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Case Study
Trade financing bridges the gap between distributors and producers
Flexible Financing — A New Solution
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Photo: BASA Press
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Domestic factoring gives small businesses much needed credit.
"Assistance... included support of a market survey that identified a profitable
target customer base," said Ala Polustanova, Head of the Product Development and Administration at MAIB.
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Challenge
Despite five years of economic growth, many of Moldova's key players have been unable to benefit from the
opportunities created by the new market-driven economy. Producers especially face a lack of working capital
or access to attractive markets, limiting their potential to develop their businesses. Similarly, distributors,
challenged by issues of scale, have not had the capacity to manage large inventory or increase their customer
base. Bulk buyers have had no single, reliable source for purchasing essential supplies on favorable credit terms.
Initiative
USAID identified a gap in supply-chain financing and commissioned research to determine how to fill it.
Moldova Agroindbank was tapped as the best-qualified institution to launch a new system — "domestic factoring"
— that helps small businesses access flexible financing and better manage the risks of extensive inventories.
When a wholesaler requires a quick payment from a buyer that is temporarily short of cash, domestic factoring
would reconcile the problems of both parties. Under the system, Moldova Agroindbank purchases the invoices
of bulk buyers, extending much-needed financing to local producers and allowing clients to offer competitive
credit terms to local wholesale distributors.
Results
Domestic factoring has spurred Moldova's leading banks to acquire training in international standards and
banking practices for a range of trade finance operations. Trade financing techniques have also bridged the
gap between distributors and Moldovan producers. Metro, an international wholesale outlet, has already invested
$20 million in Moldova, and is expanding further. Ala Polustanova, Head of the Product Development and
Administration at Moldova Agroindbank, says USAID's support has been invaluable. "The product design
exercise generated an innovative product development process, and we found ourselves in a position to
win an important contract for the bank with Metro Cash & Carry Moldova. This product matched the company's
trading cycle and credit terms provided by its suppliers."
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