Supply chain finance is emerging as an essential component that can have a big influence on how businesses operate, especially in a global economy that is intricate and interrelated. It provides a way to reduce financial strains and boost supply chain efficiency in Malaysia.
To stay ahead of the curve in this quickly changing environment, investors, tech enthusiasts, and financial professionals must comprehend the new trends in it. This blog explores trends & insights that will influence supply chain finance.
Automation and Digital Transformation
Automation is essential to this change because it removes the need for human interaction in processes like credit evaluations, payment scheduling, and invoice processing.
Automating transactions also makes it possible to follow them in real time, giving stakeholders instant access to information about the state of inventories, receivables, and payments. By leveraging digital tools, businesses can ensure that everyone has access to the same information by utilising digital tools, which will lower disagreements and promote confidence across the supply chain.
Digital transformation involves the adoption of digital technology that improves transparency, expedites financial processes, and lowers manual error rates. Both of these are proving to be the reliable supply chain solutions.
The Emergence of Blockchain
By offering a decentralised, unchangeable ledger that records every transaction in the supply chain, blockchain technology is completely changing this finance. To put it simply, blockchain creates a single source of truth by guaranteeing that all supply chain participants have access to the same data. As all transactions are recorded and verified by several parties, this clarity greatly lowers the chance of fraud.
Additionally, by making it extremely difficult to change or tamper with information, it can improve the security of supply chain transactions. This is especially significant in sectors like medicines where product authenticity is really important. Businesses in Malaysia can utilise this technology to trace the origin and path of items along the supply chain, guaranteeing that only authentic products make it to final customers.
Environmental, Social, and Governance (ESG)
Investors, consumers, and businesses are increasingly taking environmental, social, and governance (ESG) factors into account. Businesses’ supply chain operations are impacted by ESG factors in supply chain financing, particularly in relation to sustainability and ethical conduct. As concerns about social responsibility and climate change gain traction, companies are being pressured to demonstrate that their supply chains are efficient and sustainable.
ESG integration in this finance also takes social and governance aspects into account, in addition to environmental effect. Companies are paying more attention to how their supply chains impact employees and local communities. Businesses can make sure they are lessening their environmental impact and making a good contribution to society by implementing responsible financial practices. By doing this, companies may establish a stronger reputation and draw in funding from those who value sustainability.
Improved Risk Control with Data Analytics
In supply chain financing, risk management is essential, especially in a volatile global market. With the introduction of sophisticated data analytics, companies can now more accurately forecast and control risks, ensuring that their supply chains remain robust when faced with difficulties.
Large volumes of information from several sources, such as historical data, market patterns, and current events, may be analysed by organisations thanks to data analytics. Businesses can use this information to detect possible risks before they become serious issues.
Development of Trade Finance Online Platforms
In India, supply chain finance is seeing new prospects as a result of the growth of trade finance online platforms. These platforms, which put companies in direct contact with customers and suppliers, incorporate supply chain finance solutions that increase liquidity and expedite transactions.
The efficiency and ease of these platforms encourage their use in a variety of industries, such as manufacturing, agriculture, etc. These are helping to close the liquidity gap that frequently impedes the expansion of small and medium-sized businesses (SMEs) in Malaysia by giving companies easier access to funding. Additionally, these systems often offer real-time information on supplier performance, demand patterns, and market prices, empowering companies to make better decisions.
So, here are all the trends and insights that are continuously making a positive impact on supply chain finance. After learning about these insights, it is integral to know about Malaysian government initiatives or regulatory developments in SCF. Here are some of these initiatives or regulatory developments:
- In Malaysia, 98% of firms are SMEs. Under Malaysia’s Ministry of International Trade and Industry (MITI), SME Corporation Malaysia serves as the Central Coordinating Agency. It develops overarching policies and strategies for SMEs and oversees the execution of SME development initiatives across all relevant government ministries and agencies. The Malaysian government incorporated the digital economy and global digital revolution by launching Malaysia Digital as a new national strategic programme. More possibilities are created by initiatives like the Malaysia Digital Catalytic Programme (PEMANGKIN). To promote growth in the digital and technology sector, MTEP is a programme that grants new entrepreneurs a one-year permit and established entrepreneurs a five-year pass.
- In order to assist the expansion of the digital economy as outlined in the Malaysia Digital Economy Blueprint (MyDIGITAL), which was introduced in 2021, the Securities Commission Malaysia (SC), which oversees the country’s capital markets, has included more digital usage into its Capital Market Masterplan 3. Equity crowdfunding (ECF), digital asset exchanges (DAX), peer-to-peer (P2P) financing, digital investment management (DIM), initial exchange offering (IEO), property crowdfunding, digital broking, e-services, operators of electronic facilities as recognised market operators, and custodians of digital assets are all licensed and regulated by the SC as part of its digital initiatives. While SC provides guidelines for digital assets, including tokenised securities, the regulation of non-fungible tokens (NFTs) is still evolving.
- In its Financial Industry Blueprint 2022–2026, Bank Negara Malaysia (BNM) outlines its goal to advance digital transformation across the financial industry in Malaysia. This strategy prioritises digital financial services and fintech adoption as key components to enhance financial inclusion, improve risk management, and increase operational efficiency.
Now it’s time to discuss M1 NXT, which is a renowned digital financial and supply chain finance solution platform that is into working capital management.
Also Read: A Comprehensive Overview of Working Capital in Indonesia
Future-ready, smooth, competitive, secure, and paperless, M1 NXT is a leading provider of working capital solutions. It is approved by the International Financial Services Centres Authority (IFSCA). It specialises in cross-border transactions and open-account sales and acquisitions. By letting suppliers and buyers choose when to pay and when to get paid, it frees up money for all businesses to thrive. This means that it helps in cash flow management.
Conclusion
This blog post has discussed the future of supply chain finance in the form of trends and insights. They consist of automation and digital transformation, development of trade finance online platforms, and the list goes on.
As a leading digital platform for international trade finance, M1 NXT, regulated by IFSCA in GIFT City, provides businesses with seamless working capital solutions. Specialising in open account transactions, it empowers buyers and suppliers with flexible payment options, optimising cash flow and fostering global growth.