IFS Capital has entered into a non‐binding Memorandum of Understanding (MOU) with and US-headquartered PrimeRevenue on August 23.
Under the MOU, the companies propose to enter a partnership to launch supply chain financing solutions targeted at companies in Southeast Asia, including micro, small and medium enterprises (MSMEs).
“The IFS Capital-PrimeRevenue partnership is a timely one to address the supply chain issues we are facing today. PrimeRevenue is a global leader in trade finance technology, and its best in-class platform supports large MNCs and midmarket companies on supply chain financing programs globally. This coupled with our expertise and deep understanding of MSME financing needs in the region will help MSMEs gain access to capital, and unlock cash trapped in the supply chain,” said Zeng Renchun, IFS Capital’s Singapore country head.
Around 80% of global trade relies on trade finance and the Asian Development Bank has estimated that the global trade finance gap pre-Covid was around US$1.5 trillion ($2 trillion). Surveys have shown that around 40-50% of trade finance applications by MSMEs are rejected by financial institutions, with the gap further exacerbated by the pandemic.
Supply chain financing programs are a working capital solution initiated by anchor buyers to provide alternative financing options for their invoices to MSME suppliers, enabling them to gain access to competitively priced financing and shorten their cash conversion cycles. In return, anchor buyers can optimize their cashflow through favorable payment terms and stronger relationships with their suppliers.
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The pandemic has accelerated the need for supply chain financing solutions as disruptions have had a trickle-down effect on MSMEs globally. Furthermore, as financial institutions tighten their credit assessment of MSMEs, these businesses are facing heightened challenges in obtaining trade financing.
“This partnership is not only our natural progression towards realizing our vision and mission to make financing more accessible to MSMEs but also a testament to our capabilities as we are PrimeRevenue's exclusive Non Bank Financial Institution partner for MSMEs in Singapore, Thailand, and Malaysia and Indonesia,” says Zeng.
“We are excited about our collaboration with IFS Capital which will deliver supply chain financing solutions to the Southeast Asian MSME market,” said Dominic Capolongo, EVP global head of funding for PrimeRevenue.
“This partnership accentuates our belief that supply chain finance brings powerful benefits to the MSME market. Our platform is purpose built to cater not only to large scale players but also smaller companies with a strong need for working capital solutions.”
Under the MOU, the companies will negotiate and settle the terms of the definitive agreements to be entered into in relation to the proposed partnership.
Shares in IFS Capital closed down 0.1 cents or 0.54% lower at 18.5 cents on August 23.
Photo: Bloomberg
