Macroscope | How small firms will benefit from simpler, integrated trade finance systems
- Micro, small and medium-sized firms make up the backbone of the world economy but struggle to gain access to financing and global markets
- The solution is to simplify processes and integrate isolated systems to help such firms access increasingly complex trade and supply chains
Goods and services move around the world through the work of ships, trucks, planes, bytes and money. The US$5.2 trillion global trade finance system is as essential as the container or the data server to facilitate global trade.
For micro, small and medium-sized enterprises (MSMEs), the financing shortfall is even more acute as they account for around 40 per cent of trade finance application rejections by banks. These are the challenges that the International Chamber of Commerce’s (ICC) Advisory Group on Trade Finance has been wrestling with since its creation in 2020.
But this is also a problem with real-world solutions. Today, the trade finance system is characterised by a complex web of decades-old manual processes and isolated “digital islands” – closed systems of trading partners formed to address specific pain points. The answer is to simplify processes and integrate these islands so they can work together across networks and platforms.