Digitalisation driving the future of trade finance for SMEs

If trade is the gear that drives the global economy, trade finance is the oil that keeps the equipment turning.

On a macro-level, trade finance is crucial in facilitating the movement of goods across borders. It helps generate investment and employment while ensuring the population's needs are met. Furthermore, trade finance enables companies to participate in global trade by providing cash flow and risk mitigation, finding new markets, expanding their business, and capturing new revenue streams.

While trade finance underpins every phase of the global supply chain and is pivotal for the economy's growth, the world faces a chronic and vast trade finance gap. According to the Asia Development Bank (ADB), the global trade finance gap widened to US$1.7 trillion in 2020, a 15% increase from US$1.5 trillion in 2018.



Not surprisingly, small and medium-sized enterprises (SMEs) continue to be most impacted by the trade finance gap. Although SMEs comprise just 23% of all trade finance applications, more than two in five trade finance requests rejected by banks were from SMEs.

The pandemic has weakened the financial situation of SMEs, and they continue to struggle to prove creditworthiness to traditional banks. They might be left not financed due to the perceived risks.

Banks also focus their funding on established relationships and businesses to lower default risks, a trend that has left many worthy SMEs without an option for trade finance. It limits their ability to grow their business and participate in global trade.

Read more: https://prnewsdistribution.co.uk/digitalisation-driving-the-future-of-trade-finance-for-smes


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