WT/WGTDF/W/91  
 
19 September 2019  
(19-6054) Page: 1/2 
Working Group on Trade, Debt and Finance    
 
TRADE FINANCE: RECEN T DEVELOPMENTS  
REPORT BY THE WTO SE CRETARIAT  
1.1.  This short note summarizes some recent developments in trade finance since the last meeting 
of the Working Group on Trade, Debt and Finance (21 June 2019).  
1.2.  On 3 July, the Director -General of the WTO , Roberto Azevedo , and the Chief Executive Officer 
of the International Finance Corporation (IFC, private arm of the World Bank Group) , 
Philippe  Le Houérou, launched a new publication entitled "Trade Finance and the Compliance 
Challenge: A  Showcase of International Cooperation". This publication can be freely downloaded at 
www.wto.org . It showcases the mobilization of international organizations after a joint  meeting at 
the 2018 Fall Meetings of the IMF and World Bank, during which they pledged to cooperate to address 
the trade finance impact of the reduction in correspondent banking relationships affecting mainly 
developing countries. Since the end of the financial crisis, perceived regulatory ri sk, combined with 
the low capacity of the financial sector in some countries, ha d created new  gaps in trade finance 
provision , which hit mainly  banks in developing and least -developed countrie s. A renewed regulatory 
dialogue with the Financial Stability Bo ard and other regulatory institutions led to believe that one 
could help tackle these issues by building capacity in smaller, local banks, notably regarding the 
adoption of new financial regulations. The publication highlights  capacity building activities recently 
undert aken by the IFC with WTO participation in Rw anda, Madagascar, Zimbabwe and Zambia. It 
looks at the issues dealt with, the insights of participants, as well as the lessons learned.  It also 
describes similar activities organized by the Europea n Bank for Reconstruction and Development 
(EBRD), the Asian Development Bank (ADB) and the Islamic Development Bank (IsDB). The WTO 
Secretariat will continue participating in such capacity -building activities in the second half of 2019, 
notably with the IF C, the African Import and Export Bank (a subsidiary of the African Development 
Bank), and the EBRD.  
1.3.  The panel discussion following the publication launch provided an opportunity for WTO 
Members to interact with senior representatives of the IFC and multila teral development banks. To 
the question of what more could be done to address the lack of trade finance, some of the following 
replies were made: the fact that trade finance is a low risk asset should be publicly emphasized 
(ADB); 75% of ADB trade finance  program me's clients are small and medium -sized enterprises 
(SMEs), and no single trade payment default has ever been recorded in 10 years of operation of this 
program me (ADB); education of SMEs and local banks about trade finance should continue as 60% 
of SMEs' applications for trade finance are rejected because they do not follow the proper protocols 
when applying (IsDB); technology adoption by banks is key to reduce the operational costs of trade 
finance (EBRD); capacity -building should be tailor -made as  financial sector development and 
integration into value chains differ across countries and regions (IFC); at the same time, the current 
mobilization should be resource -efficient, and training material from various institutions should be 
re-grouped and ass essed (IFC); country diagnoses are necessary if capacity building and country 
advice are to be well targeted and effective (all participants). It was also emphasized that, in the 
OECD -WTO monitoring and evaluation exercise conducted in preparation to the 2 019 Aid -for-Trade 
Global Review, lack of local access to trade finance was cited as an obstacle to economic 
diversification by 60 developing WTO Members and by 14 donor respondents.  
1.4.  On 3 September, the Asian Development Bank released its 2019 Trade Financ e Gaps, Growth 
and Jobs Survey (ADB Brie f 113, available at www.adb.org/publications ). The WTO Secretariat, 
along with many other private and public partner organizations, provided input s to the survey. 
Participants included 112 banks from 47 countries, 53  private and public export credit agencies from 
17 countries, 39 forfaiting companies from 20 countries , and 336 firms from 68 countries.  WT/WGTDF/W/91  
 
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  1.5.  The Asian Development Bank estimated that the global trade finance gap was large but stable 
at US$1.5 trillion, in 2018. Despite trade finance not exceeding default rates of 0.2% per transaction 
on average, supply was still insufficient to meet demand. More than 40% of trade finance 
applications rejected by banks were from SMEs. Half of the rejected SMEs a bandoned the transaction 
as they were unable to find appropriate alternative financing. In 18% of the cases, they resorted to 
"informal" funding and only in 16% of cases they found "formal" alternative financing. Rejections 
were explained by a variety of f actors, mainly lack of collateral, lack of proper information available 
during the application process, and lack of profitability for banks. The adoption of new technologies 
was generally low in developing countries as most surveyed actors complained about  the high cost 
of it and the lack of global standards for digital finance (lack of "interoperability" of digital platforms).  
The survey is rather pessimistic about short -term prospects for reducing trade finance gaps: 60% 
of respondent banks expect the gl obal trade finance gap to increase in the next two years.  
 
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