The World Trade Organization and six other international organizations have recently pledged to deliver greater financial inclusion in trade.
At a special session during the Annual Meetings of the World Bank and the International Monetary Fund (IMF) in Nusa Dua, Bali, Indonesia, the organizations committed themselves to finding ways to close the gaps in trade finance provision.

During the event held in October 2018, the Director-General Roberto Azevêdo said that despite the importance of trade finance, a number of problems have emerged since the financial crisis. Supply and demand have become unbalanced. Perceived regulatory risk, combined with the low capacity of the financial sector in some countries, has resulted in big gaps in provision. The Asian Development Bank estimated that the global gap in trade finance is about $1.5 trillion. This gap represents a significant barrier to trade. It is of particular concern that this gap affects developing countries and smaller businesses the most. Today, 60% of trade finance requests by SMEs are rejected.

Mr. Azevedo said that opportunities for growth and development are being lost, which to him was a clear indication that action is required. He pointed that over the recent years they have been building a coalition to that end. Philippe (Le Houérou, CEO of the International Finance Corporation) and Mr. Azevedo joined forces and started reaching out to the heads of the regional development banks, the Chair of the Financial Stability Board, and many others.

He outlined the significant progress that has already been made in recent years, including to enhance the trade finance programs of key institutions. These programs are expected to support over $35 billion of trade this year, which is an increase of more than 50% over two years. He also outlined progress in addressing the knowledge gaps in local financial institutions, and in increasing dialogue with regulators to ensure that necessary financial regulations do not have unintended consequences for trade finance, which is a very low risk form of lending. He pointed to further actions which are needed in each of these areas.

Mr. Azevendo pointed that there is need to make global trade more inclusive, but further added that trade inclusion needs financial inclusion. He then explained that there was need to continue developing concrete ideas and solutions that make a real difference. Working with a range of partners – including the private sector – which can then help provide momentum to this work.

Source: World Trade Organization