Trade and Supply Chain Finance Program (TSCFP)
TSCFP works to make global trade and supply chains green, resilient, inclusive, transparent, and socially responsible.
The SCF business of ADB’s Trade and Supply Chain Finance Program (TSCFP) aims to reduce financing gaps faced by small- and medium-sized enterprises (SMEs) to help them become part of the global trading system.
These efforts support growth in ADB’s developing member countries (DMCs) in a number of ways: they broaden private sector support for supply chain finance; improve cash flow to DMC companies to enable growth and job creation; allow companies traditionally not considered bankable to receive financing and; produce a demonstration effect that encourages financial institutions to undertake more supply chain financing.
TSCFP provides funded and unfunded risk participations and guarantees through its partner financial institutions (PFIs), as well as by direct loans by ADB to obligors, to enhance the access of SMEs to working capital for supply chains.
Pre-shipment financing is a short-term commercial finance option that provides capital to pay suppliers upfront for verified purchase orders. Businesses avoid depleting cash reserves or declining an order because of cash flow challenges. It allows suppliers to accept unusually large orders and adjust the loan basis up/down quickly to meet needs. If order volume drops, there is no long-term commitment so they can stop using it at any time. ADB’s Pre-shipment Financing is tied to a post-shipment, post-acceptance Payables Finance Program offered by the PFI to the Anchor.
Post-Shipment Supplier Finance is the provision of funds to the supplier upon the delivery and acceptance of goods by the Anchor. The product is meant to finance sales receivable from the shipment of goods to the realization of the transaction. Under this product, the main risk is the repayment/credit risk of the buyer (Anchor). ADB’s credit risk assessment focuses on the Buyer.
Distributor Finance is the provision of financing for distributors of large corporates (Anchor) to cover the holding of goods for re-sale and to bridge the liquidity gap until the receipt of funds from receivables following the sale of goods to a retailer or end-customer.
Partner Financial Institution (PFI) is a bank or non-bank entity that operates a supply chain finance programs. PFIs must provide supply chain finance products or aim to launch supply chain finance business to suppliers or distributors in DMCs.
|Information requirements||Provision of information sufficient for ADB to conduct risk assessment, due diligence, and anti-money laundering (AML) and know-your-client (KYC) policies assessments|
|Credit rating||BB on a global scale (minimum)|
|Experience and capacity||At least one year of operational track record, as well the ability to track and monitor SCF transaction|
|Geographic Coverage||ADB’s developing member countries|
|Risk management||Strong credit management and well-tested internal rating, pricing systems and KYC/AML policies
Competent and adequate risk management teams
|Average portfolio quality||Default ratio for SCFP <2%|
|IT infrastructure||Robust IT infrastructure, and able/willing to interface IT systems with ADB if necessary
SCF clients use PFI's trade IT platform for SCF transactions
Supports PFI's ability to track and monitor SCF transactions
|Safeguards and integrity policies compliance||Compliance with national and ADB safeguards and integrity guidelines as well as with policies on prudential requirements. All necessary clearances from the government and regulators shall be obtained.|