Trade finance executives from OCBC, BPI, and Techcombank share their insights.
ABF: What challenges do Asian banks face in terms of supply chain management? Do the current SCM initiatives of Asian banks serve the market well?
OCBC: Clara Hang, Head, Global Trade Finance, Global Transaction Banking
Asian banks are at the early stages of adoption on SCM as a new value proposition to corporate customers and their counterparties. Asian banks has the competitive advantage in terms of credit appetite against local corporates.
Potential challenges faced by Asian banks would be its limitation to expand cross border trade flows on SCM due to lack of network breadth. Asian Banks could be hampered by older technologies & processes, which will require investment in order to plug into their customers’ quickly evolving supply chain needs
SCM will offer an alternative financing options to corporate beyond traditional trade finance and improve working capital. Large suppliers have the option to provide liquidity to their buyers to increase their sales. The weaker suppliers can rely on the strength of their buyers for credit availability. Buyers can benefit from ensuring there will be no interruption in the supply of goods or materials for manufacturing or distribution.
Bank of the Philippine Islands: Christine Grace Bandol, Vice President, Trade Finance Department
There is increased demand in Asia today as customers increasingly ask for end-to-end solutions, quicker cash conversion, and close to real-time information relative to their supply chain requirements.
This is in response to their objective of achieving efficient management of goods contributing to competitive pricing in their respective industries. The main challenge for Asian banks is to upgrade their systems to mirror the developments in supply chain management.
Techcombank: Dang Tuyet Dung, Head of Wholesale Banking Division
Asian market is strongly growing and attracting more foreign investors which open for both international and domestic trade flows. However, opportunities of SCF are also different between key markets like China, India, Singapore, Hong Kong with more established financial markets vs countries like Vietnam, Bangladesh, Cambodia etc. where the companies, especially SMEs do not have same level of capital access.
Major representation of Asian markets are small and medium enterprises (SMEs) and family-owned companies with limited resources, and the most challenge for banks is to convince SMEs to use SCF to manage their purchase orders (POs), shipment, receivables, and financing request which improves their access to affordable working capital.
Changing mindset of traditional financing way is a real break-thru in the less developed markets like Vietnam. The key point is that the advantage of SCF that help SMEs lower cost of goods sold, improve cash flows, and better manage their relationship with a larger base of buyers/sellers must be communicated well supported by both banks and government regulatory framework, so that SMEs realize that the benefits of joining SCF outweigh the extra costs.
Frontier markets in Asia like Vietnam are having less realiable credit bereau, and providing finance to clients like SMEs will be more strictly considerable, more expensive and require more complicated procedure of collateral, while SCF is linked to sales and can provide much cheaper source of funding.
Changes of business environment strongly impact on implementation of advanced SCM initiatives. With the growth trend of multinational companies, joint ventures, strategic alliances, business partners, good logistics infrastructure, regulatory framework play critical role in helping companies to build up good collaboration with partners, however, is still moving slowly in Asia emerging markets, resulting in more difficulties in SCF implementation.
In order to serve the market better, Asian banks should commit more resources (money, people, time, marketing strategy) to their SCF platforms, cooperate more closely with European and American banks that have implemented SCF for a long time to gain valuable knowledge and experience in managing and developing their own services, thus can better demonstrate the benefits of SCF solutions to suppliers who may today think it is too good to be true.
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