Lending a helping hand

How fintech solutions can support small exporters

In today’s world, reaching new markets by developing unique products and expanding operations, is critical. But funding these goals requires access to the most suitable financing options – at the right time.

Fintech startups have emerged to help businesses fund global partnerships and secure digital trade financing through game-changing non-recourse factoring. According to an Asian Development Bank (ADB) study, rejection rates for trade finance reached record highs in 2020, with the gap between demand and supply currently at $1.7tn – a 15 per cent rise compared to the previous estimate of $1.5tn in 2018.

The bank’s latest research reiterates findings from previous studies that the trade finance gap disproportionately affects smaller enterprises, which are also strongly affected by supply chain disruptions. Approximately 40 per cent of rejected trade finance requests were from small and medium-sized enterprises (SMEs).

There are significant obstacles for SMEs regarding securing financing. UAE banks are currently adopting cautious tendencies and avoiding lesser-known prospective customers. Many lenders have also adopted a risk-averse approach to trade financing – and that’s likely to continue in the future, especially for SMEs who want to trade internationally. SMEs are also often unable to secure access to trade finance because they cannot provide collateral. In addition to that, they lack detailed information on market trends, know-yourcustomer (KYC), or risk-management strategies that appeal to lenders.

Fintech companies are uniquely positioned to fill the gap and help SMEs get access to flexible injections of liquidity exactly when they need it, as well as set up digital processes that allow them to successfully trade internationally.

BIG DATA

Big data has the potential to even the playing field when assessing cross-border SME financing risks. Because every company has its unique risk profile, fintechs adopt a more customised approach to making lending decisions over a one-size-fits-all process. Digital trade finance leverages data to assess the risks of a growing pool of underserved merchants. For example, digital trade financing can present a holistic view of a seller’s risk profile by analysing multiple operational data points from credit insurance companies and additional, underused sources.

Understanding the actual risk of each transaction, as opposed to the perceived risk, streamlines trade workflows. Another advantage of a data-based infrastructure is that the system continually gets better at identifying what type of information is most helpful in determining the risks involved with any particular buyer or seller.

HOW IT WORKS

By leveraging digital trade financing, small and mid-sized traders can get invoices paid early, rather than having to wait up to 120 days or even longer. Moreover, by leveraging numerous data sources, digital trade financiers have a better understanding of risk for SMEs and can therefore not only vet and confirm the legitimacy of the buyer, but also insure the payment of the invoice. With fintech solutions, SMEs can optimise their cash flow without the need for collateral or a letter of credit.

They can apply for finance in five minutes and have the cash in their account 48 hours later, remove credit risk and trade confidently, reduce payment disputes, make their cash flow more predictable, free up current lines of credit for investing in growth producing initiatives, including purchasing equipment and seamlessly track their shipments.

REJECTION RATES FOR TRADE FINANCE REACHED RECORD HIGHS IN 2020, WITH THE GAP BETWEEN DEMAND AND SUPPLY CURRENTLY AT $1.7TN – A 15 PER CENT RISE COMPARED TO THE PREVIOUS ESTIMATE OF $1.5TN IN 2018

IN A NUTSHELL

Digital trade finance tools can help businesses reduce their credit risk, forecast cash flow and allocate working capital. In addition, having access to a digital trade finance solution can help SMEs explore a broader customer and supply base, possibly discovering new channels to buy or sell goods.

International Women’s Day falls on March 8. This year’s theme ‘Break the Bias’ highlights the need for a world free from bias, stereotypes and discrimination to strengthen the case for gender equality.

Bias makes it difficult, particularly for women, to move ahead in their careers, whether deliberate or unconscious. It’s important to recognise that bias is not simply an inclination to prejudice. In the context of the workplace, it is building a system that fails to acknowledge the conditions of a certain group while holding them to standardised expectations. Therefore, changing the intrinsic inclination to bias is not sufficient, action is needed to level the field.

CRACKS EXPOSED DURING COVID-19 During the pandemic, the impact of bias was not only amplified, but revealed faults in the workplace that ultimately led to women either leaving their jobs or considering this option.

According to research by LinkedIn, which surveyed 2,000 working professionals, aged 25 to 55 in the UAE, 52 per cent of women agreed they had taken on more responsibilities than their partner at home during Covid-19. Additionally, 43 per cent indicated that they had considered leaving or had already left the workforce. With women shouldering more childcare responsibilities while being held to the same performance standard as men, work circumstances became much harder for women.

Another report by Lean In and McKinsey & Company –

– showed that women in leadership are 1.5 times more likely than men at senior levels to think about downshifting their careers or leaving the workforce due to burnout.

The financial consequences of losing many women in senior roles could be significant. Research cited in the report also showed that companies are 50 per cent more likely to outperform their peers when women are well represented at the top. Additionally, women have a significant impact on a company’s culture, as they are more likely than men in senior levels to embrace employee-friendly policies as well as racial and gender equality at work. As such, women leaving the workforce means that females at all levels in the workplace could lose their most powerful allies.

ARE WE DOING ENOUGH? Although many employers have taken important steps to support women and their employees in general, including tools and resources to help employees work remotely and improve their wellbeing, fewer companies have taken steps to adjust expectations that are contributing to burnout.

Pre-pandemic performance expectations are no longer sustainable, especially

OF WOMEN AGREED THEY HAD TAKEN ON MORE RESPONSIBILITIES THAN THEIR PARTNER AT HOME DURING COVID-19 for working mothers.

revealed that less than a third of companies have adjusted their performance review criteria. Women are facing the choice between falling short or pushing themselves to unrealistic points. Although employers are increasingly revisiting these expectations, there’s still a long way to go. Some biases women have faced for years have been amplified during Covid-19. This includes prejudiced views towards working mothers who are taking advantage of flexible work options. With childcare responsibilities becoming more visible, such as children appearing on the screen during video calls, the view that women are less committed to their jobs has been exacerbated.

TAKING THE RIGHT STEPS

To mitigate these biases, companies can introduce bias training to sensitise employees and speak publicly about the negative impact of bias. It is also important to track outcomes for promotions and raises by gender to make sure women are being treated fairly.

Companies should also extend policies and programmes to support working mothers. This includes offering more paid time off to provide resources for homeschooling and other parenting resources.

In addition, companies should also make sure women are aware of the full range of benefits available to them. Studies have shown that there is a significant gap between the benefits offered to employees and the employees’ awareness what these benefits entail. Essentially, companies should determine their employees’ biggest challenges and allocate resources to help them effectively deal with these issues.

The pandemic has brought to light how necessary it is to revisit the work structure to guarantee women’s careers are not jeopardised with rising conflicts. It has also exposed how women primarily shoulder the responsibility of childcare and while this is changing, workplaces must guarantee that women are given the tools to succeed in their careers while respecting their responsibilities.

Breaking the bias, therefore, is not only necessary for the wellbeing of women, but for society as a whole.