Maersk expands trade financing in India

      04/10/2019

Maersk Group is significantly broadening its trade finance services in India, ostensibly buoyed by the emerging market economy's bullish containerized trade outlook.

The world’s largest container carrier said that of a total $500 million worldwide disbursement target program for 2019, it plans to provide $200 million in finance to India-based businesses during the year.

The company began offering finance to Indian importers and exporters in 2016 and underwrote credit to the tune of $150 million against goods shipped out of the country last year, a 53 percent jump from 2017 when its global financing stood at $700 million.

The credit program particularly aids smaller shippers who face problems securing early access to capital from banks or whose creditworthiness is questioned as a result of the lender viewing them as a higher risk. Such financing generally takes the form of a loan or letter of credit that provides for payment once the bank receives certain documents, more notably a bill of lading.

“India’s SME [small-to-medium enterprise] sector continues to play a significant role in India's economic development. As the sector is gearing up for its digital transformation, the rapid technological advances are putting trade finance in the spotlight and playing a significant role in changing the way global supply chains are managed and monitored,” Vipul Sardana, Maersk’s global head for trade finance, told.

The carrier said it built relationships with new customer verticals such as those engaged in the retail and fast-moving consumer goods sectors last year, in addition to increasing its focus on the automotive, metal, agriculture, and chemical industries. As a result, the company signed more than 120 Indian importers and exporters under the “Maersk trade finance” program, officials said.

“The company continues to work with customers across India, Singapore, the United Arab Emirates, the Netherlands, the US, and Spain, and plans to further expand and cater to the needs of the growing SME and start-up audience in India to co-create simple solutions and enable global commerce, further encouraging them to participate in global trade,” officials said.

Aside from export financing, the company rolled out similar solutions for import shipments in 2017, which in 2018 logged a 30 percent increase year over year by credit size. The credit requests are processed through a digital platform, dubbed a one-stop shop, and Maersk customers are able to use those funds either to pay for shipments or invest in new orders.

“While trade finance has been a catalyst for expansion, for most SMEs access to funds has been restrictive due to strict collateral requirements and credit background checks. As digital trade finance develops into an essential alternative, start-ups and SMEs will no longer be as reliant on banks as before,” Sardana added.

Maersk also said it remains constantly engaged in exploring opportunities to simplify the shipping process as part of a broader effort to keep pace with evolving customer demands. Underscoring that proactive approach, the carrier highlighted its blockchain platform, called TradeLens, currently under development in partnership with IBM.

In pursuit of supply chain technological innovations, the group also recently signed seven Indian startups to its OceanPro accelerator program, a collaborative rolled out in October 2018 with the goal of leveraging the benefits of blockchain, the Internet of Things (IoT), advanced analytics, and artificial intelligence (AI) on a larger scale for the development of unique end-to-end logistics solutions.

As competition intensifies, supply chain providers are looking for newer ways to bolster the value of their services. Maersk’s credit-tech offerings will pour enormous energy into India’s growing freight industry. The transport giant currently transports roughly 20 percent of containerized freight shipped in and out of the country.

Combined with other long-established advantages, the unique service offerings will undoubtedly place Maersk on a stronger footing in the resurgent market, which the carrier in a recent regional analysis called a “top trading destination” in the world.