High Potential Trade Finance Outlook
Turkey Trade & Export Finance Conference 2015
Istanbul, 26 March 2015
UbiQ Innovations promoting PrimeRevenue Supply Chain Finance at GTR’s Turkey Trade & Export Finance Conference 2015 which took place in Istanbul across two days; the 25th to 26th of March 2015, providing the ideal platform for high level discussion and networking between business leaders from trade, export, commodity financiers and associated sectors.
The recent improving outlook for the Eurozone, combined with the more competitive Lira, present real opportunities for Turkish exporters to expand their operations over the coming year, provided that domestic conditions do not deteriorate. However, the 55% fall in Brent crude prices since June 2014 has been very positive for the Turkish economy as it quelled inflation and the current account dynamics.
The depreciation of the Turkish Lira will eventually create inflation, Turkey should rather push for Trade Finance solutions as it would be very beneficial for Turkey’s export growth. By Adopting a Trade Finance tool such as a Supply Chain Finance module, Turkey would benefit it’s SMEs greatly into getting more access to finance and thus increasing their sales both locally and abroad.
As Turkey Export to the MENA region increased to 29% out of Turkey total exports in 2014 up from 14% in 2000, and is forecasted to grow even more by the year 2020.
Although Turkey is considered one of the most important emerging markets today, it still faces many challenges, key among them is the SME liquidity access challenge. A key revelation was made during the conference which stated that limited SME access to liquidity is resulting in high availability of liquidity to large corporates at very competitive rates thus creating an imbalance funding distribution. Turkish SMEs do not favor applying for bank loans but would rather be looking for cost effective Receivable Financing solutions such as Supply Chain Finance as it would be considered a True Sale of their receivables and free up much needed cash flow that would help their growth and expansion.
While in parallel to that, large corporates are also looking for innovative finance solutions to help optimize their working capital. Supply Chain Finance enables these corporates to extend their payment terms with their suppliers thus reducing their working capital and paves the way for their suppliers to scale down from the use of Letters of Credit and move to open accounts.
Turkish Financial Institutions stand to gain from adopting a Supply Chain Finance model. With the introduction of the Bank Payment Obligation (BPO), a new comer into the trade finance world that is seen as a relatively cheaper alternative to the Letter of Credit for settlements of portfolios of both domestic and cross-border trade transactions, should alleviate fears of bad debts since the recourse would be on the same large corporates that these banks are happy to lend money to.
UbiQ Innovations was at the forefront of many topic discussions, promoting PrimeRevenue Supply Chain Finance as the best innovative trade finance solution for Turkey. Moreover, UbiQ was proud that the only Supply Chain Finance case discussed was the Kellogg’s Supply Chain Finance program, one of the flagship programs of PrimeRevenue.
For more on how Supply Chain Finance solutions will benefit Turkey, please read our “Supply Chain Finance for Turkey” whitepaper.