The global shortfall in supply of trade finance has remained steady at US$2.5tn, according to the latest edition of a closely watched benchmark survey.
The value of the trade finance gap is estimated in a biennial survey by the Asian Development Bank (ADB), which this year included more than 110 lenders, believed to represent between 30-40% of global trade.
The ADB presented a preview of the survey at GTR Asia in Singapore on August 2. The multilateral lender is set to publish a full report on the latest figure in a few weeks’ time.
The chasm between the supply of trade finance from banks and other financial institutions and demand from companies that need financial products to support their trading activity has long been a thorny issue in trade.
Developing regions such as Sub-Saharan Africa have been most acutely affected, as lenders have deployed capital to more profitable products and compliance and onboarding costs have soared.
Despite the positive news that the gap has not worsened, the ADB cautions that the data for the survey was collected in 2023 and 2024, before US President Donald Trump returned to power and upturned trade with key partners such as China, India and the EU.
The last survey was published in 2023, when the gap was estimated to have ballooned by around US$800bn since 2020 due to the war in Ukraine and soaring interest rates.
SMEs have typically found it hardest to secure trade financing, but the percentage of those businesses whose trade finance requests are rejected fell to 41%, compared to 45% in 2023, the forthcoming report will show. That is a similar level to large corporates that usually enjoy easier access to finance.
The improvement may be partly due to a majority of surveyed banks claiming to have strategies to support SMEs and offer pre-shipment financing.
In the GTR Asia presentation, Ankita Pandey, relationship manager for the ADB’s trade and supply chain finance programme, said that despite the improved figure, “SMEs are still significantly affected by the trade finance gap”.
“Compliance cost remains high,” she said. “For smaller firms, these costs are often prohibitive. Too many applications are still considered unbankable, not because the businesses are fundamentally weak, but because traditional credit models struggle to assess the risk properly.”
A year ago, the World Trade Organization said banks rejected around half of SMEs’ trade finance applications, compared to a 7% refusal rate for multinational corporations.
Pandey also warned that the supply shortfall could worsen as banks report surging demand for trade finance.
Eight in 10 banks surveyed expect demand for financing and guarantees to climb. A majority also expect higher demand for local currency trade finance. The biggest obstacle to improved supply is US dollar liquidity, according to the lenders surveyed.
“Beyond liquidity, high capital charges and ongoing policy risk and uncertainty also weigh on banks’ ability to expand supply,” Pandey said.
She added that the key solutions identified by the ADB include improving the breadth of supply chain finance, which is seen as a proven way of broadening liquidity to smaller firms using the credit risk of larger corporates, as well as hitting a goal to “digitise trade” by 2030.
