WT/WGTDF/W/88  
 
15 November  2018 
(18-7178) Page: 1/4 
Working Group on Trade, Debt and Finance    
 
 
SESSION ON "FINANCIA L INCLUSION IN TRADE  FINANCE: REDUCING T HE GLOBAL 
TRADE FINANCE GAP", HELD ON 9 OCTOBER  2018 AT THE ANNUAL MEETINGS  
OF THE INTERNATIONAL  MONETARY FUND (IMF)  AND THE WORLD BANK  
NOTE BY THE SECRETAR IAT1 
1.1.  The Director -General of the WTO and the Chief Executive Officer (CEO) of the International 
Financial Corporation (IFC) , Mr. Philippe Le Houérou, co -hosted a session at the IMF and World Bank 
Annual Meeting on "Financial inclusion in trade: Reducing the global trade finance gap ". The sess ion 
was part of  the official program of the IMF and World Bank meetings. The other speakers were senior 
officials of  institutions partnering with the WTO and the International Financial Corporation (IFC, 
World Bank Group)  in their joint trade finance work . The following individuals and institutions were 
also part of the panel : Mr. Hani Sunbol, the Chief Executive Officer (CEO)  of the Islamic Trade 
Finance Corporation ( ITFC – a subsidiary of the Islamic Development Bank) ; Mr. Benedict Oramah,  
the CEO of the African Import Export Bank  (Afrexim Bank, a subsidiary of the African Development 
Bank Group ); Mr. Pierre Heilbronn,  Vice-President of the European Bank for Reconstruction and 
Development  (EBRD) ; Mr. Rupert Thorne, Deputy Secretary General of the Financial  Stability Board  
(FSB) ; and Mrs. Yan Liu, Assistant  Genera l Counsel of the IMF . 
1.2.  The following is a short summary  of the session provided by  the Secretariat's on its own 
responsibility,  based on a transcript of the meeting.  
1.3.  Mr. Le Houérou opened the session by empha sizing  the importance of the trade finance gap  
for the countries concerned,  and the way  this gap disproportionately affected small and 
medium -sized enterprises (SMEs)  in international trade markets . The IFC and other multilateral  
development banks stepped in to address  the challenges arising from these gaps. In fiscal year 
2017, the  IFC had supported a record US$10 billion  in trade under its  global trade finance 
programme.  The IFC was preparing to strengthen trade finance delivery  in fragile and poor countries. 
It was also supporting developed and emerging market banks ' compliance with anti -money 
laundering and know -your-customer norms by publishing a new guide book, funded by donors. This 
guide book would be used in IFC 's training  activities. During  this fiscal year, the IFC had provided 
training for trade finance professionals in ten  countries , including Côte d’Ivoire, Seneg al, Tanzania, 
Lebanon, Pakistan  and Haiti. Mr. Le Houérou  wished to continue work ing with the WTO and the 
Financial Stability Board , in identifying opportunities for addressing the  correspondent banking 
relationship problem, which severely hindered the ability to distribute trade finance where it was 
needed. The WTO and IFC needed to make progress in th at field and follow -up on progress in about 
a year time.  
1.4.  WTO Director -General Roberto Azevêdo said that the theme behind this collective work was to 
increase trade inclusion. In half the countries  in the world , insufficient trade finance was one of the 
top three impediments to exports. While the trade finance gap was primarily a SME's  issue, it was 
strong ly related to  least-developed and developing economies  because exporters in these countries 
were more likely to be  SMEs . Growth and development opportunities  were lost when  trade 
transactions were abandoned , following  banks ' reject ion of requests for trade financing . Financial 
exclusion le d to trade exclusion. However, p rogress had been recorded in the past two years  on the 
"Trade Finance and SMEs" initiative , with more support provided by multilateral development banks 
(+50%, to  over US$30 billion a year ), more technical assistance (2600 persons trained in 
80 countries), and more dialogue with international regulators. Still a lot remained to be done . 
                                                
1 This document has been prepared under the Secretariat's o wn responsibility and is without prejudice 
to the positions of Members or to their rights and obligations under the WTO.  WT/WGTDF/W/88  
 
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  Institutions needed to f ocus on concrete steps.  Renewed regulatory dialogue should help build 
capacity in smaller local banks and encourage larger ones to return to markets they withdrew from. 
Joint technical assistance  was needed to build knowledge on both  trade finance and compliance 
requirements.  This required public and private sector participation.  A first event would take place at 
the African Import Export Bank's structured trade finance seminar, gathering 200 participants from 
49 African countries. Ex perts from the Financial Stability Board, the IFC and the WTO would be 
lecturing. The Director -General agreed to follow -up on progress. The Director -General called on WTO 
Members to support these efforts with their own initiatives.  
1.5.   Other participants prov ided details and insights on their own institutions' activities.  
1.6.  The CEO of the Islamic Trade Finance Corporation (ITFC) called for more inter -institutional 
cooperation. He confirmed th at the  recent l aunch of the Energy Value Chain Fund was expect ed to 
raise several hundreds of millions of dollars  to fund trade in this sector . He explained the emphasis 
of his institution  in support ing SMEs, which was to  develop  value chain projects  in Africa. He 
announced that the ITFC would support  Burkina Faso's cotton pr oject, from production to export, 
for US$1.3 billion.  Trade financing  lines in dollars and in euros had been  provided by ITFC to Afrexim  
Bank to clear transactions in these currencies, in relation with the withdrawal of  global banks. ITFC 
was also stepping up technical assistance efforts.  
1.7.  The CEO of the African Import Export Bank (Afrexim  Bank) thought that the trade finance gap 
in Africa was probably higher than the US$100 billion currently estimated. As a result , Afrexim Bank 
had expanded its trade services. A cyclical trade liquidity facility  had been established, with 
disbursements of US$9 billion in two years. Trade confirmation lines  had also been increased. They 
should reach  US$8 billion  in 2020.  In July 2018, the Africa  customer due diligence repository platform  
had also been launched . Capacity -building  was enhanced. Over the past  twenty  years , Afreximbank 
had trained over 2,000 bankers in its  structured trade finance seminar series. It would continue to 
train about one hundred banks  a year, perhaps more . It will continue to c losely  work with other 
institutions, including ITFC , the IFC  and the WTO . 
1.8.  The Vice -President for Policy of the EBRD said that the de -risking problem was still very present 
in the regions in whi ch his institution operated . It was even  sometimes more serious  than before. 
80% of surveyed local firms reported a moderate or significant decline in correspondent banking 
relationships . Continued d e-risking was related to  the implementation of Basel III and know -your-
customer requirements. This put s corresponding banks in a challenging situation. The lack of a 
single, standardized, on -demand source for validated know -your-customer  information  was a major 
obstacle to the supply of trade finance . There was a shortage of trade finance specialists , too. The 
EBRD was strengthening its on -site and e -learning courses. If the EBRD  did not support cross -border 
trade finance in some of its countries  of operation , there would be none. In the past year, the EBRD 
had s igned a cooperation agreement with the International Compliance Association,  and, in this 
context,  had provided more training capacity and certification countries such as Morocco, Belarus, 
Ukraine, and Egypt. It has also been d eveloping E -learning modules  on compliance . The priority of 
future work was to go more quickly toward s establishing uniform know-your customer's reporting 
standards across countries for issuing banks.  
1.9.  The Representative of the Financial Stability Board (FSB) said that his institution explore d with 
the WTO and the IFC how some solutions developed  in the context of the FSB group on 
correspondent banking  relationships could be tter capture the specificities of trade finance. The  
reduction  of correspondent banking relationships could  affect  countries depending on trade for 
development and access to basic supplies.  In 2017, the decline in correspondent banking 
relationships  continued across many regions. It did not result in a lower aggregate value of SWIFT 
messages. Payments in the financial  system continue d to flow, although banks had to rely on fewer 
correspondents.  The overall s ystem had become a bit more fragile.  The FSB had made progress on 
the cl arification of regulatory expectations  regarding anti money  laundering ( AML) and know-your- 
customer ( KYC). The Financial Action Task Force (FATF)  had s tressed that banks needed to take a 
risk-based approach, and not simply cut relationships indiscriminately ; correspondent banks were 
not expected to know their customer's customer. The FSB was w orking with the  WTO in Geneva on 
regulatory expectations, with the IFC and  the WTO on utility promotion, and with the Asian 
Development Bank on the  scorecard  project . The FSB was also committed to a  prioritization of 
technical assistance  projects related to trade finance organized by multilateral development banks . 
The FSB was working with  SWIFT for the promotion  of the Legal Entity  Identifier (L EI) in payment WT/WGTDF/W/88  
 
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  messages. Finally, the FSB was exploring with the WTO potential synergies with the identifiers used 
by customs authorities.  
1.10.   The Representative of the IMF said that her institution was not in charge of trade finance but 
that it faced similar  pressures on the issue of correspondent banking relationships. The IMF had a 
multi-faceted approach to address th e decline in correspondent banking relationships, including 
technical assistance, although her institution's mandate was only to work with public sector entities. 
The IMF had defined 34 projects to be implemented in 39 countries. The IMF was working over the 
long term, with a view to bringing together regulator supervisors from the affected countries as well 
as from the countries where the global banks were based. Regional initiatives focused on regions 
such as the Caribbean, the Pacific  Islands , the Middle East and North African (MENA), Central Asia, 
and Sub Saharan Africa. The IMF was looking forward to working with the other institutions, such as 
the IFC, on implementing  AML and KYC  standards.  
1.11.   In the ensuing discussion, a variety of exchanges took place. M r. Philippe Le Houérou said 
that, p anel after panel, year-after-year, he hear d that there were  fewer links, fewer correspondent 
banking relationship s in the world, particularly in developing, fragile and post -conflict regions . In 
parallel , trade flows had been growing, which mean t that the network to distribute trade finance was  
becoming  thinner , particularly in this category of countries . As South -South trade was growing faster 
than the rest of the world, existing  bank links were not probably sufficient to  supply appropriate 
amounts of trade finance. As  said by the  Director -General of the  WTO, the poorer the country, the 
less alternative s to bank financing : one could no t count on factoring, credit insurance  and other 
peer-to-peer instruments . He asked what  this mean t for our  future work in the "field". 
1.12.   Mr. Hani Sunbol said that multilateral development banks needed to leverage resources by 
working together.  There was no alternative if these institutions wanted to do more.  There was a 
need to keep the current momentum, and to invite other institutions to work with  the existing group 
of collaborating institutions . Each institution s hould be ready to be one another's investment partner.  
Mr. Benedic t Oramah said that the corres pondent banking relationship problem was a developing 
countries' problem. At same time, this was where trade was growing the fastest. Multilateral 
development banks ( MDBs ) needed to  support in priority developing countries ' bank finance.  
1.13.   A senior official in the audience said that international b anks w ould continue to  cut 
correspondent banking relationships  so long as costs are too high relative to revenue. Hence, one 
question was whether one should be looking at solutions provided by financial technology c ompanies 
("fintech 's") to help process the large amount of information needed for compliance?  The 
representative from the IMF said that her institution and some Member countries were looking at 
this possibility. However, the right controls on " fintech's " had to be in place. The Representative of 
the EBRD said that FinTech's could be  one mean, but one ha d to explore solutions making the user 
of existing  standards  and requirements  more "agile" in applying them. 
1.14.   Another official made the point that l ocal financial institutions were for the time  not sufficiently 
strong  to take over  the space left by withdrawing global financial institutions . He wondered whether 
the EBRD model allowing client banks and countries to graduate from their TFP could be repli cated 
elsewhere in the world ? The representative of the EBRD said that graduat ion was the outcome of 
wider economic reforms which some of its  Members had successfully completed.  
1.15.   The Director -General of the WTO conclu ded that all participants provided valua ble 
contributions. One important element was to involve  governments to take the lead locally . He 
wondered whether, b ased on the users' perspective, there  could be a  gradual harmonization of tools, 
data and legislation that would help minimize the challenge s for operators, in a way that would 
gradually m obilize governments. This could start with a more rigorous evaluation of the problems in 
the field.  
1.16.   Mr. Le Houérou from the IFC f ully agree d with Director -General Azevedo . There was a  need 
now for even more inter-institutional coordination . Current partners should collectively work at 
compiling country experiences , positive and negative,  across institutions : what have banks and their 
clients doing to comply ; thus , combine this  information  from the perspective  of correspondent bank  
and of respondent banks ; introduce the public -private and regional per spectives, and start to report.  
  WT/WGTDF/W/88  
 
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  This process had  to be incremental.  To address the most acute gaps in trade finance, one needed to 
get to the bottom of this comp liance and correspondent banking issue. This was not a high-profile 
job, but it was crucial in resolving the issue.  
1.17.   On this note, the moderator closed the discussion.  
 
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