Trade Finance Gap Is Holding Back Africans

LACK of access to affordable trade finance is holding back the economic and employment potential of African countries, says Standard Bank.

According to the African Development Bank’s recent report on trade finance in Africa, the conservative estimate for the value of unmet demand for bank-intermediated trade finance is between US$110 billion and US$120 billion, which is significantly higher than earlier estimated figures of US$25 billion.

“Imagine the number of jobs that would be created if small and medium enterprises (SMEs) in Africa could do the cross-border transactions that would have been supported by the unmet gap in demand for trade finance. The gap means there are corporates out there who would have liked to have done that business but just because they could not access trade finance they could not do those trades,” says Vinod Madhavan, head: transactional products and services, South Africa at Standard Bank.

Trade finance has a direct impact on employment and Madhavan, who was recently appointed as a new member of the Banking Commission Aisory Board to the International Chamber of Commerce (ICC), the largest business organisation in the world, says the African market is clearly under-serviced from a trade finance perspective.

“There is an opportunity for trade financiers to help fill this void but there are a number of barriers to trade that need to be removed. This is why creating uniform rules and standards across various facets of trade will go a long way to closing these gaps and removing these barriers,” he says.

According to the World Trade Organisation (WTO), not all developing countries participate equally in international trade, with Africa having the smallest slice of world exports. The WTO’s World Trade Report 2014 says the potential of trade in supporting development has not yet been fully realised. The emerging trends suggest, however, that trade will be a major force for development in the future.

Despite the positive outlook, the WTO report says 2014 was the third straight year of below average trade growth and that this will not change in 2015.

Source : The Namibian