How technology partners can help Pakistani banks entering the Supply Chain Finance market

The State Bank of Pakistan (SBP) issued a directive on 10^th June requiring banks to develop and offer a digital solution for Supply Chain Finance (SCF), also known as Reverse Factoring or Payables Finance, within six months.

Why SCF is appealing to the State Bank of Pakistan

The central bank’s intention appears to be that this will enhance SMEs’ bankability and access to financing. Shifting from cash transactions to digital solutions will help small firms build verifiable transaction histories, a key factor in accessing credit.

SCF solutions bring benefits to both large corporates and their suppliers. They help corporates maintain strong relationships with their suppliers, as they help suppliers improve their cash flow, which can improve their cash flow, accessing early payments, typically at more favourable rates. This helps corporates to ensure stability and reliability in their supply chain.

Pakistani banks may have historically been cautious about SCF due to its perceived complexity, but SBP’s new stance suggests this shouldn’t be a barrier to adoption given the benefits of these solutions.

Nonetheless, banks will be looking for guidance and support on how to stand up and optimise an SCF solution, given the nuances of the product set. Demica’s recent Benchmark Report identified the most common challenges for these programmes, with the top being the long customer acquisition cycle and supplier onboarding.

For banks who can overcome these challenges, there will be significant financial reward. where those who offer the most effective, competitive and customer friendly solutions are expected to take the largest share of the local market.

How Demica can support Pakistani Banks

Demica’s vision is to transform the supply chain finance market with a platform that enables banks and corporates to easily transact anywhere in the world.

Demica’s history of providing supply chain finance technology for banks globally and advising them as they stand up solutions, positions us well to offer support and guidance to Pakistani banks new to this space.

Our whitelabel solutions can be rapidly deployed, ensuring banks meets the six-month implementation timeline set by the SBP.

Demica’s reliable technology meets bank-grade security accreditations and can integrate with multiple bank systems including payment gateways to automate real-time payments in multiple currencies.

Cultivate a long-term technology partnership

Most important for any bank affected by the SBP mandate, is that they carefully assess any partner they want to bring in to support. Banks should look for partners who are invested in the long-term success of the solutions, rather than simply a vendor. For decades, Demica has worked alongside leading international banks like HSBC, Standard Chartered, Lloyd’s, BBVA, and Commercial Bank of Dubai, to drive continuous product development, and deliver market-leading functionality.