The lack of availability of trade finance is severely hindering the trade opportunities of small businesses in developing countries in particular, according to a co-publication launched by the WTO and the International Finance Corporation on 3 July at the Global Review of Aid for Trade.
The publication looks into the reasons for the growing reluctance of the global financial sector to engage in this form of financing and presents case studies of capacity-building programmes organized by the international community to address this issue.
Although trade finance is a particularly safe form of finance, it is commonly perceived to be subject to high risks. Since the 2008-09 economic crisis, in particular, international banks have become less willing to provide trade finance guarantees, particularly in developing countries. This has reduced the capacity of local banks to provide credit to businesses wishing to trade, leading to a significant gap between the demand and supply of trade finance.
This gap affects SMEs in particular, as smaller traders are more likely to see their requests for trade finance rejected than any other category of the firm. In two-thirds of cases, following an unsuccessful trade finance request, these small traders do not attempt to seek alternative financing, simply because it is not available.
Seven case studies describe the efforts of international organizations, such as the World Trade Organization and the International Finance Corporation, and multilateral development banks to respond to this issue.
Read and download the report: Trade finance and the compliance challenge.
Original source: WTO
Published on 05 July 2019
