The International Finance Corporation (IFC) and SMBC have launched a US$500mn supply chain finance facility that they say will help increase SME access to affordable working capital in emerging markets.
The IFC will commit up to US$250mn in direct funding, while the Tokyo-headquartered bank will contribute the other half, allowing it to serve a bigger range of suppliers “at longer tenors and higher volumes” than would be viable alone.
The financing will enable firms to “get paid faster, build lasting financial resilience, and support employment in the communities”, the IFC and SMBC said.
“Access to finance remains one of the most persistent barriers to growth for businesses in emerging markets,” the organisations said.
“The MSME finance gap runs into the trillions, constraining their ability to invest, expand, and create jobs.”
The facility will help give SMEs a documented history of transactions, which is vital when securing trade finance, so that firms can eventually access more banking services, “turning working capital into a pathway to lasting financial inclusion”.
Speaking to GTR at Sibos in Miami, Priyamvada Singh, SMBC’s Americas co-head of global trade finance, said the financing built on an ongoing partnership between the IFC and SMBC aimed at financial institutions, and extended it to corporates.
“Under the IFC GSCF, we can expand the scope of supply chain finance beyond approved payables only, to include other instruments and approved techniques to finance suppliers of an anchor buyer,” Singh said.
Singh added that the programme’s remit also extended beyond the traditional format of a “large buyer, typically in what we consider developed markets, and emerging market suppliers”.
“We’re also looking at it the other way round, where you could have emerging market companies who are looking at supply chain finance programmes because they’ve got SME suppliers,” Singh said.
Under the programme, credit will be ‘anchored’ to the financial strength of large buyers rather than suppliers, allowing SMEs to receive early payment and better rates.
The first anchor buyer is a large food manufacturer in Latin America, which was not named in the announcement.
Nathalie Louat, global director for trade and supply chain Finance at the IFC, said: “Supply chain finance is one of the most effective tools to put working capital directly in the hands of small businesses in emerging markets – quickly, affordably, and at scale.
“By partnering with SMBC and leveraging the creditworthiness of established buyers, we can reach suppliers that the market alone would not serve, giving them not just liquidity today, but the financial footing to grow their businesses and create jobs.”
The facility was structured through the IFC’s Global Supply Chain Finance programme.
Mizuho Bank and the IFC also recently launched a US$1bn risk-sharing facility as part of the programme, which aims to increase supplier and distributor access to supply chain finance in Asia Pacific markets.
Additional reporting by Shannon Manders.
