Supply Chain Financing Key to Global SMEs
Lima, Peru, 23 August 2016
Experts convening in Lima, Peru this week say financing the supply chain and implementing secured transaction reforms are critical elements to enable the integration of small businesses into global value chains.
Small businesses are a major driver of the region's economic growth and provide four out of five new jobs especially in emerging economies. However, up to 60% of SMEs do not have access to financing thus hampering their growth.
"Secured transaction is the single most important thing to help small business get around the challenge of accessing financing support," says Mike Dennis of the Office of the Legal Adviser, the United States Department of State.
Corporations, or buyers, often deal with a diverse group of suppliers that include small businesses thereby providing business opportunities and impetus to growth. However, up to 60 per cent of small business in the Asia-Pacific region do not have access to credit making them unable to meet the demands of the buyers.
"Ninety-seven per cent of the Asia-Pacific region enterprises are considered small-to-medium in scale. This is a huge economic potential that needs to be tapped,” says APEC Economic Committee Chair Rory McLeod. “If supply chain financing and reforms to secure transaction get more widely adopted, this will help address the financing gap.”
One of the goals of Economic Committee is to promote the value chain participation of more segments of society, including small businesses, women, youth, older workers and people with disabilities.
While supply chain financing benefits all involved, it is secure platforms that make businesses want to transact electronically and across borders opening them up to wider number of suppliers. This confidence comes from the assurance that the process of changing money and goods or services by using secure channels minimizes risk through the whole supply chain.
Addressing this issue is one of the many ways in which APEC advances measures to widen options for financing for SMEs. It is also consistent with APEC's structural reform goals recognizing the importance of developing legal instruments covering business transactions within and beyond borders. Taken together, all these contribute to the creation of a more conducive climate for cross-border trade and investment thereby facilitating economic growth.
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