TRADE FINANCE | Roxanne Uy, Singapore

Top Asian bankers reveal why larger businesses move away from plain vanilla debt financing

OCBC says it's logical and imperative.

ABF: Analysts found out that larger institutional businesses are moving away from plain vanilla debt financing towards more structured trade financing/working capital solutions. What are your thoughts on this?

OCBC: Clara Hang, Head, Global Trade Finance, Global Transaction Banking
It is logical to focus on structured trade financing as it is generally less risky compared to plain vanilla. As such financial institution is often prepared to lend more base on the project cash flow or the value of goods purchased even if the balance sheet strength is not there.

It is true that there is greater focus on working capital solutions by larger corporates as it is imperative for corporates to ensure cash don’t get trapped in Days Sales Outstanding, Days inventory outstanding and Days Payables outstanding.

Improvement in any of these can have impressive effect on working capital. Partnering the right bank who can offer solutions to improve operational efficiencies (e.g. embracing technology to automate payment and collection process) , or trade financing to accelerate order to cash ( through receivables discounting or purchase, supply ChainFinance, etc) becomes important.

Techcombank: Dang Tuyet Dung, Head of Wholesale Banking Division
Structured trade financing is a collaborative solution to maintain and extend the availability of financing for the trade of high value commodities, and at a better costs to corporates vs traditional debt financing.

With the economic liberalisation in Asia markets, more inflows of FDI have come into the countries which reinforce further harmonising rules and regulations, outpacing with regional economic integrationand enhanced regional trade.

This move of Asian market despite a lot of current challenges will be a must as to cope with the growth in supply chain finance solutions, increased capital requirements, basel II regulatory environment etc.

Bank of the Philippine Islands: Christine Grace Bandol, Vice President, Trade Finance Department
The major banks, BPI included, are able to provide the larger institutional businesses with more structured trade financing and working capital solutions, which despite the nomenclature, are really commoditized products.

The differentiation is more on a bank’s ability to provide end-to-end supply chain solutions. BPI’s large corporate customer base and unmatched branch network in the Philippines allows us to connect businesses and service their trade transactions from end-toend of the supply chain.

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