When banks and non-banking financing companies (NBFCs) are reluctant to lend to MSMEs without adequate collateral and also because of the high servicing costs and lending risks, supply chain financing (SCF) can assist them by removing working capital-related barriers to growth. Furthermore, the digitization of SCF procedures and other technical advancements witnessed during the Covid-19 pandemic have lowered financing costs significantly and increased business efficiency for sellers and buyers in sales transactions. Thus, SCF offers numerous benefits to MSMEs by enabling the latter to navigate working capital deficits, lowering costs, and stabilizing operations. MSMEs can, therefore, depend on SCF to grow and expand their operations.
World Trade Board launches plan to empower SMEs through trade and finance
BY ZAWYA
- 15/11/23
MSMEs make up around 90% of businesses globally, but accounted for just 23% of applications for trade finance in 2020. Despite their low representation, these smaller firms made up 40% of rejected trade finance applications. This mismatch between demand for and supply of trade financing known as the trade finance gap, is growing rapidly - from an estimated $1.5 trillion in 2018 to $2 trillion in 2022, and shows no signs of slowing.
