In most emerging markets, small andmedium enterprises (SMEs), lack access to the credit andliquidity they require for their daily working capitalneeds. This is partly due to the fact that the credit riskof such businesses is typically difficult to assess andtheir working capital needs are unpredictable. In mostcountries these businesses operate primarily in the retailand wholesale trade segments, and banks have generally notdone enough to finance their domestic or international tradeoperations, especially open account transactions. Supplychain finance structures offer an alternative solution tofinance the trade flows of these enterprises, with benefitsfor all stakeholders, including large enterprises, their SMEtrade counterparts, and financial institutions. This type offinancing helps banks extend working capital finance to SMEsby leveraging commercial and trust relationships between theSMEs and corporates; it helps large corporates improve theirworking capital management and decreases supply chaindisruptions; and it enables banks to better assess, measure,and manage the risks of extending financing to SMEs.
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