Tuesday 22nd October, 2013

According to Demica’s latest research report on the Supply Chain Finance (SCF) market, 75% of top European banks still believe growth prospects for SCF remain ‘strong’ or ‘very strong’.  

Respondents anticipate annual SCF growth rates between 10% and 30% per annum in mature markets, and 20-25% in emerging markets. Growth over the next few years will primarily be driven by developed economies such as the US and Europe, along with larger emerging economies including China and India.

Respondents noted that the financial markets crisis, followed by weak economic growth and current concerns about the spread of the sovereign debt crisis across the Eurozone, has propelled optimum liquidity management to the top of the financial management agenda, prompting interest in supplier financing.

In mature markets, working capital optimisation and reduction of supply chain risk have been identified as the primary drivers for establishing SCF programmes.  In emerging economies, access to liquidity and enabling suppliers to keep pace with buyers’ growth are the key motivations.  

Although SCF is seen as having growth prospects in both mature and emerging markets, corporates and banks still face a number of challenges in order to maintain and increase the momentum of adoption.

Phillip Kerle, Chief Executive Officer of Demica, comments, “The corporate credit squeeze triggered by the financial crisis has made companies much more aware of the need to optimise working capital and to protect their smaller suppliers in order to avoid supply chain disruptions.

He added: “Even though credit conditions have eased up slightly, many companies, especially SMEs, are still struggling to obtain bank financing. In a lending market that continues to remain tight, SCF solution offers both buyers and suppliers a particularly valuable proposition to monetise their supply chains to maximise working capital.”

The report was conducted amongst the top 40 European banks.