The trade gap
Last updated
Last updated
There is a $2.5 trillion global trade finance gap.
The Asian Development Bank (‘ADB’) has released a comprehensive report detailing the ‘global trade finance gap’- the amount of international trade which is unable to obtain finance.
In 2022 this number reached $2.5 trillion. This is an increase of 47% from $1.7 trillion in 2020.
These issues disproportionately affect SMEs. 45% of all trade finance applications by SMEs are rejected by banks, as shown below:
Insufficient financing is cited as the most significant issue facing supply chains by international trading firms:
The reasons for not being able to access trade finance, from the perspective of the applicant, are as follows:
Each of these are related to the traditional trade financing model undertaken by banks.
However banks cite geopolitical and country risks as being the primary reasons to reject applicants:
Despite these issues, banks overwhelmingly expect an increase in demand for trade financing:
The trade finance gap in Africa is estimated by the African Development Bank (AfDB) to have an estimated annual unmet demand of $80 billion to $100 billion.
According to the Asian Development Bank (ADB), the trade finance gap in Asia is estimated to be around $692 billion.
