Supply Chain Finance Proves Strong Alternative for Middle East Businesses

Located between Asia, Europe and Africa, the Middle East has always been synonymous with trade. However, over the past decade, the area has seen tremendous growth due to an increase in intra-emerging or south-south trade flows throughout region. The Middle East is also rich with cash resources and boasts low unemployment and more stable economies than seen elsewhere. When you combine the region’s financial security with its ideal physical location, it is clear the Middle East is perfectly positioned as the gateway for this global emerging trade. This growth doesn’t come without its challenges, however. When considering working capital options, Islamic Finance must be a consideration. As the financial industry caters to this region, it must do so in a way that does not conflict with local values. In the past, many Middle Eastern companies relied on banks to provide loans when required by their clients. But with bank funding becoming less available, companies are looking for new sources of financing, including funds accessible within their own supply chains. In the Middle East and in areas where there is large customer demand, that new source of funding will likely come from products that comply with their cultural and religious codes. Although still in the early adopter phase in the region, many Middle Eastern companies have started exploring the potential use of supply chain finance solutions for trade relationships with domestic and foreign suppliers. The underlying principle of supply chain finance is decoupling the buyers payment date from the suppliers collection date. Supply chain finance is also different than obtaining a loan or credit, which is attractive to many Middle Eastern companies. By using a specialized supply chain finance platform in combination with third-party funders, the supplier has the option to get paid early (based on the customers credit worthiness) and the buyer can extend his payment terms while benefiting from improved working capital. This creates a win-win solution for both the buying organization and the suppliers. PrimeRevenue and UbiQ Innovations partnered 2014 to meet the growing need for supply chain finance in the Middle East. While PrimeRevenue is the standard platform and service provider in working capital finance, allowing non-bank investors to participate in supply chain finance programs, UbiQ, a technology-led service provider of supply chain finance and payment solutions for business in the Middle East, provides home-market expertise and the capability to address client concerns at an in-country level.