Worldwide Supply Chain Finance developments ICC Paris 2014

The Supply Chain Financing Summit 2014 from the International Chamber of Commerce was held in Paris this year. In this article a describe some highlights, if you wish more detailed information you can contact Siebrand@dinalog.nl or call Martijn Siebrand / 0031624621598.

The participants had different backgrounds, CFO’s, Corporate credit and risk managers, corporate treasurers, import managers and trade specialists, bankers, insurers, consultants and vendors active in trade and supply chain finance were present.

With the climate of volatility during the economic crisis, innovations in working capital solutions are more vital now than ever before. That is why ICC and its Banking Commission are focusing on the establishment of new financial solutions that will enable corporates to maintain a resilient supply chain.

The summit started with the reason why SCF is still a rapidly growing market. The facts behind the increase of interest have several backgrounds.

1. more and more companies get involved in SCF solutions. From buyer or supplier perspective.
2. more and more financial parties and IT solutions are jumping on the train to start with new ventures or products.
3. the buyers that already have SCF running for a while now are looking for solutions that cover more than just the Tier 1 supplier.
4. Governments are looking for solutions to support SME companies to be able to join SCF solutions (USA, UK have a solutions and the Netherlands is building op a solution which will be ready halfway 2015).
5. Companies are asking for solutions to make use of SCF worldwide.

All points above are the reason that SCF gets more attention and adoption.

Nevertheless we notice that there is still misunderstanding and lack of knowledge about Supply Chain Finance in the Netherlands but also in the world. This is due to all the different terms that are used without common clear definitions. Approved payables financing, supply chain finance, reverse factoring are common names for almost the same products. The ICC has addressed this and have formed a working group with the main worldwide players to make a framework with common understanding of the terms.

Mentioned was that reverse factoring becomes available for more suppliers and not only the strategic ones. This is a very good development for the market and the economy. For the real strategic suppliers there are new products available that covers the total supply chain with purchasing and inventory.

Another interesting subject with a close relation to the Dutch activities to bring supply chain finance further with new products and participants was: How can SCF work for Small Medium Enterprises?

There are insights presented from the Spanish and UK market. In Spain confirming is a well-known and frequently used financing product also for SME’s. In combination with the subject of the rise of factoring and reverse factoring we get insights in a solution for SME’s presented by Raiffeisen Bank.

They offer reverse factoring for companies with a turnover between € 3- € 20 mio. We normally see in the Netherlands that the minimum requirements to start with SCF are at least € 250 mio of turnover. This is also an interesting market to develop in the Netherlands. There is one company that started to do business in this particular market in the Netherlands.

Last part of the day was a discussion about how to decrease the risk of SCF. Some banks are struggling with high volume financing on just one party. They can get troubles with the regulatory or their own credit departments policies.

Syndication of programs will be more common in the next years also due because of the extension of the solutions that will be offered to buyers.

If you wish to have more details about the summit and the discussions you can contact me directly via: siebrand@dinalog.nl or via phone number 0031624621598.