The International Finance Corporation (IFC) is extending a US$75 million loan to Li & Fung and its fintech affiliate Air8 to support the growth of small and medium-sized enterprises (SMEs) and digitalization in supply-chain management in Asia.

Li & Fung is a Hong Kong-based global supply-chain services provider in the apparel and general merchandise industries.

The senior credit facility will support Li & Fung’s working capital needs and Air8 in expanding supply-chain solutions and financing services for apparel and general merchandise suppliers, particularly SMEs.

As part of its efforts to drive sustainability, IFC will also provide guidance to improve environmental and social practices and performance among suppliers in Li & Fung’s network.

The lack of working capital remains a key challenge for SMEs globally. Supply-chain finance improves their cash flow and reduces financing costs by allowing early payment of invoices.

IFC’s investment aims to increase supply-chain finance opportunities for businesses, driving trade, employment, and economies in developing countries in Asia including Bangladesh, Cambodia, China, Indonesia, Sri Lanka, and Vietnam.

Victor Fung, honorary chairman of Li & Fung and chairman of Fung Investments, says: “IFC’s support will help Li & Fung accelerate its target vendors’ access to supply-chain funding and capital, which is not readily available for many smaller businesses in Asia, including medium-sized enterprises now playing an increasingly important role as Asia’s supply chains shift and reconfigure in a fast-changing environment.

“Strengthening these businesses will help fuel growth and create jobs in the apparel and merchandising sectors, as well as create a more sustainable supply chain that benefits all parties involved."

The apparel and footwear sector is a cornerstone of many economies in Asia, employing around 60 million workers. However, the sector is vulnerable to economic shocks, with financing gap being one of the primary barriers to its growth in the region.

Li & Fung, alongside Air8, aims to mitigate the challenges associated with supply-chain financing. At the same time, the group aims to advance the environmental, social and governance (ESG) agenda and enhance sustainability across the global supply chain.