Established in 2010, the Global Trade Supplier Finance (GTSF) program is a $500 million multicurrency investment and advisory program that provides short-term finance to emerging market suppliers and small- and medium-sized exporters, helping to address a huge shortfall in supply chain finance.
Annual export volume from emerging markets to buyers in the U.S., Western Europe and Japan is approximately $400 billion, according to a 2010 IFC market survey report. However, it is estimated that only 10 percent of exporters in emerging markets actually have access to supply chain finance.
Most local commercial banks in emerging markets have limited or no tailored financial products for suppliers and exporters to finance sales not backed by letters of credit. The global banks that do offer supply chain finance solutions often have little experience in emerging markets. Difficulty in reaching the sheer number of small and medium-sized suppliers in emerging markets also has been a major constraint to the growth of supply chain finance.
How the Program Works
Under the program, IFC will work with buyers across industries that source goods in emerging markets. This will help reach thousands of small- and medium-sized suppliers in targeted countries. IFC also help banks that offer supply chain finance increase their presence in emerging markets.
The GTSF program will provide post-shipment finance to suppliers based upon acceptance of receivables by select buyers approved by IFC. This allows suppliers to improve working capital by converting sales receivables to immediate cash and to access lower-cost financing based on the superior credit risk of the buyer. Supplier finance will also enable emerging market suppliers to finance open account transactions at competitive rates without collateral requirements. This will help make these suppliers more attractive to global buyers.
IFC will also provide comprehensive supplier on-boarding and training programs through Advisory Services as well as local partners to ensure that the GTSF program maximizes financial inclusion of small and medium-sized business. The programs will be designed to help small- and medium-sized enterprises in working capital management and the practical application of supplier finance in emerging markets.
The GTSF program aims to:
- Increase access to finance for suppliers in emerging markets by supporting capacity for implementation of supplier finance through partnerships with banks and with third-party platform providers.
- Maximize inclusion of small- and medium-sized enterprises through comprehensive on-boarding provided through advisory services under the program.
- Level the playing field among larger and smaller suppliers for access to finance at competitive terms.
- Support reduction in financing costs in emerging market supply chains.
- Develop market appetite for supplier finance in emerging markets through a successful demonstration effect.
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