Key takeaways:

• As well as focusing on multinational buyers and their top suppliers, leading banks are exploring opportunities with smaller, local names

• Banks are leveraging technology to serve a wider client base and build a business case for Supply Chain Finance deeper in the supply chain

• I&M is leading the way with an SCF platform that unlocks funding for underserved corporates 

The availability of Supply Chain Finance (SCF) solutions for multinationals vs local corporates is very different. And yet, both profiles have historically been poorly served by inflexible products – until now. 

In East Africa, one of the fastest growing markets in the world for SCF, banks are looking to new frontiers and finally building flexible products to reach clients deeper in the supply chain. The opportunity is twofold: smaller suppliers of multinational buyers and local East African corporates.

For this article, we look at the partnership between I&M Bank and Finverity to explore the bank’s tailored approach to SCF and how it has strengthened supply chains and unlocked growth in Kenya. 

Multinationals vs. local corporates

Across the world, multinational corporations enjoy easy access to robust SCF programmes. Their extensive global networks, strong credit profiles, and partnerships with global financial institutions make them attractive clients for banks.

East Africa is no different. Big, recognisable names manage working capital effectively, reduce supply chain risks, and maintain strong supplier relationships thanks to these programmes. 

That said, many of their banking partners focus on large suppliers-only, while a far greater number of smaller suppliers and local corporates in East Africa are excluded from these programmes altogether. Ironically, these are the parties most in need of financing.

The reasons for this shortfall are largely to do with limited credit histories, lack of collateral, and lower bargaining power. Cultural stereotypes also play a part, with banking partners operating under the assumption they are  “financially unstable” and basing funding decisions on performance risk rather than the actual credit risk of the anchor. 

Given the obvious demand and the very limited number of banks engaging with smaller suppliers and local corporates, it’s clear where the opportunity lies in East Africa: deeper in the supply chain.

< Read: How SCF is shaping the history of African trade >

Deeper in the supply chain

Drawing on its knowledge of local markets and experience working alongside local suppliers, I&M Bank is among the first to identify and actively explore this opportunity.

For the first time, smaller suppliers and local corporates in East Africa can access solutions they actually want. Benefits include: 

1. Enhanced cash flow management:
   SCF solutions allow local suppliers to receive payments earlier, improving cash flow to invest in growth and operational efficiency.

2. Reduced supply chain risks:
   By ensuring timely payments to suppliers, banks can help reduce the risk of supply chain disruptions and build more resilient supply chains.

3. Improved supplier relationships:
   SCF solutions help strengthen relationships between buyers and suppliers by offering more predictable and stable payment terms, fostering long-term partnerships.

4. Access to global markets:
   With improved working capital management, local corporates can be more competitive in the global market, expanding their reach and driving economic growth within the region​ 

In terms of SCF products, two stand out: Reverse Factoring and Distributor Finance. But Pre-delivery Finance is also gaining momentum as many anchors move to de-risk their balance sheets. 

The bank’s flexible approach to co-creating solutions with clients separates I&M from competitors. Instead of rigid, off-the-shelf products, the bank offers custom solutions for each client, and delivers them via a digital platform. 

Digital delivery

Through the bank’s strategic partnership with Finverity, I&M’s dedicated SCF platform automates invoice processing to significantly reduce turnaround times and administrative burdens. This level of automation enhances operational efficiency and ensures timely payments to suppliers, improving cash flow and enabling businesses to invest in growth and operational stability.

Using this platform, I&M can flex to meet the needs of different clients, from multinationals to local corporates. For example, large corporates can integrate data from their ERP or accounting systems, while less sophisticated suppliers can upload invoices directly. This comprehensive approach ensures that all parties in the supply chain benefit from improved financial stability and efficiency.

This level of flexibility also allows the bank to customise solutions to meet the diverse needs of each client, ensuring they receive the financial support they actually need. 

Already, the bank provides bespoke LPO finance solutions, offering the unique capability to shift recourse based on client requests. By offering bespoke LPO finance products, suppliers can secure funding for their contracts and purchase orders to provide more competitive financing rates and a convenient client experience for local suppliers.

Clients can then monitor the status of invoices and payments for the first time in this market, and real-time customer-facing portals give them more visibility to facilitate better cash flow management and ensure seamless transactions.

This level of flexibility and customisation represents a first for the East Africa market. However, to fully realise the potential of SCF, there is a need for policies and initiatives that create a more enabling climate for underserved segments in East Africa. 

What’s next?

Supportive policies and regulatory frameworks from the government will help reduce barriers to finance and foster a more inclusive financial ecosystem. This is particularly important for small and medium-sized enterprises (SMEs), and requires intentional and innovative collaboration between banks, fintechs, and other financial institutions in the country.

For now, banks in East Africa, especially those with advanced technological and operational capabilities, are well-positioned to play a pivotal role in advancing SCF, as evidenced by the strategic partnership between I&M Bank and Finverity. 

By leveraging Finverity’s advanced SCF solution, I&M will continue to provide local corporates with essential tools to enhance their working capital management and mitigate supply chain disruptions. The impact on East Africa’s economy as a whole remains to be seen, but the early signs are positive. 

For more information on Supply Chain Finance in Africa, its opportunities and its challenges, watch our recent webinar.