SUPPLY CHAIN FINANCE: Optimizing financial flows in Bangladesh
Supply chain finance is deemed as a win-win opportunity for all stakeholders in the supply chain ecosystem- the corporates, their suppliers and the factor. Rather than waiting on its large customers to pay invoices, the supplier can submit invoices to financiers for early payment. In turn, this provides immediate access to liquidity which can help the supplier keep operating in a “business as usual” environment in any business climate. These along with factors such as proper fund utilization, authenticity of cash flows of borrowers, etc. have garnered much popularity in the country for this particular financing vehicle.
IDLC Finance Limited pioneered and introduced supply chain finance in 1999. Despite its commencement 23 year back, this particular segment of finance is yet to live up to its potential. The clear concept of supply chain finance is still absent among customers in our country. Additionally, the corporate buyers lack interest in supporting their suppliers and as a result, the suppliers end up availing loans at a high rate.
From regulatory point of view, Bangladesh does not have any specific policy guideline or legal framework for supply chain finance. Nor there is any legal framework for the security of the payment for these products. Hence, for this segment to thrive, the driving force needs to come at policy levels. Meanwhile, corporate buyers have to come ahead and support their suppliers by means of reverse factoring.
RIFAT ISHTIAQ KHAN
Manager
IDLC Finance Ltd