Supply chain finance – a solution to support MSMEs and promote the economy

Many countries across the globe offer supply chain finance (SCF) to release working capital, especially in Europe, Asia, and America, yielding outstanding benefits of SCF products, both in domestic and international payments.

However, SCF remains new and limited in Vietnam. KPMG estimated the potential of the SCF market in Vietnam at $50 billion by 2021, but only a tiny part of this has been exploited. In 2020, more than 800,000 micro-, small-, and medium-sized enterprises (MSMEs) were registered to operate in Vietnam, equivalent to 98.1 per cent of the total number of operating enterprises, accounting for 50 per cent of Vietnam's GDP.

A solution to create early cash flow and remove "bottlenecks" for business development

In fact, MSMEs suffer many difficulties in accessing working capital. Severla surveys show that 70 per cent of businesses have to use their own capital or borrow from informal sources at extremely high costs. The most common reason given today is that businesses do not have much collateral and loan documents do not meet the requirements of banks due to unclear records management and financial reports.

IFCVN was established to accompany businesses to solve difficulties in short-term capital by understanding the challenges faced by SMEs. The solution from IFCVN is a service enabling advanced payment for suppliers by purchasing account receivables arising from sales transactions with high credit rating buyers.

Supply chain finance (SCF) can help resolve the financial issues of MSMEs

IFCVN cooperates with leading prestigious and large organisations, including KPMG. As a strategic consulting partner, with many years of experience in consulting financial and credit solutions, optimising supply chains for various multinational corporations worldwide, KPMG has shared its experience, counselled assessment and application in the supply chain for IFCVN to reduce operational risks.

Hanh Linh Truong, managing member of KPMG Vietnam, stated: "The SCF market in Vietnam and many emerging economies are promising. If operated properly, the innovative models set forth by the founding team of IFCVN will bring effective working capital solutions for numerous economic sectors in the market. KPMG is always willing to cooperate and accompany IFC to promote and increase values ​​and opportunities for sustainable development."

Founded by a dedicated team with solid financial capability, the IFCVN Board of Directors are professionals experienced in operating the SCF model at domestic and international financial institutions such as Sumitomo, Techcombank, Standard Chartered, and Mirae Asset. A representative of IFCVN shared: "We understand that working capital is a prerequisite for the production and business process. Therefore, we strive to convert future cash flows into a current financial growth tool to solve the problem of working capital for Vietnamese SMEs and micro enterprises. IFC’s aspiration is to become the first dominant fintech platform in Vietnam to help Vietnam’s SMEs access the most convenient and optimal capital by digital technology with unlimited creativity.”

Xuan Huy Dao, director of Huy Hoang Transport Service and Trading Co., Ltd., said: "My company has always lacked capital due to late payment by buyers. Now, I have found a very effective cash flow solution when joining the IFCVN platform. No collateral is needed; we still receive early payments. Transactions are carried out entirely on an electronic system using digital signatures. Within three hours of placing the order, we received the money."

Xuan Huy Dao, director of Huy Hoang Transport Service and Business Co., Ltd.

In the context of the COVID-19 pandemic and social distancing requirements, businesses encounter many difficulties in conducting procedures at the counter. Applying a digitised model, IFCVN solves their capital problems with simple and streamlined operations, supporting businesses to secure more loan channels, overcome the pandemic, and contribute to the common benefits of society and communities.

The world SCF market is incredibly dynamic with an abundance of successful fundraising deals. Typically, established in 2008, C2FO in the US raised $3.6 million in its Series A funding round in 2011. By now, the total investment in CF2O has reached $397.7 million. In 2019, C2FO was valued at $1 billion and invested $200 million by SoftBank.

In the context of international brands such as Apple, Microsoft, Sharp, Samsung, Nike, Adidas, and Puma are shifting their supply chains to Southeast and South Asia, which is promising the market "salvation" for Vietnamese MSMEs to break through.