COVID-19 liquidity crisis: Can reverse factoring be the solution to SME financing in Mexico?

Abstract

Objective: The purpose of this research is to identify the determinants of Reverse Factoring (RF) from the perspective of all parties involved, that is, buyers, suppliers, financial institutions (FI) and public administration, and to develop a proposal that allows a efficient deployment of financial resources to SME suppliers in Mexico, during the containment measures derived from the Covid-19 pandemic. Methodology: A case study was conducted through in-depth interviews with eight FIs in Mexico that represent between 60% and 80% of the factoring volume operated in the country. To interpret the information obtained in the interviews, this work uses the content analysis technique with the support of MAXQDA Analytics Pro 2018. Results: The research identifies the determinants of the FI and highlights the key elements to propose a comprehensive financing solution based on both the FI and a working capital credit program, and considers aspects of cooperation that they go beyond the traditional literature, which has focused on operational aspects. Limitations: As in any case study, it is not possible to generalize the conclusions to all FIs without making adjustments based on their profile and context, so the verification of the theory must be carried out through other studies.Practical implications: Based on these results, both FIs and the public administration can actively support the rescue of more than 120,000 SMEs and protect up to 5.3 million formal jobs, thus contributing to the economy and promoting the banking of SMEs on a large scale across the country.