'Factoring has shown constant growth in Greece'


Harris Saridis, Director of Business Development & Relationship Management at Etniki Factors Single Member SA, Greece, explains the developments of factoring industry in Greece in the most recent edition of the World Factoring Yearbook.

The COVID-19 pandemic constituted the major key determinant in 2020, as it disrupted financial stability at a global level and weighed heavily on economic activity. In Greece, many businesses temporarily closed, and tourist arrivals dropped sharply, resulting in a sizeable contraction in economic output as shown by the 8.5 per cent decline in GDP in the first nine months of 2020. This is expected to be even larger (at an estimated 10 per cent) for the whole year on the back of the second wave of the pandemic. The Greek banking sector has been facing heightened short and medium-term risks mainly in four areas: asset quality, profitability, capital adequacy and liquidity, which have negatively affected the financial system. Nonetheless, fiscal, monetary and supervisory measures taken by the competent national and euro-area authorities have largely mitigated the impact of the pandemic. The Greek economy is set to recover gradually in 2021, while constant virus outbreaks and restrictions will still weigh on services, exports, employment, and investment. In 2022, the recovery is projected to accelerate as the virus becomes better controlled with vaccination having become more generally deployed, restrictions eased globally and the Government implementing new investment projects. Efficient and faster controlling of the pandemic would hasten the recovery, and reduce the risks of rising insolvencies, non-performing loans and declining well-being.

FACTORING INDUSTRY ENVIRONMENT

The factoring industry in Greece, in contrast to the economy and the banking sector, has been able to withstand the difficult time and has shown constant growth. After some slowdown in growth during the financial crisis, the factoring GDP penetration ratio subsequently increased by 14 per cent between 2016 and 2020, from 7.27 per cent to 8.31 per cent. 

Due to the pandemic, factoring turnover in 2020 (EUR 14.4bn) was lower than in 2019 (EUR 15bn), which is a drop of only four per cent, in a year when the Greek economy contracted by 8.5 per cent in the first nine months and when the decrease for the whole year is expected to be around 10 per cent.

The growth of the factoring sector is mainly the result of a better understanding and acceptance of factoring by clients and banks. In the last few tough years, the SME sector has become a fundamental generator of growth with an increasing number of clients. In addition, the banks have recognised the importance of account receivables management tools in their product portfolio mix, especially in a period when NPLs were the main issue for all Greek banks.

It is obvious that the strategy of all the major financial groups in recent years has been to support and enhance the use of factoring as an important and secure financial tool for their clients. This trend has led the factoring GDP penetration rate to grow in importance reaching 8.31 per cent in 2020. This is the highest it has ever been, and quite impressive given that this rate was only 5.2 per cent in 2009. On the other hand, anyone can see that Greece’s factoring GDP penetration is still lower than the average EU penetration rate of roughly 12 per cent, which means that there is potential for further development in the industry: in other words, much higher volumes for existing factoring entities (Greece’s GDP for 2019 was EUR 165.8bn).

MARKET PERFORMANCE AND SUPPLY

Factoring, as mentioned earlier, has proved to be a much-used financial solution since its launch in the Greek market in the early 1990s. After its first decade, in which local factors had to educate the market and show the successful outcome of their services, the number of companies using factoring increased strongly. This trend has continued with an accelerating number of companies now using factoring.

 The factoring industry has been helped by a beneficial legal and tax regime which has enabled factors to offer:

  •              Low factoring costs for SMEs for the majority of their factoring portfolio
  •              Specialised financial analysis and transaction monitoring
  •              Long experience and a high level of know-how
  • Market volume in 2020 decreased slightly by just four per cent as a result of COVID-19. There is a degree of optimism that this market will begin to grow again in 2021.

    Domestic factoring volume at EUR 12.5bn represents the vast majority of the market, accounting for 86.5 per cent of the total factoring volume, and international factoring holds a 13.5 per cent share.  These market shares are almost the same as they were in 2019.

    ...

    To read the whole article and much more, order World Factoring Yearbook 2021 here.