BCR Publishing in association with International Finance Corporation (IFC) – part of the World Bank, have today published their latest edition of the global supply chain finance industry – the World Supply Chain Finance Yearbook. The heads of supply chain finance (SCF) programmes from leading industry institutions across 22 countries contributed to the report which was designed to determine the main trends in the countries with active SCF offerings. The report addresses the gap in information about SCF as an internationally accepted tool for SME finance.
Summary of main
1. The older and more developed SCF markets, such as Western Europe and North America experienced growth in volumes in 2011-hi2012, while the less established financial markets in Asia, Eastern Europe and South America, the penetration of SCF remains relatively low. However, the study’s contributors noted an overall growing level of knowledge and interest in SCF.
Stuart Roberts, Head of Supply Chain Finance, Wells Fargo Capital Finance in the US commented in the report “By our estimates, mandates across the three main subsets of SCF – buyer-sponsored supplier finance, channel and distribution finance and non-securitised true sale receivables purchases – were the highest on record”.
2. The majority of suppliers, especially in the emerging markets, prefer classic factoring to SCF introduced by their buyers: most if not all of the demand for SCF programmes is buyer driven.
“We are seeing an increasing number of global buyers from the US and Europe encouraging their Taiwanese suppliers to participate in SCF programmes, and large Taiwanese companies are also implementing the same in Greater China,” Bryan Chen, Head of Global Transition Banking Taiwan, Deutsche Bank.
“Convincing suppliers o join a new program initiated and delivered often by foreign entities takes some heard work and a hands on approach,” Priyamvada Singh, Product Lead, Global Trade Supplier Finance, IFC.
3. Local and regional SCF programmes continue to prevail over international solutions despite continued geographical diversifying of sourcing by multinationals.
”A large percentage of suppliers on these (cross-boarder - UK corporate-foreign supplier) programmes are European – this is in line with the trading pattern…,”
4. While technology driven SCF programmes starts at EUR10million in annual volumes for emerging markets and EUR50million for the more mature markets, larger programmes reported by banks are reaching annual turnover of over EUR300m. Corporates are getting a taste for the multi-million hi-tech solutions which allow them to be seen as supportive to their suppler and at the same time stream-line e processing of their supplier agreements. One of the biggest examples of the trend is the SCF programme of Petrobras (“Progama Progradir”), which according to the company has reached USD1.1 billion in its first year. As the scale of SCF solutions will continue to increase almost all contributors to the World Supply Chain Finance Yearbook expect syndication in the field, with multi-bank SCF programmes becoming the next big thing coming years.
"The [current] environment creates a good initiatives for well-structured receivables solutions, using investment fund (FIDC) or SCF multi-bank platforms, following the example of Petrobras,” Joao Costa Pereira, CEO, Barsilfactor S.A.
“All SCF players are looking to participate in syndications. No bank want or are able, to carry the credit risk of a large international supply chain on its own,” Niklas Callerstrom, Global Transaction Services, SEB Merchant Banking.
5. There is a general agreement that the market will grow in the next few years. While there is no consolidated statistics, the leaders of individual markets predict the annual growth of their SCF turnover of 10-20 per cent – in Europe, including Eastern Europe, 10 per cent – in Latin America and up to 25 per cent - in Asia.
With UK Prime Minister David Cameron’s government actively promoting Supply Chain Finance schemes via its agreement with “leading UK companies” it is expected that UK market growth will be higher then 10 per cent in the year to come.
“With the credit tight and risk high and most businesses having no money to invest in future growth it is becoming almost obligatory for corporations to use their power to make sure that their suppliers can get finance easier and cheaper. If all market participants finally start acting with the understanding that they are all bonded together in one chain, it would boost SCF industry growth,” comments Michael Bickers, Managing Director of BCR Publishing.