SMEs hardest hit globally by gap in trade finance

Dubai - The survey received 482 responses from 112 countries around the world and showed that SMEs account for nearly 53 per cent of all rejected trade finance transactions.

Small and medium-sized enterprises (SMEs) are among the hardest-hit by the trade finance gap, reports the Global Survey on trade finance, released recently by the International Chamber of Commerce (ICC) Banking Commission at the Dubai Chamber of Commerce and Industry.
The survey received 482 responses from 112 countries around the world and showed that SMEs account for nearly 53 per cent of all rejected trade finance transactions. By contrast, 79 per cent of the trade finance transactions for larger corporates are accepted. The trade finance gap is highlighted throughout the survey - citing compliance as a chief barrier to trade finance.
Nearly 46 per cent of the banks surveyed terminated correspondent relationships due to the cost or complexity of compliance, while 70 per cent of respondents reported declining transactions due to AML/KYC requirements. Furthermore, the percentage of respondents citing anti-financial crimes compliance requirements as a significant impediment to trade finance has increased from 69 per cent last year, to 80 per cent in this year's survey. This trend is expected to continue, as nearly all (93 per cent) of respondents expect compliance requirements to increase during 2015.
Omar Khan, director of international offices at Dubai Chamber, said: "The survey has provided a comprehensive and insightful analysis of the major trends influencing the past, current and future of the trade finance industry. These insights are relevant more than ever as we see the dynamics in global trade and finance change, with the EU facing some troubled time and the rise of economies of Asia and Africa."
"This survey also looks into the realm of Islamic finance, which is important not only to this region, but to the rest of the world as well, with the value of assets in Islamic finance sector expected to increase by 80 per cent to reach $3.24 trillion in 2020," he said.
The results from the survey also show some positive trends in trade finance. Around 63 per cent of respondents reported an increase in overall trade finance activity, with 61 per cent of banks stating they have increased their capacity to meet trade finance. What's more, 25 per cent of respondents to the Global Survey on trade finance consider trade instruments supporting trade as involving more than 75 per cent less inherent risk than conventional lending.
The results from the Global Survey also reflected positively on export finance, with 79 per cent of respondents in the industry claiming it remains a profitable business. The industry also observed a significant decrease in pricing, and even more so, fees in 2014.
- business@khaleejtimes.com