Global availability of trade finance improved in 2014 but gaps were increasingly pronounced in emerging economies, including in Asia, driven by banks' decision to move away from high-risk markets, says a new Asian Development Bank (ADB) survey of banks and companies.
"The global trade finance gap was estimated at $1.4 trillion for 2014, of which around half was in developing Asia," said Steven Beck, head of trade finance at ADB. "Trade continues to be the engine of growth and employment in the region, so addressing the financing gaps will be critical to promote growth and job creation especially in the more challenging markets."
Banks highlighted the rising costs and complexity in complying with regulatory requirements to prevent financial crimes, including money laundering and terrorism finance, as a top impediment to trade finance, partly due to the lack of clarity on their implementation. The impact of this was felt most in Africa, the Russian Federation, Central Asia, and North America.
The study also found that small and medium-sized enterprises (SMEs) were consistently underserved by financial institutions and faced the highest rejection rates for trade finance. Companies noted that higher prices for trade finance accelerated in the second half of 2014.
With compliance measures expected to tighten further, the study notes that this will put more pressure on economies already experiencing gaps in access to financing, with SMEs particularly affected.
(Continued on the next page)