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Reda Ezzat, senior vice president and head of trade and structured finance at Mashreq Bank, said digitalisation could help close the global gap between available supply chain finance and what is currently in use.
“There is a clear opportunity that we believe can be bridged by the use of digital solutions to bridge the gap in access and implementation of supply chain financial products,” Ezzat said.
According to estimates by accounts receivable finance analyst BCR Publishing, there is nearly $1.8 trillion in supply chain finance available globally, and only $713 billion is currently in use.
Increased adoption
The adoption of digital supply chain finance solutions has increased in recent years, driven by banking and corporate businesses.
“Supply chain finance has been around for a while, but what’s really been the catalyst is the digitization of processes,” Ezzat said. “Technology makes products more viable, especially for businesses with deep and diverse supply chains.”
Research conducted by McKinsey Global in 2020 shows that more than 60% of the potential trade finance market is concentrated in supply chain finance.
McKinsey further estimates that the future potential market size of supply chain finance is $17 trillion. However, the global trade finance gap, further widened by the Covid-19 pandemic, could hinder access to this pool of funds.
Technology Platform
By introducing technology platforms as part of a broader offering, banks and fintechs are now able to offer a more comprehensive value proposition, not just financing for extended payment terms.
“Digitalization can improve cash flow visibility while complementing decision-making processes through the use of data analytics,” Ezzat said. “It also allows businesses to better comply with reporting requirements.”
He also stressed the need for CFOs and treasurers to recognize the value that supply chain finance can bring and work with their sourcing partners to build more resilience and sustainability into their businesses.
“In an environment where optimization of financial costs is a priority, relevant decision makers must look at the big picture,” he said. “Instilling better buyer-seller relationships and building a more resilient ecosystem is just as important – and digital supply chain finance can be an effective way to do that.” – arab trade news agency
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