Fiducia, a technology-leveraged supply chain financing platform, recently rolled out the first-of-its-kind innovative solution, with the mission to catalyse the growth of Nigeria’s supply chain financing market, with a N12 trillion potential. In this interview, Imohimi Aig-Imoukhuede, CEO, Fiducia, spoke with Seyi John Salau about how Fiducia, as a marketplace provides suppliers access to low-cost financing while preserving the liquidity of corporate buyers. Excerpts:
Doing business in Nigeria is getting tougher by the day; give us the overview of the challenges that an average businessman or woman faces within the business environment in Nigeria?
The operating environment in Nigeria can be tough for businesses generally and specifically for smaller businesses. So, every initiative that is specifically designed towards easing the pain on businesses is a very good and far-reaching initiative. Challenges for businesses may include various things, not least of which is liquidity and cash flow. Among the things affecting businesses, the most striking are the commercial terms that they have with businesses that they themselves are dealing with. So, you find out that there’s a lot of cash locked up in these terms and they are unable to release this cash. Simply being able to release this cash would allow them to do more business, trade more, have more competitive pricing, and innovate in terms of what it is that they are offering their own customers. A business can improve simply by being able to unlock cash that is locked up in the supply chain. Fiducia comes in at this point to help sort the challenges that face these businessmen by helping to unlock cash flow that is locked up in the supply chain and this is also unlocked at best possible pricing. In other words, Fiducia as a digital marketplace brings together various parties onto the same digital platform; the Supplier, which oftentimes is the MSME, the Buyer, which oftentimes is the corporate organisation, and the Financier. In doing so, it allows the various parties to interact very quickly and safely as well. And the end result for the businessman or woman is that they are able to unlock cash flows at the best possible pricing.
You spoke about initiatives that ease the pain of businessmen and women and cash flow; so what is the unique offering of Fiducia?
Fiducia aims at all business sizes of suppliers; micro, small and medium. So, the small players would benefit from this whereas small players are typically ignored by most other solutions. Also, what makes Fiducia unique is that it is a marketplace which by definition means the best possible pricing. It is a marketplace where various financiers will each bid for the benefit of being able to finance a series of invoices. That is a very material advantage for the Suppliers on this platform as this leads to best possible pricing. Invariably, the financing will continue to improve as we continue to bring more financiers onto the platform such as developmental financial institutions and the like, thus creating a wide pool of funding options, which will lead to cheaper funding options for the Supplier. Furthermore, the Suppliers are able to unlock cash flows within a very short time, because the turnaround time on the Fiducia platform is 48 hours; all this without crippling collateral requirements.
Since the launch of the platform, how would you describe market adoption?
Market adoption has been good in the last few months. Initially, trying to convince various parties to do things differently was a challenge, but with product demonstrations and continuous engagement, there has been a remarkable change in acceptance by the various parties. Our narrative is very strong; I mean we are offering people cheaper financing at a faster turnaround time than they can currently get. This is an obvious reason for any CFO or business owner to take interest. We have seen that the market has come to accept or understand what we are offering, and increasingly the narrative about our product is getting stronger. As we continue in the coming months to expose this product to the market, we will continue to increase our communication through webinars, seminars, and speaking to our customers. We will continue to listen to what our customers require from us, and adapt ourselves to ensure we are providing those solutions.
Let’s look at the supply chain financing ecosystem in Nigeria. I would like you to give us an overview of the ecosystem and how Fiducia could change the dynamics?
The marketplace traditionally comprises the buyer, the supplier and a third-party financier. Without approaching the supply chain financing solution from the platform approach as we are doing, you would find out that suppliers and buyers are left to their own resources. In other words, if the supplier needs funding, it would have to seek financing from a financial institution by itself, on its own strength. This often leads to delays, which affect the delivery of goods and services to buyers. It is important to also note that the buyer is a stronger player than the supplier. They are bigger and have better financials, and are able to access financing at cheaper rates. So, the buyer is in a stronger position compared to the supplier. What a digital supply chain financing solution typically does is that it enables the suppliers to enjoy the relatively stronger position of the buyer. It does this by allowing each supplier to access financing at a rate that is close to the rate which the buyer enjoys. Typically for a supplier who has dealt with all kinds of difficult pricing, if he is able to get pricing at the price of the blue-chip buyer, everything will change. Not only is he able to get that pricing, he is also able to get that pricing in 48 hours. It’s a material change for every business man or woman. This is something that has happened across other markets in the world and we have now brought it into the Nigerian market.
I would like you to speak to one or two practical solutions that you have offered since you began business?
We have different variations of our offerings and they depend on the parties coming together to enjoy a particular benefit. For example, one of the popular solutions that we currently offer involves providing suppliers with financing on the strength of the pricing of the buyer. There are various other versions that we have seen and developed, but this is one of the simplest and it is well understood by most players coming on our platform. As such it is the most requested solution.
How would you estimate the gap that you have been able to bridge since you started business?
The financing gap is large; we haven’t even dealt with that yet. In the few months that we have been in operation, we are trying to ramp up our influence and, of course, we are getting there. There’s still a long way to go, there’s a whole lot of gap to fill. What we are doing is ensuring that the market picks up on our product. Obviously, Nigeria is a big market; so, there’s a lot of need for this product in Nigeria. We want to increase the awareness and understanding of our product to an extent, and then we can start looking at how we can offer similar solutions to other markets.
What are your plans for expansion within Africa?
We are currently in talks with some developmental financial institutions (DFIs) in Africa regarding working together or collaborating. We’ve signed an MoU with Afreximbank financial partners and this would allow us to collaborate in such a way that we can bring more of the kind of financing that our MSMEs will enjoy. We are looking at how we can also assist our MSMEs to go outside of our current market and enjoy trade within Africa. This is something that is very important to us. We hope that within the next few months, we will be able to proudly state the benefits or solutions that we have been able to put together.
For businesses that are in rural or grey areas of which there are many in Nigeria, how do you hope to impact such businesses?
This is a good question. What is most important is getting them to access liquidity and capital even though they are in the grey areas. This is a substantial change from what they are used to. What happens currently when they require funding is that they would present themselves to the financiers and on their own strength, they would be able to access financing at a certain rate and a set of conditions. Whereas, what our digital marketplace platform does is that it would allow them to access capital on the basis of the strength of the buyer that they are supplying to – the buyers that have validated their invoices, the buyer that will commit to pay on these invoices, the buyers that will confirm delivery, who will confirm that the invoices have passed through their internal processes. These small businesses are immediately able to have the buyers validate their invoices; the credit risk is more around the buyers than around themselves. That’s a major change for them and we hope this would draw them out and allow them access capital at the pricing they deserve as opposed to what they have been used to in the market.
What do you think are the challenges on your pathway to growth as a business?
Challenges around growth in this sector include; our ability to present our solution to the market, in the way the market understands and accepts. Apart from that, there is the regulatory framework around the entire sector, which needs to be as supportive as possible so that this solution can reach those it is intended to reach; particularly those that are currently under-banked and under-served. We are confident from what we have seen that the regulatory authorities are very interested in having this kind of solution work in Nigeria. They have seen it work in various other regions including Africa, South America, Europe, and it is good to note that there is a lot of interest in making this solution work in Nigeria.