Business Intelligence

Optimising Working Capital via Financial Supply Chains

The provision of accessible financing solutions is vital for the development of Malaysian SMEs. RHB Banking Group has introduced two innovative offerings to support the growth of this segment.

Every cent counts for SMEs

Small and medium-sized enterprises (SMEs) in Malaysia represent a fundamental part of the national economy, as the largest contributor to GDP growth. The Malaysian Government, under its SME Master Plan 2012-2020, aims to support the competiveness and growth of this vital sector and increase the contribution of SMEs to the country’s GDP, employment and exports.

In the context of the highly volatile and competitive business environment, accessible, reliable financial solutions are critical to ensuring SME success. Challenges, such as difficulties in securing increasingly expensive financing from financial institutions, underscore the importance of these solutions.


Offering innovative solutions

In response to this crucial need and in support of the bank’s continuous efforts to enhance the viability of SMEs, RHB Banking Group (RHB) has developed two innovative products: the Financial Supply Chain (FSC) platform, and Flexible Trade Finance-i (FTF-i). These products are aimed at assisting SMEs to grow their businesses at a reasonable cost and provide a seamless experience for customers.


Financial supply chain platform

FSC is an end-to-end trade process and information system that helps to improve cash flow and working capital for clients. It provides a more structured trading system for members across the supply chain and the product offering is targeted at delivering financing solutions to Malaysian SMEs that lack collateral to support their working capital needs. The provision of such a cost-efficient platform enables increased growth in the SME community and positively impacts the Malaysian economy as a whole.

At present, companies must contend with challenges relating to a disconnect between supply chains and financial service providers. FSC delivers convenience to customers by overseeing their entire supply chain, from invoicing to settlement. By leveraging information technology, the platform facilitates greater interaction between users and entities critical to their operations, including banks.

RHB understands the importance of meeting its customer requirements, and to this end, the platform functions as a financial community built around the needs of the principal client, enabling them to interact with suppliers, buyers and distributors in a closed trading ecosystem. Moreover, membership of this community enhances the capabilities of larger companies in assisting smaller organisations to access financing.

The web-based financial ecosystem solution runs on a secure platform and offers visibility for transactions made therein. In turn, this improves efficiency and helps to mitigate risks for members of the supply chain trading community. Significantly, FSC also facilitates billing and payment processes between members of the customer’s supply chain community. In addition, transactions are made in real-time, thus further improving efficiency and allowing users to benefit from added savings.



Flexible trade financing-i product

Among its portfolio of offerings, RHB has developed FTF-i, a new product that supports FSC by facilitating financing schemes for suppliers, distributors and receivables. This product is used to finance import and export businesses, goods, services, charges and payments, as well as any other local and foreign trade transactions that cannot be financed under the normal Islamic trade instruments.

The all-in-one product solution is administered under the Sharia principle of Commodity Murabaha, via the Tawarruq arrangement. This refers to the process of purchasing a commodity for a deferred price and selling it to a third party for a spot price in order to obtain cash.

FTF-i offers flexibility to customers by accommodating financing needs across a number of sectors, including transportation, ticketing and tour agencies, construction, logistics and other service-related industries.

The innovative product, moreover, provides support through all stages of a transaction, from pre-shipment to post-shipment financing, as well as for costs relating to the delivery of goods. In this respect, the offering takes a holistic approach to financing, providing coverage in terms of freight and transport charges, custom duties, port charges, takaful premiums and additional charges which may not be incorporated as part of the value bill.


Strategic supply chain solutions

Customer satisfaction is a key priority at RHB, and in support of providing customers with a hassle-free and seamless experience, the FSC and FTF-i systems are designed to operate around a principal bank customer, allowing them to function as the buyer, seller or wholesaler. By means of this arrangement, RHB offers three types of supply chain management solutions: vendor/supplier financing; receivable financing; and distributor financing.


Vendor/supplier financing

The vendor/supplier financing solution enables the bank’s customer to act as a principal buyer. This solution is focused on financing local and foreign vendor and supplier invoices that have been approved and accepted by the buyer. The buyer is able to connect with approved suppliers through the FSC platform and all financing requests can be managed online.

Benefits to the principal buyer include the possible extension to its payable credit term, improved liquidity of working capital, greater visibility relating to supply chain flows and a strengthened relationship with suppliers. The vendors or suppliers enjoy benefits including non-recourse financing, reductions in day sales outstanding, no collateral requirement and improved cash flow management.


Receivable financing

The receivable financing solution facilitates financing for the customers of the bank’s principal customer, who, in this instance, acts as the principal seller. This solution allows the bank to finance customers of the principal seller by purchasing the latter’s receivables against invoice details that have been accepted and approved by the selected buyers. This can be undertaken with or without recourse to the principal seller.

Benefits to the principal seller include a reduction in day sales outstanding, improved cash flow management and visibility of the supply chain trade flow. The buyer, in turn, benefits from a possible extension to the payable credit term, improved liquidity of working capital and increased visibility of supply chain trade flows.


Distributor financing

The distributor financing solution focuses on delivering bank financing to local buyers, such as distributors, dealers and agents on purchases made from the bank’s customer, who, in this instance, acts as the principal wholesaler. All requests for financing are managed via FSC, which connects the wholesaler with its local customers.

Benefits to the principal wholesaler include a reduction of day sales outstanding, an improved cash flow position, increased sales and business growth and reduced buyer or distributor payment risk. The buyer benefits from a possible extension to the payable credit term, improved liquidity of working capital, greater visibility of supply chain trade flows and improved business growth with an additional sales limit.


Award-winning solutions

RHB Islamic Bank is a leading innovator in the Islamic banking sector and remains committed to delivering innovative and cost-effective solutions to its customers. Its primary focus is to continuously enhance its range of products and services to meet ongoing market needs.

In recognition of its commitment to delivering flexible financing solutions to customers in the form of the FSC and FTF-i products, RHB Islamic Bank received the Most Outstanding Islamic Consumer Financing Products award at the Kuala Lumpur Islamic Finance Forum (KLIFF) in December 2015.

The provision of FSC technology, in conjunction with innovative financing solutions, enables RHB Islamic Bank customers to consolidate their standing in their respective industries. In fact, the platform represents RHB’s commitment to its customers, as both a service provider and as a strategic financial partner, in their respective journeys of developing and expanding their businesses.


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Level 11, Menara Yayasan Tun Razak
200 Jalan Bukit Bintang
55100 Kuala Lumpur
+60 3 2171-5000


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