Covering 336 firms from 68 countries, 112 banks from 47 countries, and 53 export agencies from 17 countries, the study finds that the large market gap in trade finance affects women entrepreneurs more than men.
The sixth edition of the Asian Development Bank’s (ADB’s) Trade Finance Gap, Growth, and Job Survey report shows a global trade finance gap of $1.5 trillion. It stated that this gap is a roadblock to the realisation of the Sustainable Development Goals (SDGs), especially those pertaining to gender equality (SDG 5), and economic growth (SDG 8). Covering 336 firms from 68 countries, 112 banks from 47 countries, and 53 export agencies from 17 countries, the study finds that the large market gap in trade finance affects women entrepreneurs more than men. Women entrepreneurs’ applications for trade finance saw a higher rejection—44% vs 38% for men. Further, 60% of women-owned firms were found to be less likely to apply for alternative financial support for trade after these rejections.
The lack of access to sufficient financing also impacted small and medium-sized businesses (SMEs)—45% of SMEs applications were rejected as compared to 17% of MNC applications. Around 76% of the banks surveyed stated that regulations, such as anti-money laundering (AML) and know-your-customer (KYC), have acted as major hurdles. The regulations do protect the global financial system from money laundering, and combat terrorism funding, but, as the report highlights, they inadvertently affect the growth of firms in lesser developed nations. To tackle this gap, the report suggests deployment of technologies like Big Data analysis, and blockchain, which most banks and enterprises do not adopt due to high costs, and the absence of a global standard for digital finance. Hence, ADB recommends adoption of common rules for e-commerce and digitised trade. Also, a digital code for legal entities looking to engage in financial and commercial transactions can be used. Access to trade finance needs to improve for women and SMEs if SDGs are to be met, and economic growth fostered.