Financing small and medium-size enterprises with factoring: global growth and its potential in eastern Europe

Factoring is a form of asset-based finance where the credit is extended based on the value of the borrower's accounts receivable. In recent years factoring has experienced phenomenal growth and has become an important source of financing-especially short-term working capital-for small and medium-size enterprises and corporations, reaching a worldwide volume of 760 billion euro in 2003. Although the importance of factoring varies considerably around the world, it occurs in most countries and is growing especially quickly in many developing countries. The authors explore the advantages of factoring over other types of lending for firms in developing economies, and discuss the informational, legal, tax, and regulatory barriers to its growth. They also examine the role of factoring in the eight Eastern European countries that became EU members on May 1, 2004-the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic, and Slovenia, referred to as the EU 8. The authors conclude that factoring offers key advantages over other lending products and is likely to become more important in these countries, and suggest policies to accelerate its development.Financial Intermediation,International Terrorism&Counterterrorism,Banking Law,Banks&Banking Reform,Payment Systems&Infrastructure,Banks&Banking Reform,Banking Law,Financial Intermediation,International Terrorism&Counterterrorism,Economic Theory&Research

Financing the Post-2015 Sustainable Development Goals: A Rough Roadmap

We regroup the main types of global development finance into three clusters: concessional public finance (including domestic taxes), public borrowing on market-related terms, and private finance. We look at the main purposes they can be used for, and their interdependence. We consider the global outlook for capital markets, the determinants of country creditworthiness and why grant aid should be prioritised for less creditworthy countries. We suggest that financing plans for most of the new Sustainable Development Goals should be developed at the country level rather than globally, so that key trade-offs can be fully explored. We look at specific policies to unlock access to private sector participation in five key areas -- including social services. We introduce a Market Aid Index to help track donor engagement with the private sector. We investigate how a country's mix of development finance changes as it grows -- the so-called 'missing middle' dilemma. We find that public resources overall fall continuously until a country is well into middle income status, as international assistance falls faster than tax revenues rise. Static per capita income thresholds are becoming increasingly unreliable guides to resource allocation. We look at alternative groupings, especially taking into account fiscal capacity, creditworthiness and vulnerability. We assess the recent literature on trade-offs between rapid growth and climate change mitigation imperatives. We examine the geography of public climate finance, which is intrinsically different from that of development aid, and the lack of a credible 'additionality' test for funding the former over and above the latter. We therefore consider how the limited public grant element so far available should best be rationed, to limit the scope for distortions. We revisit the role of the multilateral development banks' market-related windows, in view of the missing middle problem. We consider what factors underpin their secular stagnation, and how to overcome them. We summarise other specific international reform options in response to our analysis, on private sector contributions, market-related lending and climate finance. We conclude by contrasting two alternative world views: (1) making international public finance a complement to private finance everywhere, and (2) deliberately focusing public stakes where the private sector is not present. We suggest a way forward

Commercial lending distance and historically underserved areas

We study recent changes in the geographic distances between small businesses and their bank lenders, using a large random sample of loans guaranteed by the Small Business Administration. Consistent with extant research, we find that small borrower-lender distances generally increased between 1984 and 2001, with a rapid acceleration in distance beginning in the late-1990s. We also document a new phenomenon: a fundamental reordering of borrower-lender distance by the borrowers' neighborhood income and race characteristics. Historically, borrower-lender distance tended to be shorter than average for historically underserved (for example, low-income and minority) areas, but by 2000 borrowers in these areas tended to be farther away from their lenders on average. This structural change is coincident in time with the adoption of credit scoring models that rely on automated lending processes and quantitative information, and we find indirect evidence consistent with this link. Our findings suggest that there has been increased entry into local markets for small business loans and this should help allay fears that movement toward automated lending processes will reduce small businesses' access to credit in already underserved markets.

Distances and Small Business Credit Constraints: the French case.

Deregulation and progress in information and communication technologies have increased the geographical expansion of banking structures and instruments. This makes banks operationally close to the borrowers. At the same time, banking industry consolidation have induced a geographical concentration of banking decision centers and strategic functions, leading to an increase of the functional distance that separates the decision center of a bank from its operational branches. The aim of this paper is to evaluate the impact of these two trends on SME lending. Our findings on French data show that increased functional distance and operational proximity are positively associated with the investment-cash flow sensitivity, considered as a measure of financing constraints. These adverse effects are particularly acute for small firms.Operational proximity; Investment-cash flow sensitivity; Financing constraints; SME lending; Functional distance;

"Minskyan Perspective, Part II--Treasury, CRMPG Reports, Financial Stability Forum"

This four-part study is a critical analysis of several reports dealing with the reform of the financial system in the United States. The study uses Minsky's framework of analysis and focuses on the implications of Ponzi finance for regulatory and supervisory policies. The main conclusion of the study is that, while all reports make some valuable suggestions, they fail to deal with the socioeconomic dynamics that emerge during long periods of economic stability. As a consequence, it is highly doubtful that the principal suggestions contained in the reports will provide any applicable means to limit the worsening of financial fragility over periods of economic stability. The study also concludes that any meaningful systemic and prudential regulatory changes should focus on the analysis of expected and actual cash flows (sources and stability) rather than capital equity, and on preventing the emergence of Ponzi processes. The latter tend to emerge over long periods of economic stability and are not necessarily engineered by crooks. On the contrary, the pursuit of economic growth may involve the extensive use of Ponzi financial processes in legal economic activities. The study argues that some Ponzi processes--more precisely, pyramid Ponzi processes--should not be allowed to proceed, no matter how severe the immediate impact on economic growth, standards of living, or competitiveness. This is so because pyramid Ponzi processes always collapse, regardless how efficient financial markets are, how well informed and well behaved individuals are, or whether there is a "bubble" or not. The longer the process is allowed to proceed, the more destructive it becomes. Pyramid Ponzi processes cannot be risk-managed or buffered against; if economic growth is to be based on a solid financial foundation, these processes cannot be allowed to continue. Finally, a supervisory and regulatory process focused on detecting Ponzi processes would be much more flexible and adaptive, since it would not be preoccupied with either functional or product limits, or with arbitrary ratios of "prudence." Rather, it would oversee all financial institutions and all products, no matter how new or marginal they might be. See also, Working Paper Nos. 574.1, 574.3, and 574.4.

Women and Trade: Gender\u27s Impact on Trade Finance and Fintech

Woman-owned firms engage differently with finance for trade. The barriers they face in starting and running a business are well-known. Yet, this offers little insight into how they finance their business once globalized. Surveys indicate that finance is often the primary barrier to trade. We seek to deepen and modernize this finding by using a unique data set to explore the patterns of financial access exhibited by woman-owned exporting firms. We show that women face two levels of exclusion in access to finance—access to basic finance and access to trade finance. The latter is driven by characteristics common to firms owned by women. Also, in line with existing work, we show that woman-owned firms tend to turn to informal finance as an alternative more than their male counterparts. However, we also show that women are more likely to adopt fintech as a financial solution than men. This suggests that policies aimed at incentivizing banks to lend more to women may not be solving the right problem

Investing in the Clean Trillion: Closing the Clean Energy Investment Gap

In 2010 world governments agreed to limit the increase in global temperature to two degrees Celsius (2 °C) above pre-industrial levels to avoid the worst impacts of climate change. To have an 80 percent chance of maintaining this 2 °C limit, the IEA estimates an additional $36 trillion in clean energy investment is needed through 2050 -- or an average of$1 trillion more per year compared to a "business as usual" scenario over the next 36 years.This report provides 10 recommendations for investors, companies and policymakers to increase annual global investment in clean energy to at least $1 trillion by 2030 -- roughly a four-fold jump from current investment levels

Islamic Personality Model as Psychometric Tool To Assess Creditworthiness of Micro Financing

This study aims to develop an Islamic personality model as a psychometric tool to assess creditworthiness as an alternative predictive character analysis for micro businesses. The method designed to formulate the proposed model coded in R Studio uses two approaches. First, we modify Moslem Religiosity Personality Inventory and then frame a structural model based on Partial Least Square. Subsequently, we use the random forest technique to see the model's accuracy. The result shows a valid and reliable model and performs with 89.47 % accuracy with an Area Under Curve -Receiver Operating Characteristic of 90.06 %. This model implies a solution to strengthen the assessment of the character of creditworthiness of a potential micro-business and helps Islamic Financial Institutions to assess prospective micro-business to determine credit risk and pricing.JEL Classification: B41, D81, D87, G21, P43How to Cite:Hardiansyah., Amalia, E., & Hamid, A. (2023). Islamic Personality Model as Pychometric Tool To Access Creditworthiness of Micro Financing. Etikonomi, 22(1), 233–246. https://doi.org/10.15408/etk.v22i2.30370