Global shortage of trade finance is worsening, says ICC

The International Chamber of Commerce, the largest and most representative business organisation in the world, says in its recently published ICC 2016 Global Survey on Trade Finance that a growing number of banks are concerned about their ability to finance international trade. In the survey, 61% of the 357 respondents – national, regional and global banks with trade finance functions from 109 countries – reported a global shortage of trade finance.

 “Only 52% reported an increase in trade finance activity, compared to 63% in 2015 and 80% in 2012,” the survey reported. Notably, small and medium-sized enterprises (SMEs) suffered much of the brunt of this decline – SMEs face 58% of total rejections.

Impediments to trade finance included the cost and complexity of compliance regulations, low country credit ratings, regulatory requirements, and low obligator or company ratings. 

The survey also highlighted an acute shortage of trade finance in Africa – 66% of businesses view access to finance as a major impediment to trade in Africa, the ICC reported.

 “Africa has a trade finance shortage estimated at between $110bn to $120bn – a range far higher than the previous estimate of $25bn,” said Vincent O’Brien, a member of the ICC Banking Commission Executive Committee. The fall in commodity values has also created liquidity gaps for numerous banks across the continent. “Initiatives that facilitate internal and external trade should be fully encouraged, while Africa also needs to attract much-needed financing to support trade and meet the significant trade finance deficits,” he added.