The rise of alternative lenders
The good news is that alternative lenders have emerged in the last 10 years that are leveraging alternate data points to assess creditworthiness of SMEs. The lenders include non-bank financial institutions, crowdfunding platforms, peer-to-peer lenders (P2P), private lenders and family offices.
However, they may not fully address SMEs’ needs. For instance, non-bank financial institutions do not offer the full suite of banking services, such as payment and foreign exchange services, which SMEs need for cross-border trades.
In addition, non-bank lenders, unlike banks, do not have full visibility and control of the bank accounts used by borrowers. This means, they do not have access to monitor the “health” of the borrower, nor have the ability to take control of any assets in the account, should the borrower default. So to mitigate risks, they may levy even higher interest rates for SMEs with poorer credit scores.
For traders, by traders
So in spite of the increased options, there remains a critical global trade finance gap. The Asian Development Bank estimated it to be at US$2.5 trillion in 2022 (up from US$1.7 trillion in 2020).
Based on this figure, Oceanus estimates that US$151 billion to be related to food trade. This is an enormous opportunity for growth — for lenders and borrowers alike.
What is standing in the way of more affordable financing?
After 16 years of being in the food trade business, we know it boils down to:
- Lenders having no access to reliable commercial, trading and finance data
- Lenders having little control over what happens in the complex international supply chain.
To address this, we’ve spent the past few years developing a seamless platform for trade financing that we believe creates a win-win situation for lenders and borrowers.
How ODIN works
ODIN Pay and ODIN Finance form the backbone of the platform.
The former streamlines complex cross-border payments processes and digitises trade documents like invoices and third-party bill of laden, which is a requirement by Singapore law. Using ODIN Pay, SMEs can open multi-currency virtual accounts, and even lock in favourable foreign exchange rates with FX forwards and options.
The transactional payment data generated is then utilised by ODIN Finance for credit risk assessment to provide innovative financing solutions. This gives the lenders on our platform access to granular data for risk assessment — greatly reducing their acquisition costs.
So the more payments an SME makes on ODIN Pay, the more data will be collected for lenders, enabling them to gain confidence in financing the SME.
Amplifying the effects of ODIN
Making the digital network more powerful are ODIN Market and ODIN WMS.
ODIN Market connects purchasers and suppliers through trade facilitation. Customers entrust Oceanus, a Singapore-listed, publicly-traded entity, with their goods or their buying requirements, and we play matchmaker for them. Our network of 23 countries allows us to fulfil orders by sourcing from trusted suppliers efficiently.
The result: more trade i.e., more cross-border payments i.e., more transactional data for ODIN Finance.
ODIN WMS adds data to our platform too. Our proprietary Warehouse Management System digitalises warehouses, enabling real-time tracking of physical goods into and out of the warehouse.
This real-time data, coupled with transactional payment data from ODIN Pay, feeds into ODIN Finance. Lenders can access the additional data points from WMS partners to make even more accurate risk assessments.
The result: lenders offer better financing rates for borrowers, which encourages more trade volumes and frequency, which generates more data for ODIN Finance. The virtuous cycle then continues.
