Micro, small and medium sized enterprises (MSMEs) are the backbone of the economy in many developing and developed countries, employing the majority of the workforce and contributing significantly to overall economic growth and to trade expansion. But 56% of MSME requests for trade finance are rejected, compared with only 10% of the requests made by multinational companies. MSMEs in developing countries face the greatest challenges. This reluctance to provide funds to smaller companies is a major reason why the Asian Development Bank estimates that unmet demand for trade finance reached $1.6 trillion in 2015.
At their meeting in Washington D.C. on 6 October, WTO Director-General Roberto Azevêdo and International Finance Corporation (IFC) Chief Executive Philippe Le Houérou discussed how their institutions and other global actors could address the gaps in trade finance to ensure that smaller companies can obtain the capital they need to compete in the international marketplace. They agreed to enhance their cooperation on these issues.
WTO Director-General Roberto Azevêdo said:
“Smaller enterprises bring dynamism, creativity and energy to the economy of every country, but this is particularly true for developing countries. Trade finance is the lifeblood of outward-looking MSMEs. Depriving these companies of such funding places severe limitations on the growth and development prospects in Africa, Asia and Latin America. We all have a role to play in addressing this problem through enhanced trade finance facilitation programmes from international lenders. We must promote greater awareness by banks and small companies of the benefits such lending can generate. We must also carefully monitor the global picture on trade finance.”