Impact Financing with Deep Tier Financing An open protocol for the - - PowerPoint PPT Presentation

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

Delivery Issue & acceptance Portfolio of invoices Payment reconciliation and scoring of invoices Payment

• Sell

Invoices Payments Financing

+

Repayment financing

*

Receivables Financing - Expanded Scheme

12 Delivery Issue & acceptance SPV Portfolio of invoices Payment reconciliation and scoring of invoices Initial Payment

• Sell

Deferred Payment / RMR Invoices Payments And / Or Financing Fund

+

Repayment financing

1 2 3 4 5 *

Senior debt Junior debt Mezzanine Junior equity Equity Guarantee DeFi Securization

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

(SPV to distributor)

Risk Margin Retention (RMR)

(differed payment from SPV to distributor)

$ 100 $ 4 $ 1 $ 80 $ 15 If 10 equal invoice $ 1.000 $ 40 $ 10 $ 800 $ 150 (expected loss 15%*) 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

Client)

Expected payment of RMR (SPV to distributor) Actual payments of RMR (SPV

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

Delivery Issue & acceptance SPV Portfolio of invoices Payment reconciliation and scoring of invoices Payment

• Sell

Invoices Payments Financing Investors

+

Repayment financing

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

• 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 Distributors / Anchors

• 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

Benefits to MSME’s

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