Receivables finance is increasingly recognised as a crucial financial tool for banks aiming to support small and medium-sized enterprises (SMEs), especially in emerging markets where traditional lending faces significant challenges, as highlighted in the “Managing Receivables Finance Programme” webinar hosted by the EBRD Trade Facilitation Programme (TFP) and Trade Treasury Payments (TTP) on 11 March.

Moderated by Carter Hoffman, Trade Editor at TTP, the panel featured Irina Tyan (Associate Director at EBRD TFP), John Beaney  (Executive Director at HSBC Invoice Finance). Andre Casterman (Founder and Managing Director of Casterman Advisory, an independent transaction banking technology consultant), and Aysen Cetintas (Education Director at Factors Chain International – FCI).

The core theme of the webinar was that effective receivables finance programs require a delicate balance of strong governance, rigorous risk management, and advanced technological integration to unlock liquidity and foster sustainable economic growth.

The growing importance of receivables finance 

Receivables finance helps suppliers turn their outstanding invoices into immediate cash, which improves their cash flow. However, small and SMEs in emerging markets face some challenges with receivables finance. These challenges include having insufficient collateral, weak financial reporting, and limited credit histories. These factors make it difficult for them to access bank loans. This is of utmost importance as SMEs account for 90% to 95% of businesses in these markets.

Receivables finance allows banks to leverage the creditworthiness of buyers rather than sellers, providing a more reliable basis for lending. This approach supports SMEs’ working capital needs and strengthens supply chains by ensuring suppliers have timely access to funds.

It is important to understand the specific needs of clients. Large companies often have different financing needs compared to small ones. Additionally, domestic businesses face different risks and challenges than exporters.

Additionally, receivables finance is distinct from traditional lending. It shifts the focus from the seller’s creditworthiness to the quality and collectability of the receivables themselves, which often represent payment obligations from more financially stable buyers.

John Beaney, Executive Director at HSBC Invoice Finance, said, “One key concern is the impact on buyers, especially when starting a residual program that requires buyer disclosure. Sellers often ask, ‘Will my buyer consent? What will they think?’ From my experience, buyers prefer to work with reliable suppliers, and reliability comes from having access to liquidity. By providing liquidity, suppliers become more dependable, and most buyers recognise and support this.” Receivables finance can be structured without buyer disclosure or engagement, particularly when the seller has a strong track record in collecting receivables.

The role and scope of factoring 

In receivables finance, factoring plays a crucial role. The global factoring market was valued at nearly €3.9 trillion in 2024. Europe dominates this market, accounting for approximately €2,600 billion or 66.7% of the total. Emerging European markets such as Moldova, North Macedonia, Georgia, Türkiye, and Latvia have shown strong adoption.

Asia-Pacific is the second-largest region, contributing €964 billion (24.8%) and growing 2.4%, led by China’s €679 billion in turnover. The Americas recorded €271 billion, driven by growth in South and Central America and a strong North American rebound.

Compared to them, Africa’s market is small at €50 billion (1–2% of global volume), and is led by South Africa and emerging hubs in Nigeria, Egypt, and Morocco.

This diverse adoption shows that to expand receivables finance in these regions requires tailored solutions that address local legal and operational challenges, which the webinar discussed.

The technology side of receivables finance

In today’s increasingly digital world, technology plays a pivotal role in transforming receivables finance. Corporates, especially sophisticated ones, demand faster, end-to-end digital processes with full transaction visibility and seamless integration with their internal systems, capabilities that traditional, paper-based trade products cannot provide.

The shift from manual, time-consuming processes toward digital solutions is ongoing, supported by regulatory efforts to align legislation and recognise digital trade documents.

The receivables finance market has shown strong momentum toward automation, driven by skyrocketing volumes over the past two decades. Open account and working capital financing have digitised more rapidly than traditional trade instruments such as letters of credit or bills of lading, which face greater legal and operational challenges. This digital transformation enhances efficiency and competitive pricing.

However, the rise in digital transactions has also exposed the market to increased fraud risks.

Andre Casterman, Founder and Managing Director of Casterman Advisory, talked on the role of technology in combating fraud, stating, “The only fraud we witness are the ones that are leading to insolvencies. So we only see the scratching the surface in terms of the fraud that are leading to insolvencies. But if we could use over time, new technologies or existing technologies, doesn’t matter which one, to verify entities, to verify individuals, to have more visibility on the past of some people, of some businesses, to better understand the context of the transactions, not only for fraud but also for compliance.”
“Using technology to verify, to fight fraud, to scrutinise, not just to check if the UCP 600 rules are applied. This is easy. This is done. But the jury is spotting the fraud that is so hard to detect, and this is where we need to work more together, banks, regulators, and others.”

New regulatory frameworks are using advanced technologies to allow secure and selective data sharing while protecting privacy. For example, the global legal entity identifier system helps verify entities and reduce fraud risk for funders in both primary and secondary markets.

Andre added, “This is my aspiration, and where we have lots to do, particularly with top banks, multilaterals, and associations. We are also working with governments to digitise more and leverage new technologies to fight fraud and comply with growing anti-money laundering regulations, such as the new AML regulations in Europe.”

Training and capability gaps while launching super finance programs?

When supporting banks, particularly in emerging markets, a common challenge is the general knowledge gap surrounding receivables finance. While this gap is not universal, it is prevalent in many markets where these programs are being introduced.

Irina Tyan, Associate Director at EBRD TFP, said, “The importance of organisational and cross-functional communication cannot be overstated. Teams must speak the same language and understand key concepts like disclosed versus undisclosed structures and recourse versus non-recourse financing. This alignment is critical to managing the operational and risk complexities inherent in receivables finance.”

This shared understanding is essential because receivables finance requires deep knowledge of supply chains, payment behaviours, and how day-to-day decisions flow across departments.

It is particularly important to bridge gaps between front-office staff, who engage directly with clients, and back-office teams, ensuring consistent knowledge and communication throughout the organisation.

Managing risks in receivables finance is very important. This requires regularly checking on receivables portfolios. The main risks to look for include concentration risk, dilution analysis, eligibility criteria, invoice verification, and fraud detection. These elements must be managed continuously to maintain portfolio quality.

Additionally, legal and regulatory rules differ from country to country, adding complexity. Banks need to know how to handle assignment and perfection processes, what notification requirements exist, and whether electronic signatures are enforceable in different areas.

Finally, technology and data capabilities are crucial for banks. They need powerful architectures to spot signs of fraud, ensure accurate data, and provide transparency across transactions. By combining technology with their daily operations, banks can improve their risk management and overall program effectiveness.

Conditions for receivables to be financeable

Once a receivables finance program is established, risk management becomes central alongside operations and business development.

Aysen Cetintas, Education Director at FCI, explained this, stating, “Receivables are financeable when they are genuine, enforceable, and supported by verifiable commercial transactions. Concentration limits help ensure that portfolios are balanced and resilient, protecting both the bank and its clients from undue risk.”

“The bank must have confidence that the receivables arise from completed delivery of goods or services, with no material disputes, and that the payment obligation is legally valid and collectable. This aligns with the academic definition of factoring, where factorable accounts receivable are legally assignable and enforceable,” she added.

In practice, banks assess the quality of both parties, the seller and the buyer (the debtor), as repayment depends on the debtor’s ability and willingness to pay. Other critical factors include the tenor and payment terms of the receivable, the buyer’s historical payment behaviour, and dilution risks such as returns, discounts, or credit notes.

Effective risk management begins before client onboarding and continues throughout the life of the transaction and the buyer-seller relationship.

Concentration limits are a must to avoid overexposure to a single obligor, corporate group, industry, or geographic area. Lack of diversification can make portfolios susceptible to specific stresses or risks.

These limits not only help manage risk but also promote discipline within the bank and among stakeholders, keeping the portfolio balanced and resilient.