@Risk

The global financial crisis –in combination with the trend toward increased use of open account trading and pressure from major customers to increase payment terms –has made financing a critical concern for suppliers everywhere, but the problem is particularly acute for suppliers in emerging markets.

A new study by the International Finance Corporation (IFC) and the Nordic business consultancy Capacent underscores the issue and shows that suppliers in emerging markets are now eager to find financing solutions.

The Global Supply Chain Financing Market Study, conducted between May and November 2009, analyzes the need and interest in supply chain financing, focusing on Bangladesh, Brazil, Guatemala, Indonesia, Romania, Turkey, and Vietnam.  The study also includes proposals for how IFC might create a platform that would being supply chain financing to emerging markets.

According to the IFC, supply chain financing helps suppliers find financing at attractive rates, freeing up liquidity by introducing a platform that allows suppliers to sell their invoices to financiers after the invoices have been approved by buyers. This type of financing, which reduces invoice risk by providing transparency of buyer approval of the invoice, is becoming increasingly popular in developed markets.

“The study has given us excellent insights into the needs in the market, and how IFC could play a role in supporting emerging-market suppliers,” says Rogers LeBaron, Senior Advisor at IFC, adding that the IFC will continue working with Capacent to develop supply chain financing solutions in further detail.

In the meantime, continue to focus on supplier collaboration, so that you won’t unexpectedly encounter a supplier that is in dire financial trouble.