Jordan’s supply chain finance revolution fuels SME growth and regional trade ambitions

Jordan is undergoing a transformative shift in its business landscape as supply chain finance (SCF) drives SME growth, enhances competitiveness, and positions the country as a regional trade hub through digital innovation and international collaborations.

Jordan is witnessing a significant transformation in its business environment, driven by the growing prominence of supply chain finance (SCF). Traditionally known as a trade crossroads, Jordan’s commercial landscape ...

is now evolving digitally, with SCF playing a pivotal role in supporting the country’s economic backbone—its small and medium-sized enterprises (SMEs).

SCF’s importance extends well beyond enhancing individual company cash flows. At a macroeconomic level, a vibrant SCF ecosystem fosters competitiveness by formalizing transactions, boosting tax compliance, and strengthening the industrial sector. These improvements not only facilitate smoother business operations but also enhance Jordan’s appeal as an investment destination by demonstrating a mature, secure, and technologically advanced financial sector.

For SMEs, which constitute over 99% of private enterprises and employ more than 60% of the workforce, SCF addresses one of their most pressing issues: delayed payments. By converting approved invoices into immediate cash, SCF unlocks essential working capital without adding debt. This liquidity helps businesses pay employees, purchase raw materials, fulfil new orders, and invest in growth opportunities. A crucial sector, SMEs confront a financing gap estimated at around JD 3 billion, making the adoption of SCF solutions particularly urgent.

Several financial tools underpin SCF’s transformative potential. Invoice financing and reverse factoring shorten cash conversion cycles, allowing businesses to invest in innovation and technology, thus boosting their competitiveness. For larger companies, SCF enables extended payment terms while ensuring suppliers receive timely payments, mitigating supply chain risks and fostering robust partnerships.

Recent developments in Jordan’s SCF landscape reflect concerted efforts among banks, government bodies, and fintech innovators. The Central Bank of Jordan (CBJ) has taken a proactive stance, initiating policies that encourage the advancement of SCF while promoting financial inclusion. Notably, the Supply Chain Finance Challenge launched by JOIN Fincubator, a fintech incubator affiliated with JoPACC, in partnership with GIZ, exemplifies coordinated efforts to develop innovative SCF models tailored to Jordanian SMEs.

International collaboration has further accelerated progress. A key milestone was the conference “Unlocking Trade Potential: Factoring & Supply Chain Finance Unveiled,” co-hosted in Amman by the European Bank for Reconstruction and Development (EBRD), Factors Chain International (FCI), and the Association of Banks in Jordan. The event underscored the critical role global institutions play in training, capacity building, and knowledge sharing, supporting Jordan’s alignment with international regulatory standards in factoring and reverse factoring.

Several Jordanian banks have launched initiatives to expand SCF offerings. The Housing Bank introduced the country’s first comprehensive SCF programme, offering reverse factoring through integration with CreditPlus, Jordan’s pioneering digital SCF platform. This initiative aims to empower SMEs with more affordable and sustainable financing options, supporting cash flow and job creation. Similarly, Jordan Kuwait Bank, in partnership with USAID, is developing a sustainable SCF platform to provide flexible, cost-effective financing, addressing challenges like limited SME access to affordable credit and delayed cash conversion.

Additionally, major financial institutions like Arab Bank utilise advanced digital SCF platforms that allow businesses to optimise cash flow by extending payment terms to suppliers while providing early payment options. These platforms feature secure online payments and seamless invoice management, promoting efficiency and reducing supply chain risks.

Despite these advances, challenges remain. Awareness among SMEs about SCF’s benefits and mechanics is limited, leading to mistrust or unfamiliarity with these financial tools. The uneven adoption of digital platforms hampers the creation of a fully integrated SCF ecosystem, vital for efficient transactions and data sharing. Regulatory frameworks, although improving, require further development to offer clear guidance, protect stakeholders, and encourage innovation while maintaining financial stability.

Enhancing education and training programmes through local banks is essential to increase SME understanding and capacity in using SCF. Strengthening regulatory clarity and specificity—covering factoring, receivables financing, and digital SCF platforms—will provide a safer, more transparent environment conducive to growth. Advancing digitalisation through emerging technologies like blockchain and artificial intelligence could improve transparency, lower operational costs, and boost overall efficiency.

Moreover, fostering collaboration among banks, fintech companies, technology providers, and government agencies will be crucial in building a synchronized SCF ecosystem. Aligning supply chain finance solutions with Jordan’s green finance initiatives also presents an opportunity to attract environmentally conscious investments and promote sustainable business practices.

These multi-dimensional efforts signify that supply chain finance in Jordan is not merely a financial technique but a strategic tool for empowering SMEs, stabilising the economy, and promoting sustainable development. With continued commitment from policymakers, financial institutions, and the business community, SCF can become a powerful lever for Jordan’s economic resilience and heightened regional trade prominence.

Source: Noah Wire Services