Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Trading

NEW SURVEY FINDS WORSENING GLOBAL SHORTAGE OF TRADE FINANCE

NEW SURVEY FINDS WORSENING GLOBAL SHORTAGE OF TRADE FINANCE
  • Growing number of banks concerned about ability to finance global trade
  • 60% of SME applications for trade finance rejected
  • Survey highlights acute shortages of trade finance in Africa 

Small and medium-sized enterprises (SMEs) and African countries are suffering the most from a deepening global trade finance gap, according to a new survey by the International Chamber of Commerce (ICC) released today.

The ICC 2016 Global Survey on Trade Finance shows that 61% of respondents – national, regional and global banks with trade finance functions – reported a global shortage of trade finance. Only 52% reported an increase in trade finance activity, compared to 63% in 2015 and 80% in 2012.

According to this year’s Global Survey – which received 357 responses from 109 countries worldwide – 61% of respondents reported a global shortage of trade finance. Only 52% of respondents reported an increase in trade finance activity, compared to 63% in 2015 and 80% in 2012. Furthermore, the perceived shortfall came predominantly from regional and global banks –78% and 56% respectively, compared to 41% of national banks.

ICC Secretary General John Danilovich said: “We must emphasise the importance of trade finance. It is often forgotten – trade finance has dropped off the international agenda. We need to do more to communicate its central importance to the global economy.”

The Global Survey also shows that SMEs face 58% of total rejections – despite submitting 44% of all trade finance proposals, in contrast to 40% submitted by large corporates (33% of rejections) and 16% by multinational corporations (9% of rejections).

In addition, 90% of Global Survey respondents cited the cost and complexity of compliance requirements relating to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulation as barriers to the provision of trade finance, up from 81% in the 2015 Global Survey. Indeed, 40% of respondents reported terminating banking relationships due to compliance requirements, with 83% expecting compliance costs to increase in 2016. Other impediments to trade finance noted by respondents included low issuing bank credit ratings (86%), low country credit ratings (82%), regulatory requirements (76%), and low obligator or company ratings (70%).

A decrease in the use of traditional trade finance was also evident in this year’s Global Survey report, with nearly 50% of respondents reporting a decrease in commercial Letters of Credit, while nearly 35% reported an increase in supply chain finance deals.

“Year on year, the Global Survey continues to provide a snapshot into market trends, ensuring that the trade finance industry keeps pace with an ever-changing banking environment and remains fit for purpose,” said Daniel Schmand, Chair of the ICC Banking Commission that conducted the Survey. “This year’s Survey highlights the challenges ahead, revealing that compliance is one of the main impediments to trade finance provision – with the majority of industry players only expecting complexity and cost to increase further over the rest of the year. Urgent action is required to limit the effects of such requirements on trade finance provision, and to help meet the needs of global SMEs, which are being disproportionately affected.”

This year’s Global Survey also highlights the benefits that digitization brings to the industry – particularly by automating processes and reducing the cost and complexity of trade finance. Despite this, only 7.4% of banks reported that their trade finance processes had been digitized “to a great extent”, while 43% reported “very little” advancement, with global banks the most likely to embrace digital solutions. However, the Global Survey predicts an acceleration towards digitization in the years to come for the trade finance industry.

The increasing engagement of African economies and businesses in international trade is also a key focus of this year’s Global Survey. While intra-African trade has shown signs of significant growth – accounting for nearly 18% of the region’s total trade in 2014, an upward trend from 10% in 2010 – intra-African investment accounts for only 12% of the total value of investment in Africa, in comparison to 33% in Asia. In addition, 66% of businesses find access to finance a significant obstacle to trade in Africa.

“Africa has a trade finance shortage estimated at between US$110 to US$120 billion – a range far higher than the previous estimate of US$25 billion,” said Vincent O’Brien, a member of the ICC Banking Commission Executive Committee. “In particular, the unprecedented fall in commodity values has created liquidity gaps for many banks across the region. Initiatives that facilitate internal and external trade should be fully encouraged, while Africa also needs to attract much-needed financing to support trade and meet the significant trade finance deficits.”

ICC’s Global Survey – released every year since 2009 – is enriched by data, insights and expert commentary from a variety of partners, contributors and specialists in trade, financing and development. It provides a unique perspective on the foregoing issues in business and trade, and can inform the decision of bankers, financiers, business executives and entrepreneurs, as well as policymakers at national, regional and international levels – with the objective of helping to restore trade as a driver of economic growth, value-creation and development.

Data from this year’s Global Survey was put under the spotlight at a SIBOSBanking Commission meeting, which focused on the debate around trade and trade finance. In addition, the report findings aim to inform the high-level discussions at WTO, IMF and World Bank annual meetings occurring this week in Washington.

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post