ADB’s SCF evangelist is keen to expand the reach of supplier finance in Asian markets, he tells SCF Briefing – and technology will be a key part of that mission.
When Sunil Mascarenhas moved to Manila last year to take up a new role with the Asian Development Bank (ADB), he knew the move would bring fresh opportunities to learn new skills.
One skill he perhaps wasn’t anticipating to hone was his ability to cook. With his wife and family still based for most of the time in Mumbai, he has found that despite a busy day job, he has a fair amount of free time in the evenings.
“I invested in learning to cook, and I think I am doing a good job of it,” he jokes, saying his wife approved of it during her last visit.
Despite being hundreds of miles away from home, he is also keeping tabs on his son’s school work making use of the TeamViewer app to help with maths homework. “Maths continues to be my area of responsibility,” he smiles.
A natural aptitude for numbers is no doubt one of the many skills that has helped Mascarenhas become a leading force in the expansion of supply chain finance throughout Asia.
He’s been active in the market for around 20 years – a record that helped secure him the award for SCF Leader of the Year award last November.
Mascarenhas started his career working for development banks in early 2018 when he joined International Finance Corporation (IFC), taking on anadvisory role and launching SCF programmes in Bangladesh, Vietnam and Mongolia.
Before that, he spent 12 years with HSBC in both India and Malaysia.
At IFC he helped launch SCF businesses within four Bangladeshi banks, helping them set up the required internal infrastructure, meet regulatory requirements and also assisting with internal training.
He’s worked with large companies including Bangladeshi agro-producers Pran and Paragon, helping bring on hundreds of suppliers onto SCF platforms.
In most of these markets, SCF was a new concept, with banks having limited knowledge of how to set up a platform and what benefits it might bring, explains Mascarenhas.
“Going from a market that was not aware of SCF to a market where banks are now actually hunting down new business has been very interesting,” he tells SCF Briefing, citing one example of a “tech-savvy” bank in Bangladesh that managed to deploy $20 million on the supplier side of the business and $30 million on the distributor side within a year of setting up its SCF unit.
A more traditional bank he worked with – where new technology was adopted at a slower pace – reached around $25 million in total assets within the same time period. Still an impressive achievement.
In Vietnam, Mascarenhas worked closely with banks to launch SCF programmes, one of which is now up and running. He also spearheaded a programme in Mongolia for the country’s largest mining company.
In total, during his time at IFC he managed to enrol more than 50 companies and more than 800 suppliers and dealers. Asked to name one quality that was essential to his success, Mascarenhas suggests thes ‘ability to influence people’,. “It is critical to come across as someone who can work with people and not force solutions on companies,” he says.
he future growth of SCF will rely on increased market awareness among the region’s large corporates, he explains, noting how the automotive industry in India has been particularly eager to use the solution.It is already “a big product in the four-wheeler and two-wheeler industries,” a trend partly supported by local banks’ ability to lend personal loans to consumers to buy cars.
Mascarenhas anticipates a similar expansion of SCF in Bangladesh’s automotive sector once the banking industry is more comfortable with providing personal finance loans to consumers. The anticipated growth of auto-parts manufacturing in the country will be another factor which will help drive demand.
Armed with this wealth of experience, Mascarenhas is excited about the opportunities at ADB – which he joined last June – to support the growth of its growing supply chain finance business.
he is already working on ADB’s new SCF advisory unit, launched in June last year with the aim of helping more banks in the region set up SCF units. He says talks with a few financial institutions are already taking place.
Once established within banks, these nascent SCF departments could take advantage of ADB’s existing supply chain finance risk participation programme to further expand their business.
The programme allows ADB to participate – on a funded or unfunded basis – with a partner bank in the risks undertaken in a supply chain finance transaction.
“Our strategy is to help developing market banks to set up robust SCF businesses and then facilitate the expansion of those SCF businesses through our risk participation programmes,” he explains.
Mascarenhas has many other ambitions. “There is a huge opportunity at ADB to experiment with new technology,” he says, explaining how blockchain technology could be used to set up deep-tier SCF financing programmes.
“We are talking to a couple of market players, and some large corporates on how to explore deep-tier financing,” he says.
Deep-tier financing could offer the potential to not just finance the first tier of suppliers, but the suppliers of the suppliers and potentially even further down the supply chain.
This could result in a “massive reduction” in the cost of financing at each layer, and ultimately reducing the cost of the goods to the main buyer, Mascarenhas says. He is working towards piloting a deep-tier financing programme towards the end of the year.
The use of deep-tier financing could support ADB’s growing interest in sustainability, helping the development bank offer sustainability-linked financing to multiple levels of the supply chain.
“These are long-term plans and being in a bank like ADB enables one to have resources to see these [ideas] through to completion,” he says.
Reflecting on the wider SCF industry, Mascarenhas is keen to see greater focus on is distributor finance.
“One thing that has not ceased to surprise me is that we only talk about the buy cycle, the relationship between the large buyers and suppliers, when there is a whole area where a corporate is selling to its distributors – which are often small and medium-sized companies themselves and are in need of reasonably-priced financing,” he explains.
If you look at the car industry, he says, the typical small dealership needs funding to buy cars from the large multinational car producer. Usually, the dealer would have to take a loan against some form of collateral or backed by a mortgage over its showroom to be able to buy the goods from the large manufacturer.
Distributor finance could offer an automated and more efficient alternative where bank financing could be extended to distributor to cover the holding of the goods for re-sale, such as cars, until the dealer receives funds from the retailer or end-customer.
“The fundamental backstop is the cooperation of a large corporate,” he explains, saying it is important for the buyer to use its influence to ensure distributors pay their bills.
Yet, despite the product being unsecured and deemed riskier than SCF, the loss rates are typically low, making it something worth exploring, he suggests.
“Apart from India and Vietnam, no other country in the region is really talking about supply chain finance in terms of distributors,” he says.
Mascarenhas is clearly keen to broaden the scope of the SCF product in his new role at ADB.
Whether it is exploring the use of distributor finance, the potential of deep-tier financing or even keeping tabs on his son’s school work from another country, his evident interest in the latest technological innovation will prove invaluable as he seeks to fulfil his ambitions.