Receivables market: SMEs game changer

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The Trade Receivables Discounting System (TRDS) that will be run by the recently launched Zimbabwe Receivables Market Place (ZRM), a joint venture between the Zimbabwe Stock Exchange (ZSE) and Harare Receivables Exchange (HRE), will provide small to medium enterprises with a financing option that can grow with the needs of the business, ZRM chief executive Tinashe Tamba has said.

Tamba described invoice discounting, which is what this financing option is all about, as a key financial tool available to businesses, SMEs in particular, to manage their funding requirements.

Tamba said currently, most financing facilities require immovable property as collateral and are based on collateral provided and not the opportunity presented.

But with the TRDS, as long as businesses have capacity to deliver and generate an invoice, they can access financing on the platform.

“By ensuring goods are delivered and accepted by a reputable buyer. The risk shifts away from the supplier, to the ability of the Buyer to settle the invoiced amount,” according to Tamba.

“So instead of waiting 30 days for payment, they can be funded in as little as three working days and restock and supply their reputable customers. This cycle can see an SME generating $30,000 revenue per month increase that to $100,000 revenue per month when used correctly,” Tamba explained.

SME Association of Zimbabwe founder, Farai Mutambanengwe, described the new offering as “a positive move.”

“The more financial solutions we have the better. Just getting funding for SMEs is difficult,” according to Mutambanengwe.

And Tamba believes the Receivable’s market place will facilitate SME participation in the supply chain of big corporates.

“A big issue with SMEs is the inability to wait 30-60 days for payment once supply has happened.

“We want to see growth in more indigenous companies especially SMEs participating in the supply chain of reputable companies like some of our listed entities,” Tamba said.

According to Mutambanengwe, the success of the new platform will also depend on the discount rates, which he hoped will not be “exploitative”.

Tamba said the TRDS platform will only be able to quote rates “once the market starts trading and transactions are concluded.”

This will also depend on the “the size of the invoice and the quality of the underlying debtor,” Tamba said.

The Zimbabwe Stock and Exchange and the Harare Receivables Exchange Limited this week announced the launch of the Zimbabwe Receivables Marketplace Limited (ZRM).

ZRM’s mandate is to offer working capital solutions through receivables financing. ZRM uses a Trade Receivables Discounting System (TRDS), according to the joint statement.

“TRDS is a formal mechanism set up in order to facilitate the financing of trade receivables of Small and Medium Enterprises (SMEs) from corporate buyers through invoice financing by multiple financiers. This step is deemed essential to enhance the trade account receivable management of SMEs,” reads part of the joint statement.

Some of the highlighted benefits of the TRDS is that SMEs get greater access to finance, at competitive rates without providing any additional collateral.

Corporates will also “save on procurement cost through an improved negotiation of financing term for its vendors.”

“Investors such as Asset Managers and Pension Funds get an opportunity to build their alternative asset portfolio,” reads part of the joint statement.

Tamba said the platform is also looking at financiers (investors) to provide them with a new asset class to diversify their portfolio.

ZRM reportedly hold “a strong order book in Zimbabwean Dollars and is inviting potential Financiers in Zimbabwean Dollars to come on board.”

On the other hand, it has strong financiers in United States Dollars and “is inviting potential corporates and their suppliers to come on board.”–

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