Debt Collection Complexity

International debt collection: The worst and best places to collect your debts

February 2018

Executive summary

  • This second edition of the Euler Hermes Collection Complexity analysis looks into debt collection procedures in 50 countries (*). Sweden, Germany, and Ireland take the lead of our ranking for being the easiest countries where to collect a debt. Saudi Arabia, the United Arab Emirates and Malaysia are still lagging behind when it comes to simplifying the life of companies trying to recover their dues. International debt collection is three times more complex in Saudi Arabia than in Sweden.
  • Good economic growth fundamentals do not necessarily entail a more conducive business environment when it comes to inter- company payments. Pockets of collection complexity exist in all countries: local payment practices, and court- and insolvency- related complexities are a challenge. On average, half of the collection complexity comes from the insolvency proceedings.

The Methodology

The Euler Hermes Collection Complexity Score is a measure of the level of complexity relating to international debt collection procedures within each given country from 0 (least complex) to 100 (most complex). The score combines expert judgment by Euler Hermes' Collection specialists worldwide and over 40 administrative indicators relating to three areas:

  1. Local payment practices:  The local payment habits and regulatory framework overseeing payments. Based on the availability of financial information, payment methods, payment terms, days sales outstanding figures, local payment behavior and the legal framework relating to late payment interest and collection costs.
  2. Local court proceedings: The complexity and efficiency of court proceedings - measure of the regulatory environment, chances of success, fast-track proceedings, default judgments, the formal legal action process, ownership protection and alternative dispute resolution methods.
  3. Local insolvency proceedings: The existence of effective insolvency proceedings - taking into account out-of-court negotiation, restructuration and liquidation proceedings, priority rules and cancellation of prior transactions.

The score is then split into a four-modality rating system: Notable (score below 40), High (score between 40 and 50), Very High (50 to 60) and Severe (above 60).

Figure 1: Collection Complexity Score and Ratings from least complex to most complex

Figure 1: Collection Complexity Score and Ratings from least complex to most complex
(*) GFC: Great Financial Crisis
Source: Allianz Research