SMEs in Nigeria, Uganda, Ghana and Kenya will be the first to benefit from a new US$150mn supply chain finance scheme by Standard Chartered and the UK’s development finance institution CDC.
The programme will be set up as a result of a memorandum of understanding signed by the two institutions this week, and is expected to disburse at least US$150mn to suppliers over three years, ultimately also reaching other countries across Africa and South Asia.
Specifically, the scheme will finance the working capital gap of SMEs while they are awaiting payment (typically 30-90 days) for delivered products, thus allowing businesses to receive short-term funds that they otherwise do not have access to. To get such financing from their local banks, suppliers often need to provide collateral, a requirement many struggle to meet, and, as a result, their business growth and production levels are constrained.
The agreement is a 50:50 risk-sharing facility and the two institutions will bear the risks of local anchor buyers involved in supporting their supplier base. These will typically be Standard Chartered clients who are involved in national and regional supply chains.
“This agreement will ensure we provide the much-needed working capital to SMEs, which still face significant challenges in gaining access to credit despite being the life-blood of our economies,” says Lisa Robins, global head of transaction banking at Standard Chartered.
The programme builds on previous partnership agreements whereby CDC and Standard Chartered have promoted risk-sharing and trade finance schemes in emerging economies. In a statement, the institutions say they have already put in place around US$500mn, including a US$50mn programme to boost lending in Sierra Leone during the Ebola crisis and a US$400mn agreement in 2013 to bring trade finance to businesses in Africa and South Asia.