Theory about factoring service

• Author: Burhan Rexhepi
• Position: University of Business and Technology - Kosovo
• Pages: 78-87

Vo

l.

6

N

o

. 1

M

arc

h,

202

0

A

cademic Journal o

f

Business,

A

dministration, Law and Social Science

s

II

PCCL Publishin

g

, Graz-

A

ustri

a

I

SSN 2410-391

8

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cces online at www.ii

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ccl.or

g

78

Theor

y

about factoring service

Dr. Burhan Rexhe

p

i

U

niversity o

f

Business and Technology - Kosovo

Ab

str

a

c

t

F

actorin

g

is one of the oldest and common methods of trade fi nance over the world with a lon

g

historical development.

A

ccording to historians, Factoring is originated 4,000 years ago in the

d

ays of King Hammurabi of Mesopotamia whereby the fi rst literate societies were developed.

A

lthough Mesopotamia no longer exists, many of its great contributions to civilization have

e

ndured, includin

g

Factorin

g

.

The fi rst documented-use of factoring was widespread occurred in the

A

merican colonies

b

e

f

ore the revolution to serve

f

or trade. With the abundance o

f

the North

A

merican landscape,

colonists cultivated and traded commodities like co on, fur and timber with the

E

uropeans.

I

n briefl y, Factoring is the sale and purchase a receivable with a certain discount rat

e

.

H

owever,

factoring is not simply one homogenous product because the factors also o er a range o

f

professional fi nancial services that might typically include: (i) Collecting payments from their

customers, (ii) Pursuing late payers, (iii) Providing advice to clients on credit management,

(iv) protecting the client against bad debts. The di erence among these defi nitions is how

m

any services to provide by the factors.

I

n a recourse factorin

g

arran

g

ement, the factor has a ri

g

ht to recover the funds from the seller

i

n case of default payments as the seller takes the risk of any bad debt losses himself. The

f

actor char

g

es the seller

f

or maintainin

g

the sales led

g

er and debt collection services and

charges interest on the amount drawn by the client (selling

fi

rm)

f

or the period. This is the

m

ost common type factoring. Recourse factoring is o ered at a lower interest rate since the

r

isk by the factor is low.

I

t’s highly suited for factoring arrangements at high risk markets as

well as for factors at the fi rst phase of entrance into the market as they’re lack of experience

and meet di



culties in accessing buyer ’s credit- worthiness

.

K

e

y

words:

F

actorin

g

service,

K

osovo,

EU

.

I

ntr

odu

ct

io

n

K

osovo is

d

ee

ply

integrating into g

l

o

b

a

l

econom

y

, es

p

ecia

lly

since it

b

ecame an

in

d

e

p

en

d

ent in 1999. Kosovo’s

p

osition em

ph

asizes increasing

ly

as a

l

ig

h

t growt

h

e

conom

y

in

E

uro

p

e. The integration creates breakthroughs

f

or higher develo

p

ment

b

ut also brings man

y

threats to overall econom

y

as well as each economic industr

y

.

B

anking industr

y

is not out o

f

this trend. Diversi

fi

cation o

f

services and kee

p

ing the

c

om

p

etitive advantages is the survival

f

or Kosovo commercial banks, es

p

eciall

y

joint

stock banks (JSCBs) which have serious

p

roblems o

f

a tin

y

ca

p

ital base and weak

op

eration.

The small and medium enter

p

rises (SM

E

s) - the targeted customers o

f

JSCBs are

p

la

y

ing an im

p

ortant role

f

or develo

p

ment o

f

econom

y

in Kosovo. SM

E

s have

c

ontributed to create increasing GDP, creating jobs and increasing national’s ex

p

ort

volume.

I

t said that SM

E

s have currentl

y

contributed 60

p

ercent o

f

GDP and em

p

lo

y

s