The Asian Development Bank (ADB) and Standard Chartered have signed a supply chain finance agreement worth almost US$40mn to Malaysian businesses.

Through the agreement, each of the institutions will make RM80mn (around US$19.34mn) available to small businesses in the country through the ADB’s supply chain finance programme.

The finance will be available to businesses in the pharmaceutical sector initially, although that is open to development, Jovi Cotio, relationship manager at the ADB tells GTR.

It builds on an existing agreement the pair signed in China which was worth over US$100mn and which supported more than 200 SME transactions in the country. Cotio is hopeful that the deal in Malaysia, the first of its kind for the ADB, can have a similar effect.

She says: “The ADB and Standard Chartered are working on identifying opportunities in new locations and sectors. Supply chain finance programmes can be challenging for banks to roll out especially to SMEs because of the compliance costs and workforce needed to on-board and maintain relationships.

“This is exacerbated by the de-risking observed across the banking industry. Banks will also have to get comfortable with differing law and regulations across countries.”

The ADB’s supply chain finance programme enables the development bank to fund suppliers upon the receipt and acceptance of goods, at which point the partner bank (Standard Chartered in this case) disburses funds to the supplier and receives the payment at invoice due date.

The supply chain finance deal is the latest in Standard Chartered’s increased participation with development finance institutions. In August, it accessed a US$500mn trade finance facility from the IFC which will allow it to continue to bank emerging market trade.

The trend is part of the bank’s efforts to maintain financing trade in emerging markets, where it has 90% of its business, at a time when regulatory costs are forcing banks to cut lines to developing countries.