Supply chain finance experts advocate regulatory support to bolster MSMEs growth

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Respected industry leaders in the supply chain finance segment including Chuka Amadife, Executive Director/Chief Operating Officer of Fiducia, a digital supply chain marketplace, have advocated for continued regulatory support for the Nigerian micro, small and medium enterprises (MSMEs) to enable them to contribute more to national Gross Domestic Product (GDP) growth.

They also emphasised that unrestricted access to funding was a critical imperative for MSMEs in Nigeria and called on micro and small businesses to leverage supply chain financing and reverse factoring as an alternative funding model to scale their growth and expansion.

Speaking at the AfreximBank Trade Finance Seminar 2023 with the theme, ‘Power to Trade’, the experts said the large number of MSMEs in the informal sector can exit the financial exclusion space and accelerate their growth by taking advantage of the opportunities offered by platforms-based alternative funding system to access funding faster and with less stringent conditions.

Fiducia’s Executive Director / COO, Chuka Amadife, stated that the supply chain finance and reverse factoring system relieved MSMEs of the challenges of limited access to funding occasioned by tougher conditions set by traditional financial institutions including provision of collateral, paperwork documentation, and lack of credit history.

“As a technology platform, Fiducia aggregates buyers, sellers, and banks into a digital marketplace. We launched into the Nigerian market earlier this year with a promise to help small businesses access funds within 48 hours. To achieve this, we automate price discovery for all the players; and enable easy collection from the buyer on due dates automatically” he stated.

Amadife said further that Fiducia’s digital marketplace through partnerships with strategic international development financial institutions and Nigerian financial services providers, has developed appropriate structures that enable buyers, suppliers, funders, and partners to work together efficiently in a marketplace ecosystem.

“We have aggregated 16 financial institutions to date, and strategic partnerships that are flexible and allow parties to learn and participate on the platform, while at the same time drive market development. Taking learning from the World Bank, we are training and equipping commercial banks with the knowledge they require to have a better understanding of how factoring works.

“We’ve started seeing traction with about 16 financial institutions, and over 200 corporates and suppliers on the platform. We are convinced that with more regulatory support for MSMEs, we will see a significant growth in the informal MSMEs market in the near future,” he said.

Other industry leaders including Mojisola Hunponu-Wusu, Founder & CEO of Woodhall Capital, also affirmed that the greatest need of small and medium-sized enterprises was access to funds to grow and expand their operations, stressing that her organisation in partnership with AfreximBank has provided support for many MSMEs in Nigeria to overcome funding challenges.

“Small and medium-sized enterprises in Nigeria can easily jump-start when they have sufficient support. Just as AfreximBank is supporting us, we are supporting the SMEs. It’s been very interesting structuring the transactions, structuring the framework, identifying the financial institutions for the collection, and ensuring the receivables come in. We have evolved a structure where a financial institution takes control of the receivables, or the ledger inventory registration and we crafted a promissory note that commits the buyer to pay the financial institutions. It is worthy to note that all players are willing to participate in this”, she stated.

The participants also agreed that the supply chain financing and reverse factoring market potential was large and that it would play a crucial role in the growth of the MSMEs sector by serving as alternative funding sources for informal micro and small businesses.