TRADE FINANCE TALKS
7.1
Supply Chain Finance – An enabler for MSME growth and financial inclusion? supply chain financing trends and its role in Micro, Small and Medium Enterprise (MSME) access to finance.
SUPPLY CHAIN FINANCE (SCF) – A CORRESPONDENT BANK PERSPECTIVE
QAMAR SALEEM
Global SCF Lead and Regional Manager, Asia & Pacific International Finance Corporation
Globalization has opened new business opportunities for emerging-market enterprises including small and medium enterprises. A modern supply chain process that links buyers, suppliers, and their financial institutions, helps local producers and exporters to participate in the global supply chain to grow their businesses, expand into new markets, and contribute to the economy. But are products such as Supply Chain Finance really helping MSMEs or just larger banks? TFG’s Deepesh Patel (DP) caught up with Qamar Saleem (QS), Global SCF Lead and Regional Manager, Asia & Pacific at International Finance Corporation (IFC), on
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Deepesh Patel (DP): Supply chain finance is relatively new in comparison to traditional trade finance. What is supply chain finance (from your perspective), who does it help, and how does it benefit smaller businesses? Qamar Saleem (QS): In this context, supply chain financing (SCF) is becoming an increasingly common vertical within the banking industry. The global credit crisis of 2008 forced trade finance seekers to look for alternatives as liquidity in supply chains became a major concern for businesses. This spurred an increased demand for SCF as businesses worked to maintain liquidity and their competitive edge. Most international banks that work globally with multinational corporations to facilitate their suppliers and buyers in developing countries are familiar with the concept of SCF. However, it is a relatively new concept for domestic banks, which are more likely to have relationships with small and medium enterprises enabling a local SCF environment across clients, especially MSMEs, which are typically left behind in large cross-border SCF programs. Against this backdrop, it is imperative that SCF is viewed beyond the ambit of loan-based
products and instead is more integrated with the ecosystem rather than simply providing transaction loans. SCF can significantly contribute towards solving MSMEs’ access to finance while creating efficiencies for the real sector corporations. To realize the full potential of the opportunity, a coordinated approach would be needed under a five-corner model where regulators, financial institutions, corporations, MSMEs, and SCF technology platforms collaborate and make concerted and resultoriented efforts. IFC is committed to creating SCF markets and engaging all stakeholders to ensure SCF for MSMEs becomes an impactful solution to support the growth of MSMEs across emerging markets.
ASIA, AND THE ‘TRADE FINANCE GAP’ DP: Can you give us a market overview of some of the developing markets in Asia? QS: In Asia, manufacturing contributes over 25 percent of GDP in most countries including India, Bangladesh, Indonesia, and Vietnam. This leads us to establish estimates on the size and scale of supply chain networks in these countries, which is primarily based on the selection of industries most conducive to SCF. Some of these include size and number of corporates in specific industries, percentage of exports, and exposure of banks to those industries. We have developed a toptradefinanceglobal.com
