BCR Publishing in association with International Finance Corporation (IFC) – part of the World Bank, have today published their latest edition of the World Supply Chain Finance Yearbook. The heads of supply chain finance (SCF) programmes from leading industry institutions across 22 countries have contributed to the report which is a country by country review of industry trends in the main global SCF markets. The report addresses the gap in market information about SCF as an internationally accepted tool for SME finance.
Summary of main findings:
1. The older and more developed SCF markets, such as Western Europe and North America experienced growth in volumes in 2011-hi2012, while in 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 hard 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…,” Anil Walia, RBS Head of Trade and Supply Chain Finance Advisory, UK and EMEA.
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 turnovers 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 suppliers and at the same time stream-line the e-processing of their supplier agreements. One of the biggest examples of this 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 is expected to continue to increase, almost all contributors to the World Supply Chain Finance Yearbook expect increased syndication in the field, with multi-bank SCF programmes becoming increasingly common in the coming years.
”The [current] environment creates 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, Brasilfactor S.A.
“All SCF players are looking to participate in syndications. No bank wants or is 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 substantially in the next few years. While there is no consolidated statistics, the leaders of individual markets predict the annual growth of their SCF turnover to be 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 credit tight and risk high and most businesses having little money to invest in future growth, corporations are under increasing pressure to use their power to ensure that their suppliers can get finance easier and cheaper. Market participants are beginning to understand that they are all bonded together in one chain and this will help to boost SCF industry growth,” comments Michael Bickers, Publisher, BCR Publishing.
About BCR Publishing:
Formed in 1992, London based BCR Publishing is a leading provider of receivables finance industry market intelligence. BCR produces reports and guides to the world's specialised financial markets through titles as the World Factoring Yearbook, the World Supply Chain Finance Yearbook, the World Trade Finance Yearbook. BCR also produces Factorscan - an up-to-the-minute market intelligence service for the world's receivables finance industry. To learn more go to www.factorscan.com.
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. IFC helps developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, ther investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. For more information, visit www.ifc.org.
Anya Tatyanchenko, editor, the World Supply Chain Finance Yearbook
Telephone: +44 (0)20 8466 6987, Fax: +44 (0)20 8466 0654
E-mail: email@example.com, www.factorscan.com
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