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SMEs Need Financing Alternatives to Access International Trade

Santiago Molina - Finkargo
Co-Founder and CEO


Sofía Hanna By Sofía Hanna | Journalist and Industry Analyst - Wed, 05/25/2022 - 09:37

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Q: What financing alternatives do Mexican SMEs require to enhance their growth in international markets?

A: International commerce requires trust between the supplier and the importer. Access to financing is also necessary throughout the entire supply chain, including production, international transit, payment of customs, taxes, inland transportation and warehousing until the buyer can profit from those goods.


For imports to take place, there must be institutions or entities that guarantee that both the exporter and importer can be trusted and that the capital is available to fund the entire process. The only financing mechanisms available to SMEs in these circumstances are their own funds or long-term loans from financial institutions, which do not necessarily adapt to their operations. There are few options to finance international transactions.


Mexican exporters have access to financing alternatives if they export to the US, Mexico’s largest market and recipient of 80 percent of Mexican exports. All other markets in the world are underdeveloped due to the lack of financing alternatives.


Q: Why did Finkargo adapt its services to the needs of SMEs?

A: Large companies already work with major financial institutions and do not need new players to help them. SMEs, on the other hand, have limited access to financing, especially in Mexico and Latin America. We want to allow SMEs to participate in international trade through financing. Globally, 90 percent of international transactions require financing, mainly in the short term


Q: How has Finkargo capitalized on free trade agreements (FTA) to benefit its clients?

A: FTAs provide transparency and facilitate the free movement of goods, services, capital, and people. USMCA and the Pacific Alliance are part of a new generation of economic blocks. About 50 percent of all Mexican imports come from the USMCA region, which also receives 80 percent of all Mexican exports. These numbers prove that the market works well, but there are great opportunities to increase SMEs access to this market, which is why the economic block has recently included a new chapter to support SMEs internationalization processes. This can potentialize the impact we can generate, as we can contribute to closing the trade finance gap for more SMEs that are preparing to enter global markets.


On the other hand, the Pacific Alliance represents less than 5 percent of Mexican imports and exports. There are huge opportunities of increasing trade in this economic block, and we expect recent regulatory harmonization of key economic sectors within the block will help make transactions a reality in a context where it has been difficult to integrate Mexico and Latin America due to the lack of regulatory standardization and productive linkages. Finkargo is setting its sights on the Pacific Alliance because we are trying to connect Mexico with Latin America and the rest of the world to diversify its exposure. 


Q: What tools does Finkargo offer to support its clients during difficult periods, such as the supply chain challenges?

A: The main difficulties supply chains face are high freight costs, reduced supply and longer transit times. These three issues have led to greater working capital needs. High freight costs have increased import prices by 10 percent, and on average, have impacted global inflation by 1.5 percentage points, while larger transit times are more expensive to finance. Also, companies now need larger inventories to cover their operations and must secure goods through advanced payments. Access to financing has become crucial. In this scenario, we help SMEs by providing liquidity to secure and buy more merchandise and diversify their supplier base.


Q: What role does Mexico play in Finkargo’s future plans?

A: Mexico is Latin America’s largest market in terms of international trade. Mexico exchanges around US$800 billion in imports and exports but has the second-lowest level of credit penetration in Latin America. Our business has two key components: access to financing and international commerce. We see a large opportunity to pave the path for SMEs to participate in international trade. We provide a key solution to grow their operations.


Q: How do Colombia and Mexico complement each other in your strategic plan?

A: These are two of the largest economies in Latin America, part of the Pacific Alliance and share the same language and cultural patterns. There are great opportunities for trade as the relationship between them represents less than 4 percent of Colombia’s exports and less than 1 percent of Mexico’s. They have some of the best connectivity in the region and have complementary economies. For example, Colombia exports light manufacturing and basic industry, while Mexico exports machinery, equipment and auto parts where we can complement our productive structures.


Q: What are Finkargo’s long-term plans?

A: We are about to launch operations in Mexico. Our long-term plan is to allow Mexican SMEs to integrate and de-risk international transactions and show to the world that Latin American SMEs are trustworthy buyers and suppliers that can participate in trade. Latin America represents less than 6 percent of global commerce and we are going to change that.


Finkargo is Latin America’s first import financing platform. Its goal is to give SMEs the opportunity to participate in international trade.

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