International Finance Corporation (IFC) plans to float a $500-million trade finance facility for small and medium enterprises from emerging markets, including India, who are suppliers to global apparel and footware brands.
The purpose of facility is to encourage responsible environmental and social performance (E&S) in the supply chain structure. Many apparel and footwear brands as well as retailers are conscious about reputational risk to their own brands from potential supply chain exposure. They have taken steps to ensure equitable working conditions and responsible E&S performance among their supply chains.
In the first phase of the project, IFC, which is World Bank’s private-sector financing arm, is expected to support over 200 Suppliers in countries such as Bangladesh, Indonesia, India, Peru, Pakistan, Sri Lanka, Egypt, Jordan and Philippines.
This project, IFC said, was proposed under the Global Trade Supplier Finance program. The corporation will provide revolving short-term working capital finance to suppliers in emerging markets selling to large companies (Buyers), it said in a statement here.
The finance would be disbursed to eligible suppliers after buyers assure to pay on the due date, for goods or services supplied. This arrangement is expected to increase access to finance to suppliers. Another benefit would be an immediate improvement in the cash flow rather than awaiting weeks long for payment from the buyer.
These companies are expected to have supply-chain assurance processes. Their suppliers will have satisfactory E&S practices. IFC will conduct supplier due diligence, which will be based review of the Buyers’ corporate social management systems and procurement practices.
