While the hunt for the COVID-19 vaccine continues, the global economic outlook continues to look grim. A particular sector that is experiencing devastating disruption is international finance.
Globally, exports and imports have slowly begun to open up after the lockdowns. In such a time, having a working capital is crucial. How are Indian exporters faring in the post Covid scenario? With the ´Make In India´ slogan, will India see its supply chain finance perform better?
Seeking answers, The Tech Panda spoke to Tim Nicolle, Founder and CEO of PrimaDollar, a UK-based leading fintech player in global trade finance. Players like PrimaDollar help companies to produce and sell without looking for cash to continue.
Tim Nicolle
We will see the economic realities in the first half of 2021, but many businesses will have problems. Exporters should be wary of granting credit
Nicolle calls Indian exporters resilient, entrepreneurial, and smart but adds that great care is needed to navigate the period ahead.
“It is difficult to deal with buyers who have their own pressures and always tempting to take on business to get workers working and factories making,” he says.
He also notes that while Make in India is a strong and important initiative, it makes international supply chains more complicated as components and materials are imported rather than finished goods.
“Our supply chain trade finance platform is what India needs, as without platforms like ours, large corporates, who are making in India, will not have efficient supply chain finance working for their international suppliers,” he explains.
The company is bringing their supply chain trade finance platform to India to help Indian importers fund and pay their own suppliers.
“Importers are just as important for Indian GDP as exporters – as India needs the raw materials and components in its manufacturing processes to drive GDP – and the pandemic is making it harder for India’s import sector to bring the needed items into the country,” he adds.
The Global Scenario
A look at the current scenario of global trade reveals that the pandemic has created a major financial loss for most businesses. What changes are visible post Covid? What problems are imminent for exporters and importers? Nicolle reveals the picture.
Businesses are financially weaker today than they were in March. On top, we have shifting patterns of behaviour, for example more online shopping and less offline
“Although government support packages vary country-by-country, the common theme is that there have been some support wages. But there are still capital costs that continue to accrue (interest, rent, lease payments, some taxes) and these have to be paid at some point,” he says.
He also adds that most support is in the form of loans rather than grants, which have to be repaid in the near future.
“So this means that businesses are financially weaker today than they were in March. On top, we have shifting patterns of behaviour, for example more online shopping and less offline,” he says.
How PrimaDollar is Helping
PrimaDollar offers a simpler, quicker, and lower-cost trade finance product, required by exporters and importers globally. With clients already in over 35 countries, it bridges the financial gap in export-import cycle, or mid and large-cap companies, in the form of export trade finance and supply chain trade finance.
We are here to help exporters understand the realities of their situation – and to provide finance where we can. We have seen a substantial increase in enquiry, and on our side, we are factoring in the additional stresses into our analysis
In a post-Covid landscape, the company is helping companies to produce and sell.
“We do not have a crystal ball. We are here to help exporters understand the realities of their situation – and to provide finance where we can. We have seen a substantial increase in enquiry, and on our side, we are factoring in the additional stresses into our analysis,” he says.
A Grim Future
Nicolle points out that right now it is too early to see the impact of the changes brought on by the pandemic and paints a grim picture of the future.
“We will see the economic realities in the first half of 2021, but many businesses will have problems. Exporters should be wary of granting credit,” he warns.
The key point is that there will be systemic consequences from defaults in one sector knocking over into defaults in other sectors
Many sectors that have been experiencing setbacks are starting to improve. For example, a couple of the winners from the pandemic are food and other essential goods and online retailers and supporting businesses.
On the other hand, travel and hospitality and retail (offline) have been suffering ever since the pandemic started and will see long-term consequences.
“The key point is that there will be systemic consequences from defaults in one sector knocking over into defaults in other sectors – so, apart from direct-to-consumer businesses, there are possible consequences for business across the board,” he explains.
Can global trade prepare for an event like Covid-19 in the future? Can companies like PrimaDollar help? Nicolle says it is too early to diagnose how to position better for the future. One can only hope for a beginning of ideas for solutions.
“As Churchill famously said ´Now is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning´,” he concludes.
