ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.
Established in 1966, it is owned by 68 members—49 from the region.
ORGANIZATION
ACCOUNTABILITY
ADB supports projects in developing member countries that create economic and development impact, delivered through both public and private sector operations, advisory services, and knowledge support.
Trade and Supply Chain Finance Program (TSCFP)
TSCFP works to make global trade and supply chains green, resilient, inclusive, transparent, and socially responsible.
- Jump to:
- Join SCF
- Program Highlights
Supply Chain Finance (SCF)
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.
SCF Products: How It Works
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 Finance
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.
- Funded and Unfunded Risk Participation / Portfolio Guarantee
- Maximum tenor of 180 days
Key Benefits
For the distributor:
- Finance raised against a strong credit rating with lower implied cost of funding.
- Working capital optimization with improved cash flow forecasting and flexibility.
- Alternative sources of funding with reduced use of credit availability from traditional banking sources.
- Ability to manage significantly longer payment terms imposed by financially strong buyers.
- Suppliers get additional working capital for the production and the purchase of raw materials.
- Ability to obtain finance for the fulfilment of an order from a buyer when other forms of finance are financially less attractive or not available.
- Improved cash flow forecasting and flexibility
For the Anchor:
- Greater supply chain stability as the financing of the suppliers is covered.
- Extension of payment terms by providing finance at the normal maturity of the invoices.
- Cuts the cost of processing and reconciling supplier payments
- Ensuring supply from the seller without committing its own financial resources.
- Cost reduction as involvement of the Anchor can result in better financing rates from PFIs.
Post-shipment Post-acceptance Finance / Payables Finance / Supplier Finance
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.
- Funded and Unfunded Risk Participation / Portfolio Guarantee
- Maximum tenor of 12 months
Key Benefits
For the distributor:
- Finance raised against a strong credit rating with lower implied cost of funding.
- Working capital optimization with improved cash flow forecasting and flexibility.
- Alternative sources of funding with reduced use of credit availability from traditional banking sources.
- Ability to manage significantly longer payment terms imposed by financially strong buyers.
- Suppliers get additional working capital for the production and the purchase of raw materials.
- Ability to obtain finance for the fulfilment of an order from a buyer when other forms of finance are financially less attractive or not available.
- Improved cash flow forecasting and flexibility
For the Anchor:
- Greater supply chain stability as the financing of the suppliers is covered.
- Extension of payment terms by providing finance at the normal maturity of the invoices.
- Cuts the cost of processing and reconciling supplier payments
- Ensuring supply from the seller without committing its own financial resources.
- Cost reduction as involvement of the Anchor can result in better financing rates from PFIs.
Distributor Finance (DF)
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.
- Funded and Unfunded Risk Participation / Portfolio Guarantee
- Maximum tenor of 3 months
Key Benefits
For the distributor:
- Working capital optimization permitting the distributor to bridge the liquidity gap between the purchase of inventory and payments received from its customers.
- Increased credit for distributors based on the existence of actual financial or commercial support from the Anchor.
- Credit for distributors at a lower cost than what would be available from traditional banking sources.
For the Anchor:
- Sales growth (by providing additional finance to increase product availability through distributors, the finance of inventory and support for the prompt delivery of products).
- Provide extended credit terms to the distributor or to ensure that additional funding can be raised with its support.
How to Join the SCF
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. |