20-21 February 2018, Mexico City: Workshop on building business linkages that boost SME productivity. http://www.oecd.org/cfe/smes/workshop-on-building-business-linkages-that-boost-SME-productivity.htm

1. Translating Supply Chain Finance into SME
Productivity: Lessons learned

2. Background
• Small and medium sized enterprises (SMEs) are
often considered the engine of economic
development and closely linked to economic
growth (Beck & Demirguc-Kunt, 2006).
• Financial constraints require SMEs to manage
inventory and cash flows interrelated (Katehakis,
Melamed, & Shi, 2016).
• Extended payment terms plus late payments have
further negative impact on cash position of SMEs

3. Supply Chain Finance
• Supply Chain Finance (SCF) may help suppliers
to deal with deferred payments.
• It helps to overcome financial frictions as it
helps to partially extend good credit ratings of
large, transparent firms (buyers) to their SME
suppliers.
• Essential to SCF is a third party, called SCF
provider. This entity is typically either a SCF
platform provider or a bank.

4. Supply Chain Finance Mechanism
• Automatic versus manual SCF

5. Importance of SCF
• After growing annually by about 20% for five
consecutive years, the SCF market is expected
to grow by about 15% annually in the near
future (Herath, 2015).
• Despite the large potential of SCF, still only
surprisingly few programs are run (Herath,
2015).

6. Hurdles
• Most important and often critical is the ability
of a focal buying firm to onboard a sufficient
amount of its suppliers timely.
• In addition, regulatory issues and accounting
standards moderate the value that buyers can
create through adopting SCF.

7. Case studies
• Case of German production firm
– Today, the firm in case has enrolled about 3,000 suppliers
in global programs. Among those, about 2,000 are actively
transacting. Roughly 90% of those are SMEs.
– When the firm extended its SCF program globally, certain
regulatory differences across countries emerged.
– The form of disclosure and publication through registries
differs.
– Taxation differs across countries.
– And finally, accounting rules differ across countries and
among the Big 4 accounting firms.
• Carillion

8. Policy Requirements
There are numerous regulations that affect the efficiency of SCF. Only
if the following conditions are met, SCF can be adopted by SMEs and
positively affect their cash flow and thus productivity.
a) Regulations, accounting standards, and taxes must allow for an
environment in which large, global buying firms find it beneficial
to adopt SCF.
b) SCF programs have to be structured such that inclusion of SMEs is
in the interest of all involved parties.
c) Buying firms use an automated platform that facilitates the
enrolment of suppliers.
d) Public endorsements by governments and a clear commitment
can have a positive effect and seem to result in better regulations
for buying firms.