Impact Financing with Deep Tier Financing
● An open protocol for the financial supply chain using permission-less Blockchain technology, which allows its users to share financial documents, such as invoices and purchase orders with each other. ● The support of decentralized finance (DeFi) brings transparency, cost-efficiency, speed, and accessibility to supply chain financing. ● Founders have vast experience in Supply Chain Financing. Previous successes include founding and scaling Taulia (www.taulia.com), the global leader in supplier financing with 1.5 Million businesses connected and around 2 billion USD a month worth of accelerated invoices.
● Centrifuge Tinlake is a financing protocol to bundle and manage the funding of NFTs ● Asset Originators bring verifiable Real-World Assets like invoices as Tokenized NFTs on chain, using the Centrifuge Chain
Composable & Interconnected
● A2F Solutions Ltd focuses on promoting access to finance (A2F) for micro, small and medium enterprises (MSMEs) ● The company specializes in developing financing schemes, both for payables and receivables financing. ● Its management team have more than 40 years of combined experience in assisting financial institutions in over 50 countries in Africa, Asia, the Middle East, and Latin America.
Deep Tier Finance ● to enable financial innovations in global supply-chains through improved transparency ● to improve the livelihoods and resilience of MSME’s worldwide by providing additional access to finance ● to increase traceability and accountability in the supply chains
Questions?
Case Study: ConsolFreight
● SaaS freight marketplace for freight forwarders and procurement of logistics services combined with digital contract management and trade financing ● Founding team combines 50+ years of experience running successful freight forwarding businesses in the U.S., Latin America, and Europe ● Partnerships with renowned freight forwarding networks such as X2 Logistics Networks, and Globalink ● Secured more than 600 freight forwarders as exclusive trade lane providers
Invoices Payments Financing 0 Payment * Portfolio of - + invoices Repayment financing Sell Issue & Delivery acceptance Payment reconciliation and scoring of invoices
Receivables Financing - Expanded Scheme
Invoices Payments And / Or 4 SPV Initial Payment Fund 1 Senior debt Financing Junior debt Portfolio of 0 - invoices Mezzanine Junior equity Sell * Equity Issue & + Delivery acceptance Repayment Guarantee Payment financing 3 reconciliation and scoring of invoices DeFi Securization Deferred 2 Payment / RMR 5 12
Receivables Financing Steps 1. The SPV receives financing for buying invoices from the fund as agreed on the financing contract. 2. Participating distributor creates an invoice in the platform. The client accepts (conforms) the invoice in the platform 3. Participating supplier through the platform sell the invoices to the SPV. 4. The SPV agrees to purchase the invoice and based on information provided by the platform, pays the supplier the face amount of the invoice minus a percentage that includes the financing costs, the proportional transaction costs of the platform, and a risk margin retention determined by the platform’s scoring methodology. See transacting slide. 5. The clients sends their payments to an escrow account of the SPV. The SPV reconciles the amount received from the clients with the invoices 6. The percentage not paid will be reimbursed to the distributor once the invoice is cancelled by the client/farmer (deferred payment). * Fund receives its payments as agreed on the financing contract with SPV.
Transacting Invoice acquisition Invoice Discounted Interest Service fee of SPV Advance on invoices Risk Margin Retention (RMR) (SPV to distributor) (differed payment from SPV to distributor) $ 100 $ 4 $ 1 $ 80 $ 15 If 10 equal invoice $ 150 (expected loss 15% * ) $ 1.000 $ 40 $ 10 $ 800 Time of payment of invoices If all invoices are paid Cash received (from SME clients into escrow account of SPV) Loss from invoices (not paid by SME Expected payment of Actual payments of RMR (SPV Client) RMR ( SPV to distributor) to distributor) $ 1.000 = 10 x $ 100 $ 0 $ 150 $ 150 – $ 0 = $ 150 If only 9 invoices are paid $ 900 = 9 x $ 100 $ 100 $ 150 $ 150 - $ 100 = $ 50 If only 8 invoices are paid $ 800 = 8 x $ 100 $ 200 $ 150 $ 50 loss of SPV If RMR – actual losses >= 0, then the SPV (and hence the financier) does not suffer losses itself. First losses are with distributor. (*) Risk scoring is based on history payment of invoices and adjusted on permanent basis. The higher the expected losses, the higher the RMR / lower the advances on invoices.
Payables Financing / Reverse Factoring - Expanded Scheme
Invoices Payments SPV Payment Investors Financing Portfolio of - invoices Sell Issue & + Delivery acceptance Repayment Payment financing reconciliation and scoring of invoices
Payables Financing Steps 1. The SPV receives financing for buying invoices from the investors as agreed on the financing contract. 2. Participating MSMEs creates an invoice in the platform. The Buyer accepts (conforms) the invoice in the platform 3. Participating MSMEs through the platform sell the invoices to the SPV. 4. The SPV agrees to purchase the invoice and based on information provided by the platform, pays the MSMEs the face amount of the invoice minus a percentage that includes the financing costs and the proportional transaction costs of the platform. 5. The Buyer sends their payments to an escrow account of the SPV. The SPV reconciles the amount received from the Buyer with the invoices * Investors receive their payments as agreed on the financing contract with SPV.
Benefits to Investors ● Simplified funding / easier scale Develop and implement an innovative and low operating cost investment product/vehicle, easy to replicate, scale, and combine funding sources including decentralized finance ● Better Risk Management Full transparency of historic and ongoing transactions improves risk management and reduce capital requirement vis-à-vis traditional lending ● Combined Benefits Traceability features for measuring the impact of investments on relation to SDGs ● Deep Tier Financing Deep tier financing focus that allows reaching out to MSMEs deeper in the supply chain
Benefits to Distributors / Anchors ● More liquidity through the supply chain helps increasing sales ● Improve risk management by accessing payment information from the supply- chain ● Business Intelligence: traceability of sales / products, additional market information to facilitate marketing campaigns / cross selling ● Crisis management: Able to trace product sales at a granular level
Benefits to MSME’s ● Access to Financing Increase access to liquidity / credit through their supply-chain (both in terms of maturities and amounts) ● Risk Assessment Build payment history and reputation within an open platform, while owning the data (Receivable Financing) ● Combine Benefits Link blockchain protocols to collect and validate environmental and social metrics profile, and with it increased access to finance, aligned with the SDGs; and to track and trace for origin ● Holistic Supply Chain Data Receive value added tools and information through the interaction with the platform
What are we looking for? Onboarding corporates: ● detecting potential supply chains in different markets ● Identifying/introducing FI and anchors that could be interested in its implementation Progressive Funders: ● Providing debt to FIs that grant credit utilizing the scheme or ● Providing debt/equity directly to the SPV
Thank you! www.centrifuge.io www.a2f-solutions.com
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