Integrating Trade Finance & Supply Chain Finance into Trade Facilitation
Project Identifier (PID)
Project Proposal
Project Status
p1024
In development
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Executive Summary
Project purpose
The purpose of this project is to recommend the explicit integration and inclusion of Trade Finance and Supply Chain Finance (for the sake of simplicity defined hereon as Trade and Supply Chain Finance) into current frameworks and practices related to Trade Facilitation.
Trade and Supply Chain Finance supports the vast majority of world trade today, some estimates suggesting that 80-90% of trade flows require some form of trade finance-related liquidity or risk mitigation support.
Trade Facilitation programs and practices, including Single Window initiatives, have concentrated on a variety of “mission-critical” elements in both public sector and private sector, from education to logistics, infrastructure to regulatory considerations and many more, however, the role of financing has historically been viewed as “out of scope” for a variety of reasons.
The role of small-medium enterprises (SMEs) in global trade flows and economic value-creation is now widely acknowledged, as is the critical need of SMEs for access to timely and affordable financing – including trade financing. At the same time, post-crisis market dynamics and increasing regulatory pressures have combined to motivate trade financiers to be far more open about their business, even actively seeking new sources of capital and investment to ensure adequate supplies of trade finance in the global system.
These factors and others combine to suggest that the timing is excellent, for the explicit and systematic inclusion of Trade and Supply Chain Finance into the practices of trade facilitation and development-related international trade activity.
The financing of international trade has, as a direct result of the global economic crisis, gained an unprecedented level of profile and visibility among political and business leaders, as those leaders came to see robust global trade as one of the major mechanisms to enable economic recovery. Those same leaders also realized the critical importance of trade finance in enabling the required trade flows, to the extent that the subject of Trade Finance and Supply Chain Finance has been discussed by several world leaders and has made it onto the agenda at IMF, WTO and G-20/B-20 meetings.
There is an imperative for a clearly articulated top-level vision related to the evolution of global Trade Finance and Supply Chain Finance, and there is an urgent need for a well-placed, trusted facilitator to identify and gather key stakeholders and to oversee the execution of a medium-term program aimed at helping ensure that all-important international commerce can be supported and enabled through a well-matched global system of Trade Finance and Supply Chain Finance, explicitly integrated into established practices and disciplines in trade facilitation and trade-related international development.
