This is the third edition of the study assessing the degree of complexity of debt collection[1] conducted by Allianz Trade. It clearly reflects the difficulties in recovering receivables, which helps in decision-making and in managing receivables in international trade, which is essential in a situation of globally rising corporate insolvencies (+10% in 2022 and +14% in 2023). The assessment covers 49 countries representing almost 90% of global GDP and 85% of global trade.
Europe is still the easiest place to recover your receivables
Europe still leads in debt collection
Where is it best (that is, most effective) to collect receivables? It is no surprise that, as in the previous edition of our debt collection complexity assessment (2018), Europe takes the leading position. The top ten most debt-collection-friendly places include the following European countries. Sweden (with a score of 30), Germany (30), and Finland (32) are best in class, and their scores remain stable compared with our previous report. New Zealand is the first
non-European country to appear in the ranking (12th place, score 36, +1 point since 2018), followed by Brazil (20th place, score 43, stable).
"In Sweden, Germany, and Finland, local companies meet their payment obligations well, and courts issue decisions on time, which makes it easier for companies to collect debts. This contrasts with other European countries such as France (10th place, 36 points, unchanged) and Spain (11th place, 36 points, down -1 point), where debt collection is very complicated in the event of debtor insolvency, especially for unsecured creditors," explains Maxime Lemerle, Chief Insolvency Research Analyst at Allianz Trade.
Saudi Arabia (91, an improvement of 3 points), Malaysia (78, stable), and the United Arab Emirates (72, a decrease in debt collection complexity of as much as 9 points) close the ranking in 2022. Despite some improvement in the complexity of court procedures, international debt collection in Saudi Arabia is three times more complicated than in Sweden, Germany, and Finland.
In nearly every second country, we recorded a decline in the debt collection complexity score
The gap between developed economies and emerging markets remains large. Indeed, 14 of 16 Western European countries have a noticeably less burdensome level of debt collection complexity for creditors.
By contrast, the United States (32nd place, 55 points, unchanged) and Canada (29th place, 53 points, unchanged) received a rating of "Very High (level of debt collection complication)." The Middle East, Asia, and Africa are the three regions where debt collection is most complicated.
Nevertheless, this gap is narrowing over time. "Over the past four years, nearly half of the countries recorded a decline in their debt collection complexity score (20 out of 49 countries). Covid-19 prompted several countries to accelerate reforms of insolvency legal frameworks. We also noted some improvement in preventive restructuring frameworks, for example in the United Kingdom (thanks to the new Moratorium procedure), Australia, and the EU, where Directive 2019/1023 is now being implemented (changing the legal framework) in various member states. Saudi Arabia and China also took actions resulting in noticeable improvement: in these countries, debt collection complexity indicators decreased by -3 points and -2 points, respectively," says Fabrice Desnos, Member of the Board of Management of Allianz Trade, responsible for Risk Assessment, Reinsurance, and Guarantees.
Debt collection: where is it the hardest?
The global debt collection complexity score has decreased over the past four years: it now stands at 49, which is 2 points lower than in 2018 (51). However, despite this positive trend, international debt collection remains generally very complex (the average level is: High).
"In all countries, there are areas where debt collection is complicated: local payment practices stand out (for their complexity), especially in the Middle East, but in most countries they are a source of difficulty. By contrast, the complexity of court proceedings is somewhat less common, especially in Western Europe and North America, but when we do encounter it, it is definitely a greater challenge (than the aforementioned local customary conditions). The most difficult, however, are the complexities related to corporate insolvency: bankruptcy proceedings still account for half of all debt collection difficulties worldwide," explains Maxime Lemerle.
Which exporters are most exposed to debt collection complexity?
Who feels the complexity the most?
By combining each country's debt collection complexity score with its trading partners (who exports where), Allianz Trade calculated exporters' exposure to the international complexity of the process of collecting their export receivables.
The least exposed (to difficulties in recovering their export receivables) are Finland, Austria, and Norway, because their dominant trading partners are countries where debt collection is least complicated. At the other end of the spectrum, Asia stands out, where seven countries are at the top of the list of countries most exposed to complicated debt collection in connection with international trade: Hong Kong, Indonesia, Thailand, Malaysia, Japan, Singapore, and India.
We predict trade and credit risk today so that companies can act with confidence tomorrow
Allianz Trade is the global leader in trade credit insurance and a recognized specialist in the areas of insurance guarantees, debt recovery, structured trade credit, and political risk. Our business information network provides the ability to analyze current changes in the solvency of more than 80 million companies. We give companies confidence through the ability to enter into transactions with payment protection. In the event of uncollectible receivables, we pay compensation, but most importantly, we help them avoid them altogether. Whenever we provide trade credit insurance or other financial solutions, our priority is to provide protection based on business analysis. If, however, something unforeseen happens, our AA credit rating means that we have the resources, supported by Allianz, that will enable us to pay compensation allowing the insured company to continue operating. Allianz Trade is headquartered in Paris, but the company is present in more than 52 countries and employs 5,500 people. In 2021, our consolidated turnover amounted to EUR 2.9 billion, and transactions insured globally involved exposure at a level of EUR 931 billion. More information can be found at www.allianz-trade.pl
[1] The Allianz Trade debt collection complexity score measures the level of complexity of international debt collection procedures on a scale from 0 (least complex) to 100 (most complex). This score combines the expertise of Allianz Trade debt collection specialists worldwide and more than 40 administrative indicators relating to: (i) local payment practices; (ii) local court proceedings; and (iii) local bankruptcy proceedings. This score is then divided into four rating types: Noticeable (score below 40), High (score between 40 and 50), Very High (50 to 60), and Severe (above 60).
Summary
The Allianz Trade study shows that Western Europe remains the easiest region for recovering receivables — Sweden, Germany, and Finland perform best. The greatest difficulties await creditors in Saudi Arabia, Malaysia, and the United Arab Emirates. Importantly, over the past four years, 20 of the 49 countries studied improved their scores, partly thanks to insolvency procedure reforms accelerated by the COVID-19 pandemic. The global average score fell from 51 to 49 points, but it still indicates a high level of complication. Analysts emphasize that bankruptcy proceedings remain the greatest challenge, accounting for half of all difficulties.
