The long collection times of commercial invoices in Italy lead to a phenomenon whereby SME suppliers bank (without guarantees) large customers. This is a kind of 'shadow' credit and means that suppliers find themselves lending to their customers, at 30-60-90-180 days (depending on the due date of the invoice), and without any regulation. No covenants, no transparency obligations, no penalties or sanctions. The risk is enormous, especially if payment delays suddenly lengthen (as happened during the pandemic period), as the supplier will have no guarantee or parachute to get its liquidity back.
The latest report of the Supply Chain Finance Observatory of the Politecnico di Milano speaks clearly: trade receivables in Italy amounted to EUR 424 billion at the end of 2020. In 2021 they rose to the values of 2019, approaching 490 billion. This is a huge figure that almost equals the total stock of business loans granted by banks (EUR 660 billion in April 2022, according to Bank of Italy data).
This is evidently a 'frozen' endowment of liquidity that would be so useful to the Italian system, especially in a situation of prolonged uncertainty (energy price rises, supply chains still lagging behind) and which instead often stagnates in the folds of invoices collected with serious delays, not excluding the possibility that they may turn into uncollectable receivables.
The scenario described raises alarm and hides the damaging phenomenon for the real economy of 'shadow credit' chains, fuelled by all those suppliers (especially SMEs) who are forced to grant credit to their customers with payments that go well beyond the canonical 30-60 days, without incurring penalties or sanctions, thus acting as a bank for large private companies.
While waiting for more robust legislation to regulate the credit of large companies vis-à-vis suppliers with less bargaining power, fintech can offer some solutions to limit the liquidity crisis in the short and medium term.
Fintech, crowdfunding, private lending: the market proliferates with new solutions to rescue SMEs in liquidity crisis.
These companies offer businesses quick and easy support at a time when the measures taken by the government to tackle the problem are not sufficient to stem the phenomenon of 'shadow' credit.
To counteract the lack of liquidity, the new ways of disbursing and managing credit for businesses, conveyed by the use of blockchain technology and digital lending in both banking and finance in general, can therefore be a valid tool for combating the phenomenon.
In the field of corporate lending, alternative forms of financing to banks make it possible to
· mitigate the costs of finding matching parties
· achieve economies of scale in the collection and use of big data;
· achieve cost-effective and secure information transmission through e.g. blockchain technology applications;
· increase the level of efficiency, simplification and collaboration between all actors involved;
· reduce verification costs.
In conclusion, innovations in digital lending supported by responsible applications of blockchain technology are welcome; even more so, if relationships and partnerships between institutions, inventive banks and the best fintech companies should develop from these.
The risk, in fact, that access to credit, even if facilitated and accelerated by technology, could turn into stagnation in the debt exposure of small and medium-sized enterprises, which are often scarcely competitive and have a low capitalisation index and other weak structure indicators, is tangible and concrete at the moment. In this regard, close cooperation between SMEs, credit providers (whether traditional or alternative) and institutions, which is urgently awaited by the business world, seems to be increasingly important.