A new survey shows that supply chain finance (SCF) is growing at 30 to 40% annually among major banks.

The Demica-authored report predicts that growth will continue at 20 to 30% for the next three years, before settling down to 10% per year by 2020.

The sectors in which the growth is strongest include retail, manufacturing, consumer products, automotive, agriculture, chemicals and pharmaceuticals. The report highlights Eastern Europe, India and China as the regions with the biggest pickup.

Philip Kerle, CEO of Demica, tells GTR that the strong pickup can be largely attributed to increased awareness of SCF in the market. “We have more proposals out now than we had in the last two years,” he explains. “There’s more awareness. Every time you pick up a paper or go to a conference there’s something on SCF. You see the British government pushing the SCF agenda and there’s recognition of the benefit.”

In addition, the continued squeeze on the working capital facilities of companies of all sizes means that SCF solutions are increasingly viewed as being essential. At a recent event in Hamburg, Eric Riddle, vice-president of PrimeRevenue’s European operations, said that for some industries that operate lean manufacturing (such as the automotive business), SCF is vital if suppliers are to meet their working capital requirements.

Of those interviewed for the survey, 90% said that SCF was a “must have” financial solution, rather than a “nice to have” one. However, Kerle says that the strong response may be due to some respondents not fully understanding of the complexities of SCF.

“We were surprised that it came back at 90%,” he says. “We thought it would be 60 to 70%. It tells you people are aware and want to participate if they can. I’m not sure they’re aware of the complexities. I’m not sure that the physical supply chain is any more complex than the financial. The number of potential issues that can arise in a cross-border SCF transaction is huge.”

Within the results, many banks predict that In five years, domestic SCF will be a necessity for corporates, while cross-border SCF may be more complicated to implement. The report highlights issues such as local legislation, multi-regime compliance and marketing the advantages of SCF in different jurisdictions as being the main hurdles to implementing cross-border SCF transactions.