SMEs Hardest Hit by Trade Finance Gaps
World Economy

SMEs Hardest Hit by Trade Finance Gaps

Small- and medium-sized enterprises are among the hardest-hit by the trade finance gap, a report said, adding that SMEs account for nearly 53% of all rejected trade finance transactions.
By contrast, 79% of the trade finance transactions for larger corporates are accepted, highlighted the latest Global Survey released by the International Chamber of Commerce Banking Commission, TradeArabia reported.
The 2015 Global Survey on trade finance underlines the impact of the trade finance gap on SMEs, the impact of regulation on correspondent banking, as well as positive trade finance trends, particularly with regards to export finance.
The trade finance gap is highlighted throughout the survey–citing compliance as a chief barrier to trade finance. Nearly 46% of the banks surveyed terminated correspondent relationships due to the cost or complexity of compliance, while 70% of respondents reported declining transactions due to AML/KYC (anti-money laundering/know-your-customer) requirements.
Furthermore, the percentage of respondents citing anti-financial crimes compliance requirements as a significant impediment to trade finance has increased from 69% last year, to 80% in this year’s survey. This trend is expected to continue, as nearly all (93%) of respondents expect compliance requirements to increase during 2015.

 Comparing Progress
“The Global Survey works as a snapshot of market trends–allowing us to compare progress from previous years and gauge global expectations,” said Vincent O’Brien, chair of the ICC Banking Commission Market Intelligence.
“This year that snapshot has highlighted the severity of the trade finance gap–which continues to be impacted by regulation, despite the low-risk nature of trade finance–and particularly its impact on SMEs. This is crucial given SMEs constitute over 95% of all firms and account for approximately 60% of employment worldwide.”
The results from the survey also show some positive trends in trade finance. Around 63% of respondents reported an increase in overall trade finance activity, with 61% of banks stating they have increased their capacity to meet trade finance. What’s more, 25% of respondents to the Global Survey on trade finance consider trade instruments supporting trade as involving more than 75% less inherent risk than conventional lending.

 Not All Doom and Gloom
The results from the Global Survey also reflected positively on export finance, with 79% of respondents in the industry claiming it remains a profitable business. The industry also observed a significant decrease in pricing, and even more so, fees in 2014.
“While the trade finance industry is certainly facing challenges and the trade finance gap is a clear issue, the results from the Global Survey on trade finance show that it is not all doom and gloom,” added O’Brien.
“The financial landscape is recognizing the importance of trade and, in addition to banks stating they have increased capacity to meet trade finance, we have an array of alternative lenders–such as specialist financiers, export credit agencies, and multilateral development banks–stepping up to fill the trade finance gap.”
Omar Khan, director, International Offices, Dubai Chamber said: “The survey has provided a comprehensive and insightful analysis of the major trends influencing the past, current and future of the trade finance industry.”
“These insights are relevant more than ever as we see the dynamics in global trade and finance change, with the EU facing some troubled time and the rise of economies of Asia and Africa. This survey also looks into the realm of Islamic finance, which is important not only to this region, but to the rest of the world as well, with the value of assets in Islamic finance sector expected to increase by 80% to reach $3.24 trillion in 2020,” Khan concluded.

Short URL : https://goo.gl/7q13Te
  1. https://goo.gl/8iy6ru
  • https://goo.gl/YPhPrN
  • https://goo.gl/dxuQoy
  • https://goo.gl/PNpxvx
  • https://goo.gl/itL2al

You can also read ...

An electronic stock indicator of a securities firm in Tokyo.
As investors come to terms with the impending end of easy...
Close to 40% of digital transformation initiatives will be supported by AI capabilities.
The digital economy in Asia-Pacific, or APAC, is expected to...
Maersk is expanding its competitive universe to include different types of companies.
The world’s largest container company will start looking for...
Most economists would agree that Italy needs faster economic growth if it is to resolve its public debt  and banking-sector problems in an orderly manner.
Italy’s economy is growing again, but it’s still the worst...
More Scots Jobless
Scotland’s unemployment rate rose to 4.5% in the final three...
Pak Current Account Gap Widens
Pakistan’s current account deficit widened 28.74% on a month-...
CBs May Top Inflation Targets
Not only will central banks meet their inflation targets, they...
NZ Says Pacific Trade Deal Will Boost GDP
New Zealand estimates a Pacific trade deal would boost its...