Beating The Risks of Expanding Into Emerging Market IT Channels

For IT vendors, emerging markets are risky. Local regulations, cultural differences, local currencies, channel liquidity, and settling disputes complicate such plans. Fortunately, a new generation of channel finance solutions is smoothing the journey.

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The emerging market growth trend

Emerging markets are becoming the engines powering global and regional trade, growing at an annual rate of 4.2% (IMF), versus 1.7% in mature economies, and contributing two-thirds to global growth.

India's heavy investments in its technology sector, China's focus on modern healthcare, Brazil's ambitions for green energy, and the rise of mobility among African countries—digital technology enables strong growth in emerging markets. Technology vendors are changing how they tap into those markets through supporting local IT channels.

"For decades, technology was sold through various hubs around the world, and the channel effectively stopped there," says Boris Todorov, Executive Vice President of WeFi's Client Solutions Group. "But what we have seen is that IT vendors have established onshore presence in several countries with the goal of developing local channel programmes."

Emerging Market Blues

However, establishing presences in emerging markets is hard, expensive, and risky to local complexities.

"Emerging markets bring several challenges, starting with import regulations, taxes, local currency risks including convertibility, legal risks, banking regulation, compliance, and credit risk. All of the listed areas are subject to changes, which can impact the other areas; hence the complexities and resources required," says Todorov.

Vendor channel programmes must accommodate and manage challenges like credit checks, legal agreements, currency fluctuations, negotiations around delivery and receivables, and disputes to reap expansion rewards. Yet, traditional channel finance companies often lack the scope or flexibility to help.

How Channel Finance Derisks Emerging Markets

A new generation of channel finance fintechs are filling this gap. For example, WeFi develops managed vendor channel programs that include legal contracts, easy access to credit, local currency management, buyer vetting, receivables forecasting, and even ensuring vendor customers have the connectivity to access these services.

"We address the issues inherent to different channel finance situations so that sellers and buyers can focus on their pure business," says Todorov. "Emerging market resellers are excited to join these managed channel programs because they can access longer terms and higher credit limits that can be calibrated with minimal usage of insurance or reseller collateral. Vendors and creditors vastly simplify their administration and oversight. For example, treasurers can use our platform data to predict future demand and potential payment delays accurately."

They combine human expertise supported by proprietary technologies such as WeFi's IZZI platform. These specialised platforms deliver innovative solutions that streamline channel finance processes, introduce new finance technologies, and facilitate complex deals and programs.

"In 2024, we have seen and financed a number of large-AI related deals, which have been split between developed and emerging markets, and which require longer terms, specific credit lines and structures which often take risk on the final customer," says Todorov. "The shift from traditional channel finance is continuing. Channel finance solution providers stay on top of these trends by working closely with their clients who require customised structured solutions."

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For more information about WeFi Technology Group visit: https://wefitec.com/

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