Standard Definitions for Techniques of Supply Chain Finance

The “Standard Definitions for Techniques of Supply Chain Finance” set out in this document builds upon several excellent initiatives and documents aiming to develop terminology related to this fastgrowing, high-value but still fairly nascent form of financing, which applies equally in support of domestic and international supply chains.

The Global Supply Chain Finance Forum1 represents a number of industry associations with members around the world, and it has been a core principle of this initiative, that the activities of the team be collaborative, inclusive and consensus-based.

The drafting effort, executed by a team of senior practitioners, has benefitted from the guidance of an international and multi-industry Steering Group, and has actively sought a wide range of commentary and feedback from the market, including providers of supply chain finance solutions as well as end-users.

The intent of this initiative is to help create a consistent and common understanding about Supply Chain Finance (SCF) starting from the definition of terminology, to be followed by advocacy in support of global adoption of the standard definitions. It is recognised that SCF propositions have evolved at different rates and in varying directions by region and at the level of individual providers; however, the view is that there is agreement on the clear benefits to the financial industry, regulatory authorities, clients and other stakeholders, from the development and dissemination of standard definitions and terminology.

Further work based on the definitional framework developed in this document is likely to follow, including further standardization and other development activity.

After the introduction in Part 1, Part 2 provides context and background to the initiative. Part 3 articulates the rationale, methodology and process followed by the Drafting Group in the selection of the SCF techniques to define, and to determine the elements that ought to be included in each definition. The individual techniques are then defined.

The Forum has opted to deliver a document that provides more than a list of techniques and a set of high level definitions. The scope and extensive detail are offered with a view to the larger objective of global adoption, and in recognition of the various audiences to which the document will be of interest.

The definition of each technique (which includes an illustrative transaction flow) can stand on its own and the document includes a summary table for quick reference purposes.