Related News

Crédit Agricole and Demica unveil SCF platform for Asia Pacific

IFC joins Taulia as supply chain finance funder

GTR Leaders in Trade: The shortlist

Trade finance gap soars to US$2.5tn

Veefin sets sights on SCF technology expansion following successful IPO

A report has revealed that less than 10% of the market for cross-border supply chain finance (SCF) for large UK, German and French firms is being met.

Research by Demica, a working capital advisory firm, estimates that the value of imports suitable for cross-border SCF large buyers in 2011 totalled €230.22bn in Germany €124.98 in France and €114.75 in the UK.

However, only 5-10% of these transactions are actually given access to SCF. 80% of the 500 banking professionals Demica spoke to by believed that there is high demand for SCF, meaning the gap in the market is vast.

Philipp Kerle, CEO of Demica, tells GTR why he feels there is such a relative lack of take-up in the SCF market: “To some extent the main issue is that as the supply chain extends, banks in Europe are apprehensive around getting involved in jurisdictions they’re less comfortable with. What we’re seeing, which is encouraging, is banks working together on a multibank model. Some European banks are happy to take [SCF in] Eastern Europe, Turkey, and so on. If they’re uncomfortable doing so farther afield, the corporates or banks themselves may bring in a local funder.”

Primary research was conducted with 50 of Europe’s top banks and on average, respondents expect to see double digit growth in cross-border SCF programmes over the next few years, with further support coming from emerging market financiers.

Kerle thinks it would be unrealistic for the demand to be completely fulfilled at any stage in the future, but has seen signs of progress. He says: “It’s grown fairly rapidly. It’s realistic to expect to see some significant growth, but you’ll never get 100%. Partly because banks only want to bring on major suppliers, don’t want to go down to tail end of supply chain because it takes effort and is time-consuming.”

And while various governments, including the UK’s, have been vocal in their support of SCF initiatives, Kerle sees them playing a limited role in proceedings. He says: “They’ve made this big announcement, where they’ve gone to large corporates to encourage them to get involved in SCF. But it seems that beyond that, they’ve left it with corporates to implement.

“Apart from making such noises, I’m not sure it’s necessary for the government to be involved. Ultimately, it has to be the corporate that makes the decision. The government wants to get really small suppliers involved, but there’s a natural conflict, because banks and corporates only see rewards coming from the larger suppliers.”