Supply chain finance (SCF) — also known as reverse factoring — is one of the most mutually beneficial working capital tools available in the UAE. It allows buyers to extend payment terms to suppliers without harming those suppliers cash flow, and allows suppliers to access early payment at the buyer's lower cost of capital.
How Supply Chain Finance Works
In a supply chain finance programme, a buyer sets up an SCF facility with a bank. When the buyer approves an invoice, the supplier can opt to receive early payment from the bank — at a discount reflecting the buyer's creditworthiness, not the supplier's. The bank then collects the full invoice amount from the buyer at the agreed payment date.
The key innovation is that the financing rate is based on the buyer's credit rating, not the supplier's. A strong buyer can effectively extend lower-cost financing to its entire supplier base.
Benefits for Buyers
For the buyer, SCF enables extended payment terms — from 30 to 60 or even 90 days — without damaging supplier relationships. This improvement in days payable outstanding (DPO) frees significant working capital.
UAE corporates and government entities that have implemented SCF programmes have found it improves supplier loyalty, reduces procurement costs, and strengthens supply chain resilience.
Benefits for UAE SME Suppliers
For UAE SME suppliers to large buyers, joining an SCF programme provides immediate access to cost-effective working capital. The early payment option is exercised invoice by invoice — suppliers choose which invoices to accelerate and which to let run to standard terms.
The financing rate on SCF programmes in UAE typically ranges from 3-6% per annum — significantly cheaper than most SME overdraft or working capital loan rates.
UAE Banks Offering Supply Chain Finance
Several UAE banks have established supply chain finance platforms: Emirates NBD, Standard Chartered, and Citi are among the most active SCF providers for large buyer programmes.
Gulf Oasis Commercial Brokers assists UAE buyer companies in setting up SCF programmes and assists UAE SME suppliers in identifying and accessing existing programmes offered by their major customers.