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Closing the Widening Trade Finance Gap

Closing the Widening Trade Finance Gap

(12 February 2024 – Global) As the global trade finance gaps expands to US$2.5 trillion, concern is mounting that readily available solutions will not be pursued fast enough to close the yawning gap.

Banking Risk & Regulation reports that the disparity, the difference between requests and approvals for financing to support imports and exports, is primarily attributed to an imbalance between demand and supply.

SMEs are affected the most by the trade finance gap, with two thirds of trade finance applications by SMEs rejected, in contrast to a mere seven percent for large corporates. In two-thirds of cases where SMEs are rejected, they do not pursue alternative financing due to its unavailability.

“The high demand for trade finance overshadows the availability of assets, underscoring an urgent requirement for additional investment and liquidity to address this disparity” comments Casterman Advisory Founder and Managing Director, Andre Casterman.

“Through digitalisation, banks can enhance credit and financial crime risk management and unlock revenue opportunities for both SMEs and themselves. Mid- to senior-level professionals in banks must be aware of these evolving challenges and opportunities. They need robust risk assessment frameworks, particularly concerning the authenticity and security of digital transactions and tokenised assets.”

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