Supply chain finance (SCF) has sustained strong growth over the last two years, with international banks reporting an average annual SCF growth rate between 30% and 40%, according to recent research by capital solutions provider Demica.

The market, while expected to continue to expand, will see the pace of SCF growth average to around 20-30% per annum by 2015, and then to 10% by 2020.

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SCF, where short-term finance is provided by transaction banks to corporates so they can pay their suppliers, is regarded as a need-to-have financial product for corporate buyers by 90% of the bankers surveyed in Demica’s research.

The highest growth of SCF currently originates from the US and Western Europe, particularly the UK and Germany. The regions considered to have the most potential in the SCF market are Eastern Europe, India and China.

According to the research, one of the key driving forces behind the advancement in SCF is technology, particularly the development of e-invoicing systems. These are deemed as a significant market accelerator.

"The upward growth trajectory of SCF witnessed by global banks demonstrates the growing importance of this facility in the trade finance armoury," said Phillip Kerle, chief executive officer of Demica.

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"In addition to the working capital benefits, nowadays businesses are also placing greater emphasis on operational efficiencies and cost reduction. The increased transparency and visibility in payment processes facilitated by SCF will therefore prove to be a particularly valuable asset for suppliers and corporates alike," he concluded.

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