Supply Chain Finance and SMEs: Evidence from International Factoring Data

29 Pages Posted: 30 Sep 2016

See all articles by Marc Auboin

Marc Auboin

World Trade Organization (WTO)

Harry Smythe

University of Denver

Robert Teh

World Trade Organization (WTO)

Date Written: August 16, 2016

Abstract

The unbundling of trade across regions offers unique opportunities for SMEs to integrate into global trade notably through their involvement into supply-chains. With supply-chains shifting and expanding into new regions of the world, the challenge for SMEs to accessing financing remains an important one; in many developing and emerging market economies, the capacity of the local financial sector to support new traders is limited. Moreover, after the financial crisis, several global banks have “retrenched”, for various reasons. In this context, supply-chain finance arrangements, and other alternative forms of financing such as through factoring, have proven increasingly popular among traders. This paper shows that factoring has a positive effect in allowing SMEs to access international trade, in countries in which it is available. Factoring also appears to be employed by firms involved in global supply chains. We employ for the first time data on factoring from Factor Chain International (FCI), the most extensive dataset on factoring available at the moment, for the period of 2008-2015. Using an instrumentation strategy, we identify a strong, stable effect of factoring on SMEs access to capital for some of the main traders in the world.

Keywords: trade credit, financial crisis, trade

JEL Classification: F130, F340, G210, G230

Suggested Citation

Auboin, Marc and Smythe, Harry and Teh, Robert, Supply Chain Finance and SMEs: Evidence from International Factoring Data (August 16, 2016). CESifo Working Paper Series No. 6039. Available at SSRN: https://ssrn.com/abstract=2845280

Marc Auboin (Contact Author)

World Trade Organization (WTO) ( email )

Rue de Lausanne 154
Geneva 21, CH-1211
Switzerland

Harry Smythe

University of Denver ( email )

2201 S. Gaylord St
Denver, CO 80208-2685
United States

Robert Teh

World Trade Organization (WTO) ( email )

154 Rue de Lausanne
CH-1211 Geneva 21
Switzerland

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