The Middle East is a prime market for the increased use of supply chain finance products due to the high volume of trade passing through the region, says Kah Chye Tan, chair of the ICC Banking Commission, speaking on the sidelines of the ICCs meeting held in Dubai on 30 April.
Supply chain finance is typically a way in which banks and financial institutions can extend credit to buyers or sellers to make trade easier and reduce non-payment risks.
The popularity of supply chain finance will be significantly more popular in the Middle East, Asia and Africa. In the Middle East, there is a lot of intra-trade and as trade becomes more integrated and diverse, more buying and selling in the region, there will be more need for finance, he tells MEED.
In Dubai alone, trade contributed around 30 per cent of the emirates GDP in 2013. The value of trade stood at AED1.39tn ($38bn) last year and is estimated to soar to AED4tn by 2020 when Dubai hosts the Expo 2020, according to government agency Dubai Trade.
Tans comments follow the official launch of the Global Supply Chain Finance Forum at the ICC meeting, which was hosted by Dubai Chamber of Commerce and Industry.
The forum is made up of various banking industry organisations which will work together to clarify existing terms and definitions governing the supply chain finance market. It intends to publish an online guide in approximately the next nine months.
The use of supply chain finance is relatively new which means that there are few market guidelines in place that ensure consistency in the terms used by different regional markets, says Tan.
He says banks in the Middle East are eager to get greater clarity. I have no concern about banks in this region and their adoption of new terminology. We know that some of them in the market are crying out for help and want the ICC to harmonise the terminology, he says.