The Global Supply Chain Finance Forum (GSCFF) – comprising BAFT (Bankers’ Association for Finance and Trade), FCI, the International Chamber of Commerce (ICC), the International Trade & Forfaiting Association (ITFA) and the Euro Banking Association (EBA) – today released a paper in response to growing concerns regarding the use of supply chain finance (SCF) and, in particular, payables finance programmes. The report, Ensuring payables finance remains a force for good, aims to address criticisms across three key areas: the potential adverse impact on suppliers, issues relating to financial reporting and transparency, and overall programme risk.
Christian Hausherr, Chair of the GSCFF, as well as European Product Head of Payables Finance, Trade Finance & Supply Chain Finance at Deutsche Bank, says: “When used in an appropriate manner, payables finance programmes enable buyers and suppliers to optimise their working capital and strengthen their relationships with each other. However, reports relating to the misuse of payables finance programmes, notably around suppliers being forced into accepting unfavourable terms, are extremely worrying. As such the GSCFF has taken the initiative to address these concerns head-on, to promote understanding of the technique and its use.”
The report addresses topics ranging from the alleged “bullying” of small and medium-sized enterprises (SMEs) to join payables finance programmes, to issues around financial disclosure, to impact of Covid-19 on the use of the technique. Key conclusions include:
The report follows extensive work from the GSCFF on promoting strong industry standards and agreed definitions, including the release of the Standard Definitions for Techniques of Supply Chain Finance and Payables finance – how it helps global supply chains. In addition, the GSCFF has been working on a series of additional guidance documents for the techniques included in the Standard Definitions. The first report, on receivables discounting, was published in June 2019, with the next on payables finance due this year.
To read the full report, please click here.