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Rising interest in supply and cold chain financing in emerging markets: IFC
Tuesday, 05 January, 2010, 08 : 00 AM [IST]
Our Bureau, Mumbai
A new study by the US-based International Finance Corporation (IFC), a member of the World Bank Group, and Nordic business consultancy Capacent shows that suppliers in emerging markets are interested in solutions for supply and cold chain financing to help them find affordable financing.

The study, “Global Supply Chain Financing Market,” carried out between May and November 2009, analyses the need and interest in supply chain financing, focusing on India, Bangladesh, Brazil, Guatemala, Indonesia, Romania, Turkey, and Vietnam The study includes proposals for how IFC might create a platform for emerging markets.

Says Peter Stenbrink, partner – Capacent Sweden, “We have been implementing supply & cold chain financing with our clients over the past few years and witnesses great benefits for both buyers and suppliers”

According to the IFC study, suppliers in emerging markets, especially small and midsize enterprises, find it more difficult to obtain financing because of the global financial crisis and the trend towards increased use of open account trading and pressure from major customers to increase payment terms.

Rogers LeBaron, Senior Advisor at IFC, said, “The study has given us excellent insights into the needs in the market, and how IFC could play a role in supporting emerging–market suppliers. We will continue working with Capacent to develop supply chain financing solutions in further detail.” IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with the International Bank for Reconstruction and Development (IBRD), it is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by working to implement new financing solution for enterprises in emerging markets.

IFC assistance to Indian cold chains:

Further to support the Indian cold chains industry, IFC has provided $5 million to Bangalore-based provider Snowman Frozen Foods Ltd (SFFL) to expand efficient storage facilities, helping reduce wastage and losses and cut costs across the country.

The corporation’s investment will support Snowman’s capital needs during the company’s strategic growth phase, helping it become more efficient and expand in existing and new locations in India. Snowman’s temperature-controlled storage infrastructure is currently spread across 16 facilities in Bangalore, Hyderabad, Kochi, Kolkata, Ludhiana, and Vishakapatnam. The company operates about 75 owned and contracted refrigerated trucks in its transportation division.

The company provides cold chain services for a variety of products, including processed foods and pulps, sea foods, meats, ice creams, and dairy products. Gopinath Pillai, chairman, SFFL, said, “With IFC as a partner, we will continue to seek the highest standards in our operations, and these efforts will support the Indian cold chains sector. The project will help reduce wastage of food products, strengthen local supply chains, and improve the company’s environmental and social practices.”

In a statement, the IFC said cold chain financing helped suppliers find financing at attractive rates, freeing up liquidity by introducing a platform that allowed suppliers to sell their invoices to financiers after the invoices had been approved by the buyers. This solution, which reduces invoice risk by providing transparency of buyer approval of the invoice, has grown in use, especially in developed markets.

Further demographic factors such as an increase in disposable incomes, the advent of double-income nuclear families, aspirations for convenience and increasing urbanisation and quality consciousness are driving the need to establish efficient and integrated temperature controlled logistics services in India. Quality cold chain service providers are not abundant, leading to wastage of perishable food products.

“Snowman is one of the few integrated service providers engaged in developing a pan-India network. Successful scaling up of the business will create further efficiencies in infrastructure development in this sector. We are excited to help a highly regarded company like Snowman expand and further serve the local market,” said Anita George, IFC infrastructure director for South Asia, East Asia, and Middle East and North Africa.

“We foster sustainable economic growth in developing countries by supporting private sector development, mobilising private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $14.5 billion in fiscal 2009, helping channel capital into developing countries during the financial crisis,” the corporation said.
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