Supply chain finance finally takes hold in Latin America

In the past, Supply Chain Finance hasn’t taken off with much success in Latin America. However as banks better understand the supply chain relationship between buyers and suppliers, much has changed in the past decade or so.

As a result, SCF offers a compelling opportunity for a growing number of buyers and suppliers to strengthen their relationships.” (Hernan Mayol, regional sales manager of supply chain solutions at Bank of America Merrill Lynch )

What is supply chain finance?

Supply chain finance is a method of business transaction that’s gained notoriety and popularity among entrepreneurs. There are three core elements to SCF – a supplier, buyer and financial institution. With each relying on the other, the ultimate goal is to optimize the relationship between the supplier and the buyer through a series of collaborative efforts that are facilitated by the financial institution.

The initial barriers to LATAM Supply Chain Finance

So, what prevented SCF from taking hold as a smart business transaction strategy in Latin America? Underneath are the mean reasons:

  • First there is the language barrier between countries like Mexico and Chile – where most people speak Spanish – versus the predominantly English-speaking America, where SCF has its roots,
  • Another formidable obstacle is the lack of existence of entities’ credit profiles of superior quality, which are necessary for SCF to effectively work.
  • Next, while SCF programs strengthen the relationship between buyers and suppliers, this alone rarely served as a compelling reason for suppliers to adopt an SCF model.
  • Finally without a proper infrastructure consisting of a supplier, a buyer, a financial institution and proper credit profieles, SCF wouldn’t be possible.

The program also relies on einvoicing, as this is what suppliers send to buyers so that they can receive payment early on. Invoiceware has the tools and professional experience to make your e-invoicing tasks seamless. For more information on SCF and the e-invoicing system that’s now required in all business dealings in Latin America, visit Invoice International’s website.


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