Factoring and supply chain finance are gaining traction as vital tools for boosting access to working capital in developing economies. That is why the European Bank for Reconstruction and Development (EBRD) is helping build the infrastructure and capacity to support these instruments.
Factoring has grown dramatically over the past 15 years, tripling in volume across Europe and reaching more than €2.4tn by 2024. While large economies such as Germany, France and the UK dominate usage, there’s enormous room for growth in smaller countries and emerging markets.
The need is clear. In developing economies, access to credit, particularly for small and medium-sized enterprises (SMEs), is often constrained by collateral requirements. Factoring and supply chain finance offer an alternative. Rather than relying on a borrower’s balance sheet, these tools unlock funding based on receivables.
Bridging the gap
That’s where the EBRD and its Trade Facilitation Programme (TFP) come in. As the TFP’s Irina Tyan put it, speaking on a panel at the bank’s Annual Meeting in London in mid-May: “From the Trade Facilitation Programme perspective, one of our strategic priorities is to facilitate the development and expansion of factoring and receivables finance.”
In practice, this support takes two forms: through financial instruments such as direct financing or guarantees for banks, and technical assistance for stakeholders across the ecosystem. “We train not only our partner banks, but also regulators, companies and other stakeholders,” Tyan added. “It’s about creating an environment where this product can develop and flourish.”
Since 2006, the TFP has supported more than €1.7bn in receivables finance. Even so, uptake remains limited in many markets. “Receivables financing is still underdeveloped in the majority of the regions where we operate,” said Irina. “Our role is to raise awareness and build the market.”
This ecosystem-building approach reflects the EBRD’s broader ambition to make factoring a sustainable and inclusive solution. That means focusing not only on immediate financing needs but also on shaping a supportive regulatory and technical foundation.
Laying legal foundations
The need for this support becomes apparent when looking at the legal and regulatory frameworks across regions. While well-established rules support traditional trade finance instruments, factoring still suffers from fragmented treatment. Legal inconsistencies between countries can complicate transactions and deter participation.
In many markets, the absence of a legal framework for recognising receivables as collateral or the inability to transfer them freely acts as a barrier to scale. As a result, the EBRD and its partners often engage in policy dialogue with local authorities to assess legal, regulatory and educational gaps. Based on these insights, they help shape tailored development plans, including guidance on model laws aligned with global best practices.
One such effort is underway in Georgia, where the EBRD supported drafting a factoring law that is now awaiting parliamentary approval. The legislation promises to address three major hurdles: legal recognition of factoring companies, the enforceability of factoring contracts regardless of clauses in underlying sales agreements, and the creation of a national invoice registry.
Efforts like these align with broader regional work to strengthen financial inclusion and transparency. In many countries, regulators have overlooked factoring in comparison to traditional banking products. With new laws and policy guidance established, factoring can be positioned as a credible, scalable solution for SME finance.
Digital beginnings, digital benefits
Alongside legal clarity, digital infrastructure is emerging as a critical enabler for factoring. The challenge is to take advantage of the opportunities the digital world presents, rather than simply transposing old paper-based processes into digital.
Neal Harm, secretary general at the FCI noted during the same panel discussion: “There’s a huge difference between the digital transaction and the digitised transaction.”
Much of today’s trade still depends on paper-based processes that are later scanned or read into systems. The goal should be true digitisation from the start, helping companies originate and manage transactions in a wholly digital format.
“When it’s digital from the very beginning, from a finance perspective, it makes the transaction process much smoother and easier,” Harm added.
Centralised invoice registries, such as those proposed in Georgia and already functioning in markets like Türkiye, offer added benefits. They allow parties to verify the status of receivables and reduce the risk of double financing. This infrastructure also helps banks and other finance providers assess credit risk more confidently.
Technology also plays an essential role in expanding financial access for micro-enterprises. In Türkiye, for example, some factoring providers use AI-driven decision tools that quickly assess risk, even for businesses with little credit history.
Mete Önol, CFO and board member at Tam Finans asserted at the event: “Time to money should be quick. In our case, we can make a financing decision within a minute and the funds are disbursed in under 30 minutes.”
Tam Finans has dispersed more than US$7bn over the past decade in Türkiye, serving firms with fewer than 10 employees and annual revenues under US$150,000. The speed of decision-making, combined with fraud recognition techniques based on invoice pattern analysis, enables even newly established firms to access working capital.
Crucially, these innovations help bridge the gap for SMEs and micro-businesses that may not meet traditional lending criteria. By moving away from balance sheet and collateral-based assessments, tech-enabled factoring models offer a faster, more responsive form of finance.
A path forward for emerging markets
For the EBRD, the goal is not just to finance individual transactions, but to foster resilient financial ecosystems. “It’s about trust,” underlined Tyan at the event. “If there is no trust, then there is no development.”
That means working with local banks, regulators and corporates to raise awareness and build infrastructure. Education remains a key focus, such as training workshops for financial institutions and outreach to SMEs unfamiliar with factoring as a solution.
Progress is underway in several countries. Alongside Georgia, Ukraine is also seeing positive momentum. Each market is different, but the building blocks remain the same: supportive legal frameworks, digital tools, and strong local partnerships.
Even in more developed markets such as the European Union, fragmentation persists. Some countries require a full banking licence to operate factoring services, while others do not. The lack of standardised registers and divergent rules around assignment creates further complexity.
These challenges mirror those faced in emerging economies, underscoring the relevance of the EBRD’s work beyond its immediate footprint. As global supply chains evolve, so must the tools used to finance them.
As Harm concluded: “Fragmentation is the key challenge and we’ve got to find a way to overcome it.”
By taking a coordinated approach, the EBRD and its partners are helping to do just that, laying the groundwork for a more inclusive, efficient and resilient model of trade finance in the markets that need it most.
Case study: Factoring in Georgia
Factoring is becoming increasingly important for SMEs in Georgia, where the lack of collateral often restricts access to working capital. EBRD support has played a vital role in advancing this market.
The initial technical assistance programme, launched in 2006, focused on introducing factoring and providing capacity building for financial institutions. More recently, the EBRD provided local currency financing to TBC Bank to help scale factoring activity, which is a first for the country.
That facility, which launched in 2024, has already delivered positive results. Local SMEs are gaining access to faster, more affordable finance. Market adoption is accelerating, as shown by TBC Bank claiming over 67% market share in factoring, supported by a steady rise in client education and outreach. And while some challenges still remain, there are plenty of reasons to be optimistic for the future of trade finance in Georgia.
Tamara Khizanishvili, director of the trade finance and factoring department at TBC Bank, acknowledged during the panel discussion: “The legal framework for factoring in Georgia is still underdeveloped, but the new legislation will be a game changer. It addresses legal recognition of factoring companies, enforces receivables contracts, and introduces a centralised registry to reduce fraud and improve transparency.”
