Journal of Applied Finance & Banking

Sustainable Finance through Trade Receivable Exchange: Evidence from Bangladesh

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• Abstract

   

  A large amount of money in the economy remains tied in the form of trade receivables that are created from the business to business (B2B) transactions among the firms. Firms have already invested their funds in the business activities that generate the invoices (trade receivables). Firms generally wait for 30 days, 60 days, 90 days and so on for the payment of the invoices. But most of the firms often cannot afford this long wait-time that leads to business losses, lost business opportunities and others. Particularly MCSMEs (micro, cottage, small and medium enterprises) cannot bear this lost opportunity cost. 51 percent of MCSMEs close business due to the lack of finance. However, this financial constraint can be catered with the help of the encashment of trade receivables through TRX (trade receivable exchange) digitally (not with conventional paper money). The large corporates may also avail this mode of financing. The study explores how firms may apply this innovative financing digitally to address their financial needs that may facilitate their sustainable development. The proxies include return on assets (ROA), return on equity (ROE), current ratio (CR), internal growth rate (IGR) and sustainable growth rate (SGR).

   

  JEL classification numbers: G0, G2, G3, G30, G300, G32, O0, O1, O12.

  Keywords: Encashment, Trade Receivables, B2B, TRX, Digital Financing, Sustainable Development, Sustainable Financing.