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The Structured Commodity Finance or SCF is a cultured and knowledgeable commodity-based trade finance method, that is particularly used for the finance transactions, along with the import, export, or foreign trade of products/ material. It is especially used for commodity trading industries and for the procedure of commodity who does business for the growth of the market.
The Structured Commodity Finance is mainly used in the three types of commodity groups-
Metals and mining
Soft commodities or Agricultural crops
It has been more than 25 years for the introduction of the structured commodity finance in the society and still it plays an important role in the trade finance markets. The structured commodity finance delivers liquidity management and also reduces the risk for the purchase, production and sale of the raw, semi-processed and semi-finished materials.
The funding for structured commodity finance involves a different types of toll finance, pre-export finance, counter trade finance and other multiple finances. It can be implemented at a small part or all of the commodity trade value chain that is, from producer to distributor and then to processor, and further more to the physical traders who buys and transport the commodities in domestic and international markets.
The establishment of the structured commodity finance is basically on the performance risk, so mainly it is suited for the companies running their business at a higher risk markets and industries.
The Structured Commodity and Trade Finance Includes-
Letters of Credit
Oil and Gas Finance
Barter and Inventory Finance
Export credits (to reduce the risk to funders, when providing trade or supply chain finance)
The International Finance Corporation (IFC’s) Structured Trade and Commodity Finance initiative (STCF) is a common solution to continue and expand the accessibility of the financing for the trade of difficult commodities in the upcoming market.
The STCF is an adjustable tool which allows international finance corporation (IFC) to involve in the biggest challenging markets with gaps of systemic financing gaps in collaboration with the banking partners of the private sector. While, it enables IFC and its collaborators to manage risk through the trending financing adjusted to the fundamental commodity transactions.
Commodity and Trade Finance at IFC-
Global Trade Liquidity Program (GTLP)
Global Trade Finance Program (GTFP)
Critical Commodities Finance Program (CCFP)
Global Trade Supplier Finance (GTSF)
Structured Trade and Commodity Finance (STCF)
Working Capital Solution (WCS)
Banking On Women (BOW)
Global Warehouse Finance Program (GWFP)
The structured commodity trade finance assists to deal life cycle, due to the ability of providing topmost security to all the parties to a transaction – like traders, producers and lender.
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