AR Financing Up, But Satisfaction Down, In Asia

Businesses across Asia are increasingly turning to one form of corporate finance: accounts receivables financing. A new report by East & Partners Asia found that the number of companies in the region that are accessing AR financing has more than doubled over the last year and a half.

According to E&P Asia research, 11.1 percent of companies in Asia are using this type of finance, also known as supply chain finance. Businesses, the survey found, are also more likely to trade the trade financing service they use in the near future.

That tendency to switch FinServ providers could signal a problem for the industry. Researchers found that while AR financing is considered “highly important” by Asian businesses, their satisfaction with this type of financing has significantly plummeted. “Thus, banks have an opportunity to exploit the trade finance needs of top Asian corporates,” reports in CFO Innovation said. E&P Asia found an increasing gap between the importance of AR financing, which is rising, and the satisfaction with the financing service providers companies work with, which is dropping.

Even some of the more highly rated, large banks earned some of the worst ratings by businesses, researchers found, and since January 2014 satisfaction levels across markets for AR financing providers have dropped in every report released by E&P Asia, which is conducted bi-annually.

“Many banks have traditionally only financed small parts of the supply chain,” said E&P Asia Chief Executive Lachlan Colquhoun to the publication. “What we are seeing is that corporates are becoming more involved with their supply chain partners at the financial level, and they want their banks to follow them.”

Colquhoun added that banks that focus on supply chain finance and strengthening their relationship with corporate borrowers stand to gain the most market growth in the region.

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