With an overall market size of more than $2.8 trillion a year, the receivables finance industry is huge and currently concentrated in developed markets. AGC published a new white paper authored by Andy Davis, a former Financial Times journalist and editor, and Peter Chen, a former research fellow at the McKinsey Global Institute and current doctoral student at the University of Chicago.
In Receivables Finance in Emerging Markets, the authors estimate that trade receivables in emerging markets could grow from $292 billion to $533 billion if it were to achieve global average penetration levels. Supply Chain Finance is a rapidly growing segment of the market and is projected to grow 40% per annum over the remainder of the decade.
Growing the Trade Receivables Market
Current SCF activity is concentrated at the top of the chain due to difficulties in putting such programs in place. SCF providers such as Nafin in Mexico who achieved 60% market share in 5 years have proven that a secure and easy-to-use technology platform is a sustainable business model that can rapidly penetrate the entire supply chain. It provides corporate buyers with a more secure supply chain and extended payment terms and SMEs with much needed access to working capital and factoring companies with acceptable returns to grow the business.
A partnership with an established factoring company in Croatia extends AGC’s Balkan network to expand cross border transactions. A Line of Credit will fund eligible receivables and bills of exchange. The factor’s strong relationships with both small businesses and corporates, and their customer-focused approach supports AGC’s goals of creating healthy financial returns while growing our social footprint and fueling local economic growth.
They have excellent relationships with ‘A’ risk companies and solid risk management systems in place. Their private ownership structure allows them to respond quickly to customers’ needs.
A few examples of businesses who have been able to use the funding include small family poultry farms that supply Perutnina Ptuj – one of Croatia’s largest poultry processors. The funding has also assisted the grain processor, Graniolo and baker, Mlinar who sell to Konzum, one of Croatia’s largest supermarkets with 700 stores and is owned by Agrokor, a growing regional retail firm. The facility also financed working capital needs of various suppliers to Solaris, a local hotel with seasonal liquidity needs.