Trade finance availability:
Gaps increase in emerging economies
Manila, Philippines - Global availability of trade finance improved
in 2014 but gaps were increasingly pronounced in emerging economies,
including in Asia, driven by banks' decision to move away from high-risk
markets, said new Asian Development Bank (ADB) survey of banks and
companies.
Head of trade finance at ADB, Steven Beck said, "The global trade
finance gap was estimated at $1.4 trillion for 2014, of which around
half was in developing Asia. Trade continues to be the engine of growth
and employment in the region, so addressing the financing gaps will be
critical to promote growth and job creation especially in the more
challenging markets."
Banks highlighted the rising costs and complexity in complying with
regulatory requirements to prevent financial crimes, including money
laundering and terrorism finance, as a top impediment to trade finance,
partly due to the lack of clarity on their implementation.
The impact of this was felt most in Africa, the Russian Federation,
Central Asia, and North America. The study also found that small and
medium-sized enterprises (SMEs) were consistently underserved by
financial institutions and faced the highest rejection rates for trade
finance.
Higher prices for trade finance accelerated in the second half of
2014. With compliance measures expected to tighten further, the study
said that this will put more pressure on economies already experiencing
gaps in access to financing, with SMEs particularly affected.
Companies surveyed said that if trade finance available to them was
doubled they would significantly boost production and exports, hire more
staff, raise salaries, and invest in other business, highlighting the
critical importance of trade credit to economic growth.
With the Trans-Pacific Partnership and ASEAN Economic Community
coming online over the next few years, demand for trade finance could
rise and guarantees offered by export credit agencies, and multilateral
development banks such as the ADB, will play a vital role in realizing
maximum potential from these new opportunities for enhanced trade,
growth and job creation, the survey said.
ADB's Trade Finance Program (TFP) closes market gaps for trade
finance by providing guarantees and loans to banks to support trade.
Since 2009, TFP has supported over $20 billion in trade through more
than 10,000 transactions. TFP operates in the most challenging markets
throughout Asia and expanded to Myanmar in October, 2015. TFP has
supported over 6,000 SMEs since 2009.
The survey conducted earlier this year aims to understand where and
why gaps in global trade finance exist and their impact on jobs and
growth. It received responses from over 250 banks across 86 countries -
more than double the previous year's number. As the survey has been
upgraded and amended since it first began in 2012, results are not
directly comparable year-on-year.
The ADB, based in Manila, is dedicated to reducing poverty in Asia
and the Pacific through inclusive economic growth, environmentally
sustainable growth, and regional integration. Established in 1966, it is
owned by 67 members - 48 from the region. In 2014, ADB assistance
totaled $22.9 billion, including cofinancing of $9.2 billion.
- ADB
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