEs) operating in an increasingly competitive world trade environment.

Speaking to the Financial Express Ulrich Zierke said that the German bank has a fractoring business of over $ 5 billion and their involvement will help GTB to have global network. “After China has entered the World Trade Organisation, there is an ample opportunity for Indian exports,” he said.

GTF also aims to provide export import solution on an e-commerce platform for Indian exporters along with comprehensive receivables management service through factoring and forfaiting.

“Despite all the uncertainties surrounding the market, we expect the turnover to be as predicted, as we have adopted a very conservative method,” said Exim Bank’s managing director TC Venkat Subramanian adding that, “Exim Bank will not transfer any part of its business to the new venture. “

GTF is already a member of Amsterdam-based Factors Chain International, a global network factoring companies, whose aim is to facilitate trade through factoring and related financial services. GTF also entered into a memorandum of understanding (MoU) with the French-based Coface Group which will provide credit protection on a e-commerce platform under which GTF will provide the factoring services to exporters.

In the context of business environmental changes evolving India, through globalisation, there is an imperative need for widening the alternative financial options available to the Indian export sector.
While some international players have established indirect presence, most players have been discouraged by the apparent unwillingness of Indian exporters to use factoring/forfaiting. The result has been a chicken-and-egg situation where the Indian market is apparently too small to attract large players and, at the same time, the absence of large players holds back the development of the market. Hence the need for a company focused on these products.