Forfaiting as a financing option for the local entity

Abstract

The main aim of this research is to gain an understanding of the use and the awareness of forfaiting as a financing option on the local scene. Furthermore, this research seeks to determine to what extent forfaiting could be of used to help ease local exporters cash flow problems, as well as help them reach a new customer base. Finally, this research aims to analyse the potential for forfaiting to develop further in Malta. To obtain an in-depth view of the situation of forfaiting in Malta, a qualitative study was carried out. Interviews were carried out with both London Forfaiting Company, who are a leading international forfaiting company and are a wholly-owned subsidiary of FIMBank p.l.c., as well as with local companies in three different sectors, with a total of ten companies being interviewed. On the whole, forfaiting is still in its infancy in Malta, and no local company currently avails of forfaiting as a financing option. The overriding issue for this is the limited knowledge local exporters have about what it entails. In spite of this, all interviewees were eager to find out more about this trade finance solution, and views towards forfaiting were all positive. This suggests that there is big potential for forfaiting to develop locally in the future. If companies were to become more aware of the service and more packages are introduced by London Forfaiting Company Limited, Malta could be part of the continuous development of forfaiting.