Maersk Trade Finance, which operates in six countries including the UAE, expects to give $200 million (Dh734 million) in trade finance (in credit) till the end of 2017 from $160 million now, a business in which banks are increasingly becoming risk averse, a senior executive told Gulf News.
Two years ago, Maersk started giving trade finance to small and medium companies, seeking a pie of an estimated $16.5 trillion industry, that was abandoned by big banks after the global financial crisis.
“The main driver for us to get into this business was to simplify things for our customers and be present across the value chain. Trade finance was constrained for companies which were not giants. The entire process of getting the finance took so long,” said Vipul Sardana, senior director global head, Maersk Trade Finance.
Besides the UAE, Maersk Trade Finance is present in India, Netherlands, Spain, Singapore and the US. Its 150 customers in these countries have been given $160 million in credit since inception.
“We are still very small, learning the ropes of the game. We are co-creating products along with our customers. I don’t look at it as how much more we can do, we look this as how much more we can simplify our offerings to our customers,” Sardana said.
The world’s largest shipping company is best placed to mitigate risks in its trade finance business.
The business is a natural extension for the company to give a short-term and a non-collateralised loan to its clients, which ship goods from one country to another through the containers.
“The biggest fear was that — is there a true transaction on the underlying piece of paper? What uniquely positions as a shipping line is that we are responsible for most of that paper. So the bill of lading is generated by us. We carry that cargo on our vessel. And this significantly changes the play around risk mitigation. We know the buyer, seller and we know the cargo because we are carrying it, so that simplifies a lot when it comes to credit assessments and credit worthiness,” Sardana said.
“The only collateral that we ask for is the cargo that we are carrying,” he said, adding “our own position as the party to the transaction changes the landscape for us.”
According to Sardana, the future of business-to-business (B2B) credit would not be decided by balance sheets alone. “It would be decided by the transparency of information in the value chain,” he said.
“The non-conventional financial companies [which are into lending], or peer to peer lending will play a huge role in the way B2B credit plays out and contribute in simplifying and enabling to remove the biggest obstacle of access to capital.”
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