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Banking Commission survey shows trade finance supply/demand imbalance

Wednesday 5 July 2017 | 11:03 AM CET

A new report from The International Chamber of Commerce (ICC) Banking Commission has confirmed disparity between trade finance supply/demand.

The 2017 report, Rethinking Trade and Finance, is based on the Global Survey on Trade Finance which interviewed 255 banks from 98 countries and several industry experts.

The focus of the report is on the state of the trade finance market; trade and supply chain finance, policy, advocacy and inclusiveness around global trade, and digitalisation and the state of FinTech.

61% of the banks who contributed to the survey reported more demand than supply for trade finance in the global market. ICC Banking Commission and the Asian Development Bank estimate the level of unmet demand for trade finance at over USD1.6 trillion a year – a figure officially recognised by the United Nations General Assembly.

Most banks (68%) name compliance and regulatory compliances as the major obstacle for trade finance in the short-term. Furthermore, 44% of respondents identify digitalisation and technology as priority areas of focus, with 50% of banks expecting digitalization of trade flow processes to be completed by 2025. This marks a shift from traditional trade finance services, as only 21% of respondents see growth in this area.

The report shows that fintech companies are seen as competitors by a very small minority (1.4%), while the overall trend seems to be collaboration. Supply chain finance is also a desirable area of investment as one-third of respondents named it as one of their top priorities.

Small and medium enterprises (SMEs) are the most vulnerable when it comes to trade demand/supply imbalance, the survey’s authors say. 46% of respondents named multinational and large companies as the highest priority clients segment for their trade finance business, while only 20% focus on providing services to SMEs.