European banking professionals surveyed in the research believed that currently only 5-10% of the available marketplace has been satisfied with cross-border SCF schemes, revealing ample space for further growth.
According to Demica’s latest research report, respondents expected on average a double digit growth rate of cross-border SCF programmes for the next few years. Germany offers the greatest market potential for cross-border supply chain finance (SCF) (€230bn), followed by France (€125bn) and the UK (€115bn).
Over 80% of financiers interviewed reported that large buyers in the three countries studied are exhibiting strong demand for international SCF schemes. In particular, suppliers in emerging economies and the Far East, where growing businesses have an intense need for liquidity and options for alternative financing
techniques are limited, demonstrate a high level of interest in SCF programmes.
Respondents also highlighted the top three challenges in developing global SCF schemes. On-boarding suppliers remains the biggest hurdle to be cleared. As vital as conducting due diligence on local suppliers, banks need to command local knowledge and expertise in servicing smaller suppliers in growth regions. Strong understanding of local legislation will be a pre-requisite for banks when setting foot in emerging markets.
Phillip Kerle, chief executive officer of Demica, said: “Our research shows that the substantial potential market for cross-border SCF is, as yet, largely unexploited. As a result, precious capital which could be deployed to add liquidity in the supply chains to the advantages of both buyers and suppliers remains idle.
“Smaller suppliers are less resistant to economic volatility and as disruptions in one part of the supply chains can trigger a domino effect, it is in the best interest of buyers to ensure the financial robustness of their strategic suppliers.”
