Jordan’s business landscape is evolving, with supply chain finance (SCF) at the forefront of this transformation.
For decades, Jordan has served as a trade crossroads; today, this crossroads is digital, affecting all businesses—particularly the SMEs that constitute the backbone of the country’s economy.
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The significance of supply chain finance (SCF) extends well beyond improving individual company balance sheets; it serves as a vital macroeconomic instrument. At the national level, a strong SCF ecosystem enhances overall competitiveness by formalizing transactions, increasing tax compliance, and reinforcing the industrial sector. It positions Jordan as a more attractive destination for foreign investment by showcasing a mature, secure, and innovative financial environment. For small and medium-sized enterprises (SMEs), SCF is essential. It directly addresses their most pressing challenge: the exhausting delay in receiving payments for delivered goods and services. By converting approved invoices into immediate cash, SCF unlocks working capital that can be used to pay employees, purchase raw materials, fulfill new orders, and invest in growth—all without incurring additional debt. This support is critical for a sector that comprises over 99% of private enterprises, employs more than 60% of the workforce, and faces an estimated JD 3 billion financing gap.
Supply Chain Finance (SCF) provides a transformative solution by leveraging tools such as invoice financing and reverse factoring. It allows businesses to convert receivables into immediate cash, thereby significantly shortening cash conversion cycles. This improved liquidity enables investment in growth, adoption of new technologies, and enhanced competitiveness. For larger corporations, SCF supports extended payment terms while ensuring suppliers receive timely payments, reducing supply chain risks and strengthening partnerships.
Jordan has made significant progress in developing its Supply Chain Finance (SCF) ecosystem through collaboration among financial institutions, government agencies, and innovative fintech companies. Notably, the Central Bank of Jordan (CBJ) has played a proactive role in fostering a favorable environment for SCF. Its strategic initiatives reflect a strong commitment to modernizing the financial sector and promoting financial inclusion.
A key development is the Supply Chain Finance Challenge launched by JOIN Fincubator (JoPACC's fintech incubator) in partnership with GIZ. This initiative involved key stakeholders, such as local banks to co-create practical and innovative SCF models tailored to Jordanian MSMEs.
International partnerships are accelerating progress as well. A key milestone was the high-profile 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. This event emphasized the crucial role of global institutions in delivering training, capacity building, and knowledge transfer on international best practices for factoring and reverse factoring, thereby supporting the alignment of Jordan's regulatory and supervisory frameworks with global standards.
Despite promising advancements, Jordan's supply chain finance (SCF) landscape faces several challenges requiring strategic focus to realize its full potential. A primary obstacle is the limited awareness and trust among MSMEs regarding SCF benefits and mechanisms, as many smaller businesses remain unfamiliar with these innovative financing options or are skeptical of their reliability. Moreover, while digital platforms are emerging, uneven digital adoption across businesses hinders the development of a fully integrated and efficient SCF ecosystem, which depends on seamless digital transactions and data exchange. Additionally, although regulatory efforts are in progress, there is an urgent need for robust, tailored frameworks specifically addressing SCF. Such regulations must provide clarity, protect all parties, foster innovation, and ensure financial stability to create a supportive environment for SCF growth.
Supply Chain Finance in Jordan is more than a financial term; it is a crucial strategy for empowering MSMEs, enhancing economic stability, and promoting sustainable growth. Despite significant progress achieved, a coordinated efforts from policymakers, financial institutions, and businesses are essential to strengthen Supply Chain Finance (SCF) in Jordan. Ongoing educational programs and workshops through local banks are important to raise awareness and build capacity among MSMEs, ensuring they recognize the substantial benefits of SCF. Concurrently, enhancing regulatory frameworks through the establishment of clear, specific legislation and guidelines—covering factoring, receivables financing, and digital SCF platforms—is crucial to provide clarity and security for all stakeholders. Promoting the widespread adoption of digital platforms and advanced technologies such as blockchain and AI will improve transparency, reduce operational costs, and increase efficiency. Additionally, fostering collaboration among banks, fintech startups, technology providers, and government agencies is key to developing an integrated and supportive SCF ecosystem. Lastly, aligning SCF with Jordan’s green finance initiatives can attract investment and encourage environmentally responsible business practices, ensuring sustainable and inclusive growth, all of these will enable Jordan to harness SCF as a powerful driver of a more resilient and prosperous economy, reinforcing its position as a dynamic and attractive hub for trade and investment in the region.
