Metro Cash & Carry Partnering with Moldovan Bank
Moldova’s economic growth over the past five years has improved quality of life for its citizens. Nonetheless, many have been unable to benefit fully from the exciting opportunities created by the new market-driven economy. Producers especially have faced a lack of working capital as well as access to attractive markets, limiting the ability to develop their businesses. Similarly, distributors, challenged by issues of scale, have not had the ability 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.
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| New product brings new clients |
USAID’s BIZPRO-Moldova identified a gap in supply chain financing and commissioned market research to determine the funding needs of small and medium enterprises. BIZPRO/Moldova then evaluated the existing capacities and strategies for new product development of five leading Moldovan banks. Finally, it selected Moldova Agroindbank (MAIB) as best qualified to pilot the launch of a new system of financing, called “domestic factoring,” which helps SMEs access flexible financing and assist them in better managing the risks of extensive inventories.
Domestic Factoring, is an innovative trade financing vehicle that enables companies to grow their business through speedy access to finance. Imagine a situation in which a wholesaler requires quick payment at a time when the buyer is temporarily short of cash. Clearly, there is a link missing that could reconcile both parties. In international banking, this situation is considered a perfect case for extending Domestic Factoring service, also known as Invoice Discounting.
To meet emerging market needs, MAIB launched a domestic factoring service whereby the bank purchases the invoices of bulk buyers, extending much-needed financing to local producers. Clients are then able to offer competitive credit terms to local wholesale distributors while having immediate access to working capital on competitive terms.
Introducing domestic factoring in Moldova has played an important role in providing opportunity for local producers to become suppliers to large wholesale and distribution chains such as Metro, an international wholesale outlet business with sales of more than $68 billion operating in 27 countries. Having already invested $20 million, Metro is now expanding into northern Moldova, as well as opening additional outlets in the Chisinau region.
“Assistance for Domestic Factoring provided by BIZPRO/Moldova has been especially valuable. It 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. “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.”
The benefits of trade financing techniques to bridge the gap between international as well as local distributors and Moldovan producers are now clearly seen. In fact, Moldova’s leading banks are now actively taking the initiative to acquire training in international standards and banking practices for an entire range of trade finance operations.
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