Mastercard, ADB Use Digital to Solve Credit Crunch

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For many wholesalers and retailers, their biggest headache now is access to credit.

New inefficiencies created by COVID-19, together with the sudden drop in demand, a marked shift in consumption patterns, unknown supply chain risks related to health measures, accounts receivable delays, and workforce restrictions, have made accessing credit a complicated affair.

As a result, wholesalers and retailers, especially small and medium enterprises (SMEs) and micro SMEs (MSMEs), face an existential crisis.

So, the latest initiative by Mastercard and the Asian Development Bank (ADB) to create a new digital channel to credit will be much welcomed.

“These unprecedented times underscore the importance of building an inclusive, sustainable digital economy, including through the application of technology to digitize trade, which can make it easier for small and medium-sized businesses to participate in global supply chains,” said Michael Froman, vice-chairman and president for strategic growth for Mastercard.

“Innovative partnerships like this one can support the agility and resilience of supply chains, accelerating access to finance and improving efficiency,” he added.

Mastercard and ADB are not alone in this. They are creating an alliance with Finastra, N-Frnds, and SGeBIZ to develop a suite of digital solutions. These aim to drive greater digital efficiency across the retail supply chain in Asia and increase wholesalers’ access to credit.

Together, the solutions address the loss of control over cash flow and access to credit by SMEs.

“One of the most fundamental problems for SMEs and micro-businesses across Asia is access to finance,” said Simon Paris, chief executive officer at Finastra. “Without credit, financially excluded businesses become caught in cycles that restrict their capacity to grow and leave them underprepared for the effects of market disruption. Technology is the enabler to tackle financial inclusion challenges. As part of this collaboration, we are able to drive change to bring positive outcomes, through digital transformation and innovative new lending pathways.”

Two significant benefits of the alliance’s efforts:

1. Easier wholesaler access to credit

Mastercard will leverage supply chain data from N-Frnds, SGeBIZ’s digital procure-2-pay platform, and other sources to partner with Finastra and its Trade Bank customers to automate access to working capital finance.

The collaboration will increase the digital data available to assess creditworthiness and create new models to evaluate it. Access to the resulting lines of credit will enable wholesalers to react more quickly to upcoming promotions, increase their inventory levels, and build their businesses.

2. Fully digitalized marketing campaigns

By integrating digital payments and supply chain data with promotions, FMCG trade spend can be allocated more efficiently with better visibility and inclusion of SME retailers.

To enable this, the alliance will leverage N-Frnds’ mobile solution — which optimizes logistics and operations by connecting FMCG companies with wholesalers for placing orders, coordinating deliveries, and monitoring inventory levels — to better communicate upcoming promotional efforts between suppliers and wholesalers.

“We are excited to join N-Frnds, our strategic partner for the last mile in this new initiative to digitalize and streamline trade financing and promotions in traditional markets. We believe that this new collaboration will enable us to lead the transformation of value chains in Indonesia, both by extending credit and ensuring that our promotional spend is significantly more effective and enjoyed by the four million grocery stores in Indonesia,” said Kadir Gunduz, president director at Coca-Cola Amatil Indonesia.

The program will start in Indonesia with 500 retailers and aims to build to 5,000 retailers by the end of Q1 2021.

“ADB has been working closely with the Government of Indonesia in its efforts to alleviate the impact of the coronavirus disease (COVID-19) pandemic, including through the USD 1.5 billion financing approved in April 2020. Our partnership with Mastercard and its alliance partners in the pilot digital supply chain project will provide critical access to finance to affected MSMEs and immediate assistance to keep the food and essential goods supply chain running,” said Ahmed Saeed, vice president for East Asia, Southeast Asia and the Pacific at ADB.

Photo credit: iStockphoto/a-image