The Asian Development Bank (ADB) is looking to partner with local banks and technology companies as it seeks to expand its nascent supply chain finance programme.
GTR can reveal that the Manila-based lender has been given the go-ahead to expand the programme by US$100mn to US$300mn and that it is also looking at the possibility of funding supply chain solutions on its own, in the absence of a banking partner.
In such cases, it would seek to partner with a technology platform that allows visibility of the entire supply chain process and which enables users to track goods as they move through the ecosystem. It is currently in discussions with a number of providers.
The ADB’s head of trade finance, Steven Beck, tells GTR that the development bank has been investigating technologies, including blockchain, as it seeks to implement deep track and trace on the supply chain programmes it implements.
“We want the end user to be able to scan a barcode and see where each of the components came from along the entire supply chain,” he says, adding that the ADB is talking to tech companies and looking for transactions on which it can pilot such technology.
All of these discussions are with a view to expanding the bank’s supply chain finance programme to help narrow the trade finance gap, which the ADB estimated to be US$1.5tn in 2017, with 40% of that in emerging Asia.
The ADB’s supply chain finance programme was launched in 2015, as a supplement to the trade finance programme, which has supported more than US$30bn in transactions since launching in 2009 (the programme grew at an impressive 45% in 2017 and an additional 35% over the first quarter of 2018).
While the trade finance programme has onboarded partners in most of the ADB’s member countries, its supply chain counterpart was launched in a more reserved fashion.
“We implemented it in our safe space, we were looking to share 50/50 risk with the larger global banks who have experience in supply chain finance. And we would only share risk in the post-acceptance phase of the supply chain, the easy bit,” Beck says.
The ADB subsequently rolled out a programme with Standard Chartered in Malaysia in 2016 and with Deutsche Bank and UAE-based retailer Landmark Group in Bangladesh, China, India, Sri Lanka and Vietnam, last year.
It is now, however, looking for local banking partners in Armenia, Bangladesh, Pakistan, Uzbekistan and Vietnam. The aim is to tap their knowledge of local supply chains and to arm them with the technology and know-how to operate supply chain programmes, with a view to encouraging the private sector to do the same.
Should the programme come close to its capacity of US$300mn (which should have a significantly larger churn, given the 75 to 90-day nature of supply chain finance), Beck says that there should be no opposition from the ADB board to increase it further.
The ADB will continue to work with global banks on this programme, and has a number of projects in the works. It aims to have at least one partner bank in each of the aforementioned nations by the end of the year.
“We’re seeking to go into more challenging markets,” Beck says.
While the ADB was established in 1966 to be a funder of public infrastructure works, it has become increasingly important to Asia’s trade finance markets since the global financial crisis, since which many western banks have retrenched and limited their exposure to emerging markets in the region.