Trade Financing and Supply Chain Performance of Multinational Manufacturing Firms in Kenya

Abstract

This study aimed to determine the trade finance modes adopted by manufacturing firms in Kenya that are multinational in facilitating international trade transactions and the relationship they had on performance of their supply chains. The study employed a descriptive research design. A self-administered questionnaire was used in collecting data from 37 respondents making a response rate of 88.1%. This was a sufficient and satisfactory representative of the target population. The study focused on variables such as post and pre shipment financing, letters of credit, loans and overdrafts, advance payments, documentary credit, factoring and forfeiting and open accounts as independent variables and customer satisfaction, product quality, cycle time, financial and cost measures, flexibility, global market share and profitability as dependent variables. According to the study findings, there are four major trade finance modes that have been adopted by these firms which include; Documentary Collection, Open Account, Advance Payments, and Letters of Credit. Other modes are Bank Guarantees, Loans and Overdrafts as pre-shipment and post-shipment financing and Bills Availization. The study results also showed that trade financing had significantly influenced the performance of the supply chains of multinational manufacturing firms as it led to increased export volumes and profits. It made the supply chain environment friendly, diversified suppliers and enhanced relationships, product quality, reduced leads time and enhanced customer satisfaction. The firms have been able to mitigate the risks associated with international trade transactions, reduced costs, achieved business growth, increased their profits, improved overall performance of the firms hence gained a competitive advantage. It was recommended that since the manufacturing sector is the engine of economy the government should extend support to multinational manufacturing firms in accessing trade finance. One major limitation was difficulty in getting information from government offices. Further study to be done on the challenges faced by these manufacturing firms in accessing trade finance and how to overcome them.