International practices and characteristics of factoring business and lessons for Vietnam

Abstract

Factoring was originally derived from international trade activities when the demand for transaction and movement of
goods and payments between countries becomes imperative. Factoring is widely defined as a form of credit granting
by financial companies or banks for the seller or the service provider based on the value of the receivables arising
from the contract of sale of goods and services between the purchaser and the seller. From the Nineteenth Century,
the early form of factoring had been employed by the British and American textile import and export firms. Domestic
factoring activities began to develop in the early years of the 20th century in America and since 1960 in Europe. Since
then, factoring business in the world is constantly evolving, contributing significantly to economic development in the
countries. In Vietnam, the operation of factoring business has not developed with its full potential; its growth rate is still
relatively slow; its sale revenue is modest and has not showed a potentially positive impact on business sector and the
economy. This article studies the operational characteristics of factoring business and examines its legal framework in
several countries in the world, thereby proposing some suggestions for amending and completing relevant regulations
and policies for the further development and growth of factoring activities in Vietnam.