In a time of unprecedented disturbances in global trade flows, supply chain risk management is a challenge for both buyers and their suppliers. On the one hand, buyers struggle to build reliable supply chains that can keep pace with their growth prospects and the rapid change of the competitive landscape; on the other, many small and medium enterprises (SMEs) struggle to access competitive funding because of a short-sighted approach to their creditworthiness which overlooks the robustness of their business.

Confronted with this problem, corporate buyers are keen to find solutions, particularly as they face growing demands from customers, investors and regulators, especially in Europe, to take responsibility for the social and environmental impacts of their supply chains.

Supply chain finance, which has surged in popularity amid the liquidity crunch of recent years, goes some way towards this funding gap. However, it often only kicks in at the point of invoice issuance, while the real need for cash arises earlier on, when an order is received.

Launched in 2017 by two banking veterans, Twinco Capital says it has cracked the working capital code, enabling affordable funding to suppliers right at the beginning of the cash conversion cycle. By combining technology and privileged access to data to assess performance risk, Twinco has already funded millions of purchase orders for SMEs in diverse markets, from Bangladesh to Bulgaria, China, Pakistan, South Korea, Turkey, Vietnam, Indonesia and beyond.

In this Industry Perspective, Sandra Nolasco, CEO of Twinco, explains the company’s approach and how it is working to make trade finance more inclusive and accessible.


GTR: How does Twinco’s business model work?

Nolasco: We look at the relationship between the buyer and the supplier and the risks that are managed by both sides. It’s a symbiotic relationship: the supplier needs to produce, deliver, and be paid by the buyer; the buyer needs to receive the product. Their incentives are aligned. Twinco´s business model leverages long-term relationships between buyers and their suppliers and the years of joint experience in managing those risks.

How do we do this? Through advanced data and technology. The game-changing factor lies in the value of the intersection between digital technologies, big data analytics and finance. This is what makes Twinco Capital unique. We have not seen any other actor, big or small, offer anything similar.

GTR: What is your approach to scaling Twinco’s solution?

Nolasco: Global trade finance is a trillion-dollar market which is ripe for disruption. We started with a handful of buyers and their suppliers in several countries; then suppliers introduced us to other buyers, while these, in turn, asked us to start working in new markets with other suppliers. This network effect has been the key to Twinco’s exponential growth. There is a virtuous circle: the more transactions we fund, the more suppliers and buyers we add to our model, and the more robust our risk assessment data becomes. We are making trade finance more efficient, more sustainable and more inclusive. I like to say that Twinco is to trade finance what a rudder is to a vessel: we are steering it towards new frontiers, to unlock the hidden potential of global production networks.

GTR: In which sectors are you seeing the most demand for Twinco’s solution?

Nolasco: We are focusing our efforts on four major verticals: retail, apparel, food and beverage and consumer goods. In addition, we are in the advanced stages with companies in the industrial and automotive sectors. These sectors are heavy users of supply chain finance: they have very fast recurrent transaction cycles that frequently require financial support. By virtue of starting with apparel and retail, we are already covering 95% of the major sourcing markets.

GTR: How has the Covid-19 pandemic impacted your business model?

Nolasco: When we launched our first large finance scheme with one big retailer, we thought that it would take a long time to optimise and digitalise all processes to reduce complexity for all parties involved and boost efficiency. Covid-19 accelerated that. Within just one and a half years, we have not only proven that we can onboard 99% of our customers digitally, but we also validated our business model, with no losses, even with supply chains more strained during the pandemic than at any time during the past decade.

The Covid-19 crisis has revealed the tremendous fragility of global supply chains, and despite various measures to support SMEs during the pandemic, Asian Development Bank trade finance gap research shows that 40% of these companies’ trade finance applications were rejected by banks. It is crystal clear to us that the traditional trade finance system has significant shortcomings. The fact that Twinco’s business is growing exponentially although the model is new for both buyers and suppliers shows that there is a great demand for new solutions.

GTR: Linking supply chain finance to ESG compliance has become popular recently. What is Twinco’s approach to sustainability?

Nolasco: Twinco has a dual approach to sustainability that draws on our mission as a company. On the one hand, our aim is to reduce the trade finance gap that disproportionately affects SMEs, often in emerging countries, and hinders their ability to access business opportunities. On the other, we want to empower both buyers and suppliers to drive sustainable growth.

Twinco’s groundbreaking trade finance scheme is a powerful tool to incentivise the sustainability of global supply chains. We are creating a virtuous circle, linking better environmental, social and governance (ESG) performance in supply chains and short-term financing at the beginning of the production cycle, when the most important manufacturing decisions are taken. The strength of the model relies on the fact that incentives for all parties are totally aligned: it helps buyers align suppliers to meet sustainability goals and stay ahead of regulation on responsible supply chain management; it provides access to affordable funding to suppliers when they most need it and mitigates the cost of ESG compliance; and finally for Twinco, sustainability criteria is a proxy for a stable long-term buyer-supplier relationship, which is precisely what our risk model looks for.

We will shortly be launching Twinco’s first ESG-incentivised dedicated financing programme, supported by a state-of-the-art ESG and performance data-driven tool that we are building. Once it is launched, I will be excited to share the results. 

GTR: Where does Twinco fit into the wider SCF ecosystem?

Nolasco: Twinco is the result of 20 years of trade finance expertise built up through commodity finance, physical trade flows, and emerging markets in leading global banks. We established the company because we felt we had a deep understanding of how the trade finance market worked and what each actor in it needed.

Banks are key actors in trade finance. I don’t subscribe to the view that banks are all ‘dinosaurs’. Banks are a key pillar of the economy. They need to be stable and somewhat risk-averse. Fintech entrepreneurs by contrast can and should be agile, testing and learning to address market gaps and unmet business needs. We can also take on a greater level of risk.

Twinco’s mission today is to address market gaps in trade finance to offer an alternative source of liquidity. There is plenty of room for many types of finance providers and great benefits in seeking strategic collaborations and partnerships.

We are discussing collaborating with some banks, however we don’t see banks as our customers. Our customers are buyers and suppliers around the world, and a bank can be either a partner or a competitor.

GTR: What is your outlook for growth for this year?

Nolasco: We are growing very quickly, with US$100mn of funding on an annual basis. Our goal for the next few years is to continue to grow at a five times multiple, so we can impact more and more companies, across industries and countries.