Reconceiving the global trade finance ecosystem

Trade finance does not work as well as it could, particularly for the millions of smaller businesses that help fuel the global economy. This joint report sets out a vision for improving the ecosystem for all players.

The need to improve the $5.2 trillion global trade finance ecosystem—which facilitates the movement of goods and services around the world—has been evident for some time. A recent Asian Development Bank study estimated that the gap in trade finance availability reached $1.7 trillion in 2020, representing 10 percent of global trade.[1] Disruptions fueled by the COVID-19 pandemic are widely acknowledged to have exacerbated this shortfall, which is expected to persist absent proactive measures.

These issues are particularly challenging for the micro-, small-, and medium-sized enterprises (MSMEs) that play an increasingly important role in global trade. Financing rejection rates for such businesses run at 40 percent; a 2017 World Bank study indicated that 65 million MSMEs were credit constrained.[2]

Against a backdrop of increasing digitization of financial and commercial services, trade finance has been relatively slow to modernize its decades-old processes. Multinational corporations have begun to leverage digital technologies that promise improved supply-chain efficiency and transparency, establishing new digital networks to facilitate trade and finance. But MSMEs, with their fragmented nature and limited scale, find it difficult to capitalize on such opportunities.

Resolving this issue is critical for all participants in the global trade finance system. The sector accounts for roughly 6% of global GDP, so its performance affects the health of the future world economy. An improved global trade finance ecosystem could add many of the 600 million new jobs needed by 2030 to absorb the growing global workforce, as well as enable progress toward the goal of financial inclusion, which is particularly needed in developing economies.

Our organizations—the International Chamber of Commerce’s Advisory Group on Trade Finance and Fung Business Intelligence, supported by McKinsey as analytical knowledge partner—collaborated on a research effort encompassing more than 150 interviews with end users and subject-matter experts around the globe to better understand the pain points and opportunity areas for enhancement of the existing trade finance ecosystem.

[1] Kijin Kim, Steven Beck, Ma. Concepcion Latoja, and Mara Claire Tayag, “2021 trade finance gaps, growth, and jobs survey,” ADB Briefs, Number 192, October 2021, adb.org.

[2] MSME finance gap: Assessment of the shortfalls and opportunities in financing micro, small and medium enterprises in emerging markets, World Bank, SME Finance Forum, and International Finance Corporation, 2017, openknowledge.worldbank.org.

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