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The 11th Asia-Europe Business Forum (AEBF 11)

The 11th Asia-Europe Business Forum (AEBF 11) Seize the trend, Time for Action and Public-Private Partnership Intervention by Margrith Lütschg-Emmenegger President 21st – 23rd October 2008 China World Hotel Beijing, P.R. China. Table of Contents. CONCURRENT SESSION III: 

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The 11th Asia-Europe Business Forum (AEBF 11)

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  1. The 11th Asia-Europe Business Forum (AEBF 11) Seize the trend, Time for Action and Public-Private Partnership Intervention by Margrith Lütschg-Emmenegger President 21st – 23rd October 2008China World HotelBeijing, P.R. China

  2. Table of Contents CONCURRENT SESSION III:  SME DEVELOPMENT WORKING GROUP • FIMBank’ Corporate History in Brief • SME – Financial Crises – Evaluation and Consequences • Some Potential Solutions – Trade Finance and Products • Which Products and Why • What it can mean for China • Way Forward – Actions Needed

  3. 100% 38.5% SOLD 40% INCREASED 100% 100% 100%

  4. FIMBank’s Corporate History • Acquisition of LFC • Global reach • Forfaiting expertise Initial licence DIFC Dubai for MENAFACTORS IFC joins as a shareholder and long term partner FIMBank established in Malta by leading Middle East businessmen Increase in capital US$15m • Acquisition of GTF • Factoring • India Rights issue US$25m Setting up of FIM Business Solutions Mar 01 Feb 03 Nov 03 Jun 05 Dec 05 Oct 06 March 08 Dec 07 1994 Sep 01 Oct 03 Dec 04 Nov 05 Jun 05 Dec 06 Opening of LFC office in Singapore FIMBank is listed on the Malta Stock Exchange Rights issue US$15m Selling Equity in GTF India Setting up EGYPTFACTORS Hired key management from WestLB (leader in trade finance) Debut in the International Capital Market Syndicated loan US$30m

  5. Vision BE THE BEST TRADE FINANCE BOUTIQUE IN THE WORLD BY PROVIDING INNOVATIVE SOLUTIONS IN ALL TRADE RELATED ACTIVITIES GLOBALLY

  6. FIMBank Group’s Core Mission FIMBank Focus Trade-related Business Trade will never stop Trade drives economies

  7. FIMBank’s Core Products • Core Competencies • Trade Finance • Pre-demolition Ship Finance • Syndications / Risk Participations • Forfaiting • Factoring • Support Services • International Fund Transfers • FX, Forward Contracts, Currency Options and Swaps • Issuance of Guarantees We provide TRADE FINANCE, i.e. the following products:

  8. FIMBank Group – Overseas Network LFC FIMBank Joint Ventures Joint Venture and FIMBank LFC and FIMBank Moscow London New York Dubai Mumbai Sao Paulo Singapore Istanbul Malta Cairo SydneyGMT +9 US WestGMT -9 US EastGMT -5 UKGMT MaltaGMT +1 SingaporeGMT +7

  9. Group Key Performance Ratios Key Performance Ratios Jun-08 Dec-07 Dec-06 Operating Income/Total Assets 5.1% 4.5% 4.7% ROAA 4.7% 2.0% 0.8% ROAE 31.6% 13.0% 5.1% Impaired Loans/Gross Loans 2.6% 4.0% 4.5% Loan Loss Reserves/Impaired Loans 109.7% 102.0% 94.2% Group Solvency Ratio 21.2% 35.4% 27.1%

  10. Group Solvency Ratio Basel II impacted ratios (as from March 2008), however capitalization remains well above regulatory threshold

  11. Group Liquidity Ratio FIMBank’s liquidity ratio (monitored daily) consistently above the regulatory minimum, with an upward trend in the last two months (despite global liquidity crunch)

  12. Financial Crises and SME’s • SME’s are in (almost) all countries the main Drivers of the Economy; • SME’s will be the first to ‘suffer’ from the lack of liquidity; • Larger financial institutions – in crises and in normal circumstances – have found/find it difficult to service the SME sector; • Trade (domestic and international) will continue to drive the global economies for many centuries to come:; • Trade Finance is not synthetic business but real and true – hard work and honest; • There are certain products that support trade finance for SME’sparticularly strong and well

  13. Products: Forfaiting • Discounting of international trade receivables on a “without recourse” basis • In essence, a form of supplier credit • Negotiable documents: • Accepted Bills of Exchanges by Importer/Buyer • Promissory Notes issued by Importer/Buyer • Letters of Credit • Book receivables with separate guarantee • Tradable assets: • After discounting the debt instruments, the forfaiter can hold them to maturity or trade them in the secondary market

  14. Products: Forfaiting • Offered within the FIMBank Group through our 100 % Subsidiary • Acquired in 2003 • Market Leader – Best Forfaiting House Award in 2005, 2007 and 2008 14

  15. Products: Factoring • Financing of Open Account sales/invoices on a continuous basis • Tenors: usually 30-90 days (max. 180 days) • Usually covering exports from Emerging Markets (performance risk) to Developed Markets (payment risk) • Notice of assignment is given by debtor/buyer • Factor assumes at least two of the following functions: • Credit Protection • Financing/Prepayment • Collection • Credit Management • Sales ledger administration and analysis

  16. Products: Factoring • Blueprint for Factoring within FIMBank • Joint Venture with Export Import Bank of India, International Finance Corporation (World Bank) Bank of Maharashtra – FIMBank 40 % acquired in 2004; • SOLD in 2008 – NOT Strategy but good profit opportunity; • Case Study ! • Followed by : in 2007 and in 2008 16

  17. Global Factoring Growth Rates Domestic Factoring International Factoring $1,600 $160 $1,400 CAGR: 17% $140 CAGR: 32% $1,200 $120 $1,000 $100 $800 $80 $600 $60 $400 $40 $200 $20 $0 $0 2002 2003 2004 2005 2002 2003 2004 2005 2006 Global Volumes (US$ billion) 2006 Global Volumes (US$ billion) Source: FCI Source: FCI Factoring is the fastest-growing product in global trade finance

  18. The Products Compared Similar but different – highly complimentary FACTORING FORFAITING MORE STABLE MATURE PRODUCT FASTEST GROWING TRADE FINANCE PRODUCT Market size: US$80 billion (est.) Single transaction based L/C or Bank Acceptance Required Primarily a Financing Service For medium/long-term transactions which could be “one-off” (90 days to 7 years) Without recourse Usually for export receivables Transactions should be minimum US$100,000 Cross border trend = DEVELOPED  EMERGING Market size: US$1 trillion Ongoing arrangement Open Account Sale Provides other than financing services Used for offering short-term credit to regular buyers (up to 180 days) Both with and without recourse For domestic and export receivables No minimum size Cross-border trend = EMERGING DEVELOPED

  19. The Products Compared vs Bank Trade Finance Trade/Bank Finance Factoring/Forfaiting • Pre-Post shipment • Financial Risk • Security/Collateral driven • Price effective for good Balance Sheet • With recourse • Post shipment • Performance and Debtor Payment Risk • Cash flow/Portfolio/Buyer driven • Value proposition for all clients (including SME’s) • Without/Limited (performance) recourse FACTORING and FORFAITING: By experience – does not work at its best within a Banking Environment but much better in a separate independent Company.

  20. Consequences for SME’s in CHINA • These products can support SME’s to facilitate trade (domestic and international) • Access to trade finance NOT based on balance sheet/size but performance, track record, quality of product and buyers • Less risk – better conditions • Less cost – better cash flow • Concurrent Session IV: Trade and Investment Facilitation Working Group

  21. Consequences for SME’s in CHINA • IMPORTANT • Products must be offered professionally – NOT as a pure banking product • Non-Banking-Financial-Institution proven to be the best format to offer these products most successfully and beneficial • CHINA does NOT YET have the right environment to offer these products optimal to the Chinese SME’s which need the help urgently to master the crises ! • Jointly we should be able to cooperate with the authorities to adjust to the market needs so that SME’s can get access to these products professionally and easily and accelerated.

  22. Thank you for your attention We cannot change the direction of the wind, however we can adjust our sails!

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