1. getting paid much earlier
15th May 2015
Nairobi

2.  Understanding SCF
 Reverse Factoring
 Towards an integrated platform
 Alternative Business Models
Contents
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3. SCF stands for a set of solutions that:
 .. provides Early Payment to suppliers
 .. lengthens Payment Terms for buyers
 .. minimizes risk throughout chains
SCF is about managing Cash flows
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Supply Chain Finance optimizes cash flow throughout
value chains

4. Optimizing Cash Flow
T60 T30 T10
T10 T30 T60
sales
procurement
EP LP EP LP
S
T
R
E
S
S
S
T
R
E
S
S
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5. Reverse
Factoring
turning unpaid
invoices into cash
Invoice
Discounting
Factoring
the lender assumes
control of payment
collection from your
customers.
many variations exist .. it is sometimes
hard to distinguish between the two
concepts
Invoice Discounting vs Factoring
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6. A global $2 trillion dollar market
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Africa accounts for 1% of the global market

7. … mostly domestic
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USD 2.3 trillion per year / mostly domestic

8. … growing very fast
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Growing 10%+ per year

9. DistributorSuppliers
INV
$50
/30
INV
$100
/30
$50 /
DAY 30
$100 /
DAY 30
SellerBuyer
suppliers require
EARLY PAYMENT
distributors require
LATE PAYMENT
Departure Point
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10. Buyer / Seller
Distributor
INV
$50
/30
Supplier
INV
$100
/30
LATE PAYMENT
SOLUTION
EARLY PAYMENT
SOLUTION
$97 /
DAY
2
FACTORING
SOLUTION
LATE PAYMENT
SOLUTION
Distributor FinancingSeller FinancingBuyer FinancingSupplier Financing
$47 /
DAY
2
$50 /
DAY
30
$100/
DAY
30
$103/
DAY
60
$53 /
DAY
60
Supply Chain Finance means different products
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11. SUPPLIERS
INV
$50
/30
$50 /
DAY 60
BUYER
In this presentation we focus on Suppliers
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12. $50 /
DAY 30
payment
$48
$2
interest
T2
T60
$50
(re)payment
BUT HOW ?
Suppliers … payment on T2 or on T60 ?
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INV
$50
/30
SUPPLIERS
BUYER

13. supplier
Buyer
B ?
 Relationship Bank will only discount invoices for established (SME) clients
 Verification Bank will need to assess status + standing of each BUYER
 Confirmation Bank will need to confirm authenticity of each invoice
 Value Bank will focus on larger tickets (in view of laborious process)
 Margin Bank will maintain a buffer margin and only advance 60-80%
 Recourse Bank will retain recourse on SUPPLIER (in case BUYER reneges)
SME Banking
client
The problem with Invoice Discounting
labour intensive process
fraud sensitive
Buyer
A
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14.  Reverse Factoring started in the 80’s when the
automotive industry (Fiat) used it as a financing
tool for its suppliers;
 Spain, lead by Banco Santander, was the market
where they picked up the concept (they call it
“confirming”) quickly. Today, the confirming
market makes up for 5,3% of the GDP of Spain;
 About ten years ago, electronic platforms were
introduced in order to role out reverse factoring
on a large scale;
 Nowadays, every major bank offers reverse
factoring and it is part of a broader Supply Chain
Finance program;
 Supply Chain Finance is not just ‘another’
product …. it is totally focused Business Line
Another way
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15. Supplier
B
Corporate Banking
client
Supplier
A
Supplier
C
Buyer
Reverse Factoring = Buyer driven
 Relationship Bank will take BUYER relationship as starting point
 Verification BUYER pre-approves invoices … verification no longer necessary
 Confirmation BUYER allows Bank to make early payment on selected invoices
 Value Bank works off SCF platform allowing large volumes + small tickets
 Margin Bank will pay 100% of invoice to SUPPLIER (-/- discounted interest)
 Recourse Bank will not retain recourse on SUPPLIER (but insure the exposure)
automated STP process
fraud significantly reduced
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16. Invoice Discounting Reverse Factoring
 Seller-centric model;
 One supplier > many buyers;
 Risk is on supplier;
 This is often a smaller SME;
 Existing SME credit relationship;
 Lack of control re ‘performance’;
 Invoice discounted at margin.
Both models are similar in the sense that they:
- deal with a commercial relationship between Buyer and Seller;
- provide EARLY PAYMENT to suppliers of goods or services.
Same Product  Different Risk
 Buyer-centric model;
 One buyer > many suppliers
 Risk is on buyer;
 This is often a Corporate client;
 Existing CORP relationship;
 Performance always confirmed;
 Invoice discounted at face value.
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17. Advantage Supplier
Perspective
Quick & Easy funding (on-demand) 
Get 100% funding of invoice 
Control 
Lower Financial costs 
Unsecured borrowing 
Cash Flow transparency 
Alternative source of liquidity 
No Investments 
Automated, paperless solution 
Free up
working capital
and improved
Financial position
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18. Advantage Buyer
Perspective
Improve relationship with Suppliers 
Improve Commercial Terms (discounts) 
Competitive advantage 
Cash Flow Predictability (Buyer Finance) 
Reduce risk in the Supply Chain (loyalty) 
Automated, paperless solution (costs) 
Control 
Sometimes: revenue share ! (cash) 
Reduced Risk
in the
Supply Chain
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19. Advantage Bank
Perspective
Eliminate laborious verification issues 
Better Control & Less Work (Fraud) 
Automated, paperless solution (Costs) 
Cross Sell Opportunities (SMEs) 
Strengthen Business Relationships 
Utilization Credit Limits (Corp) 
Turn-around-Time 
Expand client base (SMEs or Farmers) 
One Buyer
relationship
delivers hundreds
of new customers
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20. Alternative Business Models
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21. Bank Considerations
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What is needed for a successful SCF roll-out
1. A world-class scalable technology platform
2. An effective Business Model
3. A sensible product / risk strategy
4. A targeted marketing / sales strategy
5. 1st line help-desk support (for Buyers and Suppliers)
6. 2nd and 3rd line business and technical support (for Bank)
7. An onboarding methodology (for Suppliers & Buyers)
8. Training … and more training

22. Model 1: buy the IT solution
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What is needed for a successful SCF roll-out
1. A world-class scalable technology platform
2. An effective Business Model
3. A sensible product / risk strategy
4. A targeted marketing/sales strategy
5. 1st line help-desk support (for Buyers and Suppliers)
6. 2nd and 3rd line business and technical support (for Bank)
7. An onboarding methodology (for Suppliers & Buyers)
8. Training … and more training

23. Model 2: go for a PaaS solution
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What is needed for a successful SCF roll-out
1. A world-class scalable technology platform
2. An effective Business Model
3. A sensible product / risk strategy
4. A targeted marketing/sales strategy
5. 1st line help-desk support (for Buyers and Suppliers)
6. 2nd and 3rd line business and technical support (for Buyers, Suppliers)
7. An onboarding methodology (for Suppliers & Buyers)
8. Training … and more training

24. Model 3: go for a SaaS solution
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What is needed for a successful SCF roll-out
1. A world-class scalable technology platform
2. An effective Business Model
3. A sensible product / risk strategy
4. A targeted marketing/sales strategy
5. 1st line help-desk support (for Buyers and Suppliers)
6. 2nd and 3rd line business and technical support (for Bank)
7. An onboarding methodology (for Suppliers & Buyers)
8. Training … and more training

25. Model 4: SCF partnering approach
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What is needed for a successful SCF roll-out
1. A world-class scalable technology platform
2. An effective Business Model
3. A sensible product / risk strategy
4. A targeted marketing/sales strategy
5. 1st line help-desk support (for Buyers and Suppliers)
6. 2nd and 3rd line business and technical support (for Bank)
7. An onboarding methodology (for Suppliers & Buyers)
8. Training … and more training

26. Model 5: Our Prediction ….
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Within 5 – 10 years
 Totally accepted financing method
 Multi-bankTrading Platforms (auction structure ?)
 Non-bank financial providers
If you want to see the future, look at … South America

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Tying it all together

28. REASON EXPLANATION
1
DRIVE REVENUE
GROWTH
 1 BUYER gives access to 10s/100s of SUPPLIERS
 Compete against banks who do NOT deploy a system
 Reverse Factoring = SME pricing @ CORP risk
2 SCALE
 Large volume/ Small ticket transactions can only be
executed on a dedicated and automated platform
 Enormous expansion of potential prospect market
3 OPERATIONALCOST
 StraightThrough Processing (STP) reduces human
intervention (especially with volumes going up)
 System is priced on SAAS basis : no write-offs
4 TAT
 TAT reduced to “guaranteed next day payment”
 If anything, this positively contributes to client retention
(loyalty factor)
8 reasons to roll-out a SCF platform …
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29. REASON EXPLANATION
5 RISK
 A structured programme approach offers excellent
opportunities to mitigate risk through credit portfolio
insurance (on both sides of the chain).
6 FRAUD
 BUYER uploading approved invoices eliminates a very
laborious (and costly) verification process
 Maker/Checker methodology applied throughout
7 INFORMATION
 Capturing transactions on both ends of the Supply
Chain gives a true and holistic picture of client
performance
8 CONTROL
 Bringing all product limits and sub-limits together for
BUYERS + associated SELLERS gives an unparalleled
sense of control
8 reasons to roll-out a SCF platform …
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30. What others do
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31. Conclusion: it’s all about predictability
“ … our biggest problem is the uncertainty, the
timing of Cash Flows ..
.. If we can somehow lock in predictability, we’d
be happy to pay a reasonable price for that …”
CEO
Comcraft Group
March 2015
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