Discussion on the progress of the factoring reform

09 Feb 2024

On February 9, 2024, the Ministry of Economy and Sustainable Development of Georgia with the support of the Investors Council Secretariat, hosted a discussion on the progress of the factoring reform, including the new draft of the law and subsequent stages of the reform implementation.  Representatives from the National Bank of Georgia, local commercial banks and various business associations attended the meeting. 

Mr. Giorgi Gurgenidze, the head of Capital Market Development, Insurance Policy, and Pension Reform Department at the Ministry of Economy and Sustainable Development of Georgia, presented the main principles of the factoring draft law. The discussion touched on the rights of the factor and debtor, establishment of a factoring registry to be maintained under the National Agency of Public Registry of Georgia (NAPR), and the prevention of fraudulent practices, etc.

Factoring is an alternative funding instrument where a business sells its invoices to a third party (factor) to meet its short-term liquidity needs. Factoring is an important tool to support companies in managing the required level of liquidity, offering them the advantage of obtaining price discounts from suppliers.

There is empirical evidence that the legal regulation of factoring is of utmost importance for reducing transaction costs and improving the security of transactions.  It especially facilitates the increase of access to finance for small and medium businesses.