The FINANCIAL — IFC, a member of the World Bank Group, and PUMA, one of the leading sports brands, have entered into a partnership to provide financing to PUMA’s suppliers in emerging markets.
This innovative program, which is the first to be signed by IFC with a European brand, will offer financial incentives for suppliers to improve environmental, health and safety and social standards. In its first phase, the program will be rolled out in Bangladesh, Cambodia, China, Indonesia, Pakistan and Vietnam, according to IFC.
IFC will adopt a financing structure with tiered pricing of short-term working capital, offering lower costs for those suppliers that achieve a high score in PUMA’s supplier rating system. The ratings are assigned based on PUMA’s monitoring of suppliers’ adherence to its social and environmental standards through an auditing process.
“This financing program enables our suppliers to leverage their relationship with us and benefit from PUMA’s strong reputation and financial position”, said Lars Soerensen, PUMA’s Chief Operating Officer. “This is the first program in our company that rewards a supplier’s rating within PUMA’s environmental and sustainability program through related fees.”
Sérgio Pimenta, IFC Director of Manufacturing, Agribusiness and Services said, “This agreement with PUMA advances IFC’s efforts to encourage small and medium companies such as PUMA’s suppliers to improve environmental and social sustainability while achieving strong financial results”.
Ball Planet, a small and medium enterprise with production facilities in China, is the first supplier to join the program. “We are keen to start using this financing facility, since access to affordable financing is always a challenge. This innovative program will not only help us improve our cash flow, but will also provide us with a financial incentive to improve our environmental, health and safety and social standards, which will ultimately reduce our operating costs and enhance our performance”, said Ken Hong, Ball Planet General Manager.
PUMA and IFC launched this initiative in partnership with GT Nexus, a cloud-based business network and platform for global trade and supply chain management. The platform enables participants to operate against a core, real-time set of information across multiple supply chain functions. This optimizes the flow of goods, funds and trade information.
IFC provides financing to ready-made garment and footwear suppliers through its Global Trade Supplier Finance (GTSF) program, which provides working capital to suppliers backed by receivables from international buyers. Supplier finance is a scalable way for suppliers in emerging markets to access affordable financing for their receivables over a period defined by the terms of credit. Established in 2010, IFC’s GTSF program is a $500 million multicurrency investment and advisory program that provides short-term finance to emerging-market suppliers and small and midsized exporters.
Globally, the textile, clothing and footwear industry employs about 60 million people, many of them young women, according to estimates by the International Labor Organization (ILO). IFC invests in this sector because it is a provider of formal jobs for low-skilled workers that can make an important contribution to poverty reduction in developing countries. IFC’s support to the industry includes its engagement through the Better Work joint-venture program with the ILO. Better Work, operational since 2009, aims to improve both compliance with labor standards and competitiveness in global supply chains.
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