TRADE TOPICS

Trade finance and the compliance challenge:

A showcase of international cooperation

The availability of trade finance has become an increasingly important issue in the past few years, particularly for small and medium-sized enterprises (SMEs) in developing economies. This publication examines the reasons for the growing reluctance of the global financial sector to engage in this form of financing and examines the challenges of regulatory compliance. Case studies describe capacity-building programmes which aim to improve the availability of trade finance.

Although trade finance is a particularly safe form of finance, it is commonly perceived to be subject to high risks. Since the 2008-09 economic crisis in particular, international banks have become less willing to provide trade finance guarantees, particularly in developing countries. This has reduced the capacity of local banks to provide credit to businesses wishing to trade, leading to a significant gap between the demand and supply of trade finance.

This gap affects SMEs in particular, as smaller traders are more likely to see their requests for trade finance rejected than any other category of firm. In two-thirds of cases, following an unsuccessful trade finance request, these small traders do not attempt to seek alternative financing, simply because it is not available.

Seven case studies describe the efforts of international organizations, such as the World Trade Organization and the International Finance Corporation, and multilateral development banks to respond to this issue.

Co-published in 2019 by the World Trade Organization and the International Finance Corporation.

Published 2019

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