It has been recognised by a number of leading industry associations and practitioners globally, that there is a need to develop, gather and disseminate standard market definitions related to Supply Chain Finance – a nascent but increasingly important dimension of the financing of domestic and international commerce.
The current inconsistency in definitions, nomenclature and general language around the financing of trade linked to open account terms and to the support of global supply chains, is proving to be challenging for buyers, sellers, finance providers, service providers and other stakeholders alike2. This issue has immediate implications for the accounting and regulatory treatment of supply chain finance structures, and by extension, impacts market uptake and the engagement of traditional as well as emerging providers of SCF solutions.
The inconsistent– even contradictory- language currently in use is complicating advocacy efforts and diluting the effectiveness of communication aimed at fairly articulating the value proposition around supply chain finance, at a time when it is increasingly important to domestic commercial activity as well as to the facilitation of global trade.
The objective of our work is to help to remove the uncertainty, ambiguity and lack of clarity when terminology is used in both technical industry discussions and in broader conversations.
Whilst the techniques of traditional trade finance such as Documentary Credits, Documentary Collections and Guarantees may be used in conjunction with the SCF techniques described, they are not extensively described or discussed because of the vast existing literature and established practices. The exclusion of traditional trade finance should not be taken as a value judgment or a reflection of relative importance, and has been done for practical reasons.
The Global Supply Chain Finance Forum (the Forum) was established in January 2014, as an initiative of a number of sponsoring industry associations facilitated by the International Chamber of Commerce (ICC) Banking Commission, to address what has been recognised as a need to develop, publish and champion a set of commonly agreed standard market definitions for Supply Chain Finance and for SCF-related techniques. Through this document the sponsoring associations of the Forum have confirmed their support for these standard market definitions which are now recommended to the wider stakeholder community for adoption.