Standard Chartered Bank (Stanchart) is embarked on a campaign to persuade some customers to switch from letter of credit (L/C) financing to what they describe as supply chain financing.

This form of trade financing according to Stanchart offers several advantages and may satisfy demands by buyers to switch from L/C to open account terms.

Solution

Stanchart says its supply chain financing solution comprises two main elements: supplier financing and buyer financing.

Supplier financing provides pre-shipment financing to suppliers based on confirmed purchase orders or post-shipment financing with or without recourse.

Buyer financing is aimed at buyers that need a longer credit term to raise the funds to pay suppliers for the goods than the supplier can afford.

Roll out

One area where Stanchart is rolling out its supply chain financing solution is Malaysia.

Stanchart Malaysia Bhd says it wants to expand its supply chain financing facilities this year by opening six new branches to add to its existing 31-branch network around the country.

Benefits

With supply chain financing "customers can save cost and shift their traditional lending, which is confined to letter of credit, to a more flexible open account trading," Stanchart's South-East Asia head of client relationships Peter Verhoeven told Malaysia's Business Times.

Verhoeven is quoted as saying supply chain financing "differs from traditional lending because a bank does not evaluate individual trading partners on a stand-alone basis for it." He is also reported as saying supply chain financing "puts a value on the stability and track record of the trading relationship between the buyer and supplier."

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.