Trade finance

The availability of trade finance has become an increasingly important issue in the past few years. As 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. Small and medium-sized enterprises have been especially hard-hit b Read More

Cambodia, the Lao People’s Democratic Republic and Viet Nam – the so-called Mekong-3 - have experienced rapid trade growth over the last ten years. However, growth could be boosted even further by improving access to trade finance, such as loans and guarantees, for locally owned businesses seeking to trade globally. This publication presents the results of two surveys undertaken by the IFC to determine the level of trade finance available to busin Read More

In 2017, an IFC report1 pinpointed the reductions in the network officorrespondent banks in emerging markets. In emerging markets, correspondentfibanking stress and compliance challenges drove some respondent banksfito retrench their own businesses. At the time, the trade finance gap wasfiestimated at around US$1.5 trillion.2 It has likely widened since.

Up to 80 per cent of trade is financed by credit or credit insurance but availability of finance varies across regions. A lack of trade finance is a significant barrier to trade, particularly (but not exclusively) in developing countries.

The bank survey contains information on the costs of trade finance, the share of trade covered by trade finance and the trade finance gap. This information is used to generate projections of the trade effects of changes in the price and availability of trade finance. The WTO Global Trade Model (GTM), a computable general equilibrium model, is used to simulate the effects of changes in trade costs because of changes in the price and availability of Read More

The Mekong-3 – Cambodia, the Lao People’s Democratic Republic (PDR) and Viet Nam – are deepening their trade integration, increasing the volume and value of their exports and strengthening their participation in global value chains (GVCs). This expansion of opportunities for new traders in new markets generates expectations of growing demand for trade finance in the coming years.

This publication is the result of a joint effort of the IFC and the WTO and was prepared under the guidance of Susan Lund, Vice President of Economics at the IFC, and Ralph Ossa, Chief Economist of the WTO. Nathalie Louat and Denis Medvedev of the IFC and Marc Auboin of the WTO provided leadership for the research. Marcio Cruz, Maty Konte, Francesca de Nicola, Alexandros Ragoussis and Trang Thu Tran of the IFC and Eddy Bekkers and Alexei Timofti Read More

The expansion of trade depends on reliable, adequate and cost-effective sources of trade financing, which help to fill the time gap during which goods are produced, shipped and paid for. Trade finance is routinely supplied to exporters and importers by banks and other financial intermediaries, which mitigate the financial and payment risk involved in crossborder trade. While developed countries can often rely upon large and advanced economic sectors mo Read More

While conditions in trade finance markets returned to normality in the main routes of trade, the structural difficulties of poor countries in accessing trade finance have not disappeared – and might have been worsened during and after the global financial crisis. There is a consistent flow of information indicating that trade finance markets have remained characterized by a greater selectivity in risk-taking and flight to "quality" customers. In that environme Read More

The paper discusses the efforts deployed by various players, mainly multilateral financial institutions, regional development banks, export credit agencies, to mobilize greater flows of trade finance for developing countries, with a view to help them integrate in world trade. As an institution geared towards the balanced expansion of world trade, the WTO is in the business of making trade possible. Its various functions include reducing trade barriers, nego Read More

This paper reviews a number of initiatives taken by public and private institutions aimed at minimizing the impact of the on-going crisis of the financial sector on its ability to supply trade finance to support trade at affordable rates. In doing so, it draws a few policy lessons. One of them is that a relatively stable segment of the financial industry is now regularly hit by the contagion of financial crises, with potentially very harmful spill-overs on global trade th Read More

The paper studies empirically the fiscal policy instruments by which governments try to influence election outcomes in 24 developing countries for the 1973-1992 period. The study finds that the main vehicle for expansionary fiscal policies around elections is increasing public expenditure rather than lowering taxes, and public investment cycles seem particularly prominent. Institutional mechanisms which constrain discretionary expenditure policies and Read More