At the beginning of this month the news broke about the problems at Greensill. Like everybody else we were keen to understand what was going on, but more importantly we wanted to understand the potential impact on the SCF market. We then quickly launched a market survey to capture the market sentiment, as well as set up interviews with many SCF players and users. Based on all this market intelligence we produced a series of articles in which we have tried to clarify the situation (see part 1, 2, 3 and 4). In this final article on Greensill we would like to share some key findings from the survey that ran in the first week of March and reached almost 200 participants, 100 of which shared their view within the first 24 hours after the survey started (on March 3).
The first thing we tried to understand was whether there would be any risk of contagion. Could we expect funding lines to be withdrawn, banks withdrawing, programs to be halted? What was the concern from SCF providers and users? The vast majority indicated moderate to no concern at all over the continuation of their own SCF programs, as seen in figure 1. This was even more so if you zoom in on the users of SCF programs (figure 2). This supported my first column explaining that the demise of Greensill had nothing to do with SCF. It was clear that there was neither contagion nor systemic risk.
Figure 1: level of concern of respondents regarding their own SCF programme
Figure 2: level of concern of buyers and suppliers regarding their own SCF programme
We also asked providers specifically (financial as well as platform/technology) to share their view on how current events would impact the SCF industry. Where they viewed the impact on their own programs as quite low, they seemed to be much more concerned about the impact on the SCF Industry in general (figure 3). The frequent comment made by respondents was that they feared that the Greensill situation was blamed on the SCF proposition. Could this undermine the reputation of SCF as a safe short term invoice based financing solution? However, as the story unfolded in the first week it became clear that for the traditional SCF programs it was business as usual and maybe even more important we came to learn that even the Greensill funded programs were silently taken over by several banks. SCF reaching maturity as I concluded in my third column.
Figure 3: level of concern of financial and technology providers regarding the overall SCF industry
It is very obvious though that Greensill’s rapid demise has drawn the regulators’ attention to SCF. It has come to the top of the agenda for auditors, rating agencies and other stakeholders. Therefore, it can be expected that there will be a push for more transparency on (1) what is qualified as SCF and what not, (2) how buyers report on these programs in their annual reports, (3) how they treat SME suppliers and (4) how these programs are funded. The SCF Community will work with the SCF industry and its stakeholders to support this push towards transparency. We believe that such increased transparency and clarity will further spur the growth of SCF.
It will probably take quite some years for the unwinding of Greensill’s structured finance portfolio. We see already the first lawsuits are starting up. However for the SCF industry the Greensill story ends here. Let us focus again on the initiatives we recently launched as the SCF Community. Such as the groups of corporates that we recently brought together to work on further developing the role of supply chain finance in the areas of sustainability and circularity, risk mitigation and resilience, pre-shipment and deep tier financing, SME inclusiveness and trade development, and much more. You can expect regular updates and webinars to give you insights on these developments.
And for those who became interested in the topic of SCF and want to learn more. Please do check out the SCF course that will start soon.