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An Overview of the Trade Finance Gap

In 2022, the trade finance gap escalated to a record US $2.5 trillion, marking a 47% increase from US $1.7 trillion in 2020. This is a growing global crisis.

This widening gap underscores the growing disparity between importers' and exporters' financing needs and the actual availability of funds. This is felt acutely in developing countries; unmet demand for trade finance in Africa and developing Asia is estimated at $120 billion and $700 billion, respectively.

Rising borrowing costs have made lenders risk-averse, contributing to a higher rejection rate of financing applications. Persistently high inflation, weak growth in major regions and tight monetary policy have reduced the issuance of trade finance.

Rising borrowing costs have contributed to the widening gap by increasing lenders' risk aversion. As interest rates climb, the affordability of loan repayments becomes more challenging, leading to higher rates of financing application rejections. 

The trade finance gap is expected to expand in the coming years, risking increased exclusion of businesses perceived as high-risk particularly SMEs in developing markets.

According to the Future of Trade survey, over half of the respondents (52%) anticipate a widening of the finance gap, while a sizeable number (40%) expect a moderate widening.

The Impacts of Finance Gaps on Global Trade

The trade finance gap hampers the integration and effectiveness of global supply chains 

  • The trade finance gap disproportionately affects small businesses and developing countries. 

  • In 2022, 38% of bank applications came from small and medium-sized enterprises (SMEs), but these enterprises faced an even higher rejection rate of 45%.

  • This lack of access to funding makes it difficult for SMEs, including many women-led businesses, to engage in exporting, limiting the developmental potential of countries with significant informal economies.

The trade finance gap hampers the integration and effectiveness of global supply chains

  • The sale of a final product typically involves numerous components from upstream suppliers, ranging from raw materials to advanced technologies.

  • If any part of the supply chain experiences disruption due to a lack of access to finance, the entire supply chain is affected, as highlighted during the COVID-19 pandemic.

  • Companies may be compelled to work with a smaller pool of suppliers, reducing the flexibility and diversity of supply chains and rendering them more susceptible to future disruptions. 

Alternative Financing Solutions

Several initiatives are actively addressing the trade finance gap by enhancing access to finance for enterprises facing challenges in obtaining funding through conventional means. These initiatives primarily focus on reducing the perceived lending risks associated with businesses, thus facilitating smoother borrowing processes. 

Multilateral Development Banks (MDBs)

Multilateral Development Banks (MDBs) play a crucial role in bridging the trust gap and have the potential to transform financial access for businesses in developing countries that face significant credit barriers.

How can innovative financing solutions bridge the green finance gap and accelerate the transition to sustainable economic growth?

Export credit

Export credit agencies (ECAs) offer export credit loans, insurance, and guarantees to protect exporters from the risk of non-payment by foreign buyers, thereby reducing perceived risk. There are currently 39 official ECAs that provide financing that may not be available in the private market.


Microfinancing is an alternative banking approach that offers small-scale loans and financial services to individuals and small businesses who are unable to access conventional bank loans.

Microfinance plays a crucial role in bridging this financing gap by increasing access to financial resources required for exporting. Globally, there are over 10,000 microfinance institutions that process more than $120 billion in lending. 

How Fintech Could Reduce The Trade Finance Gap


Digital platforms and data

Fintech platforms facilitate direct connections between exporters and financiers, eliminating intermediaries and streamlining the trade finance process. This enables businesses to access alternative funding sources when local banks are unable to provide loans.


Blockchain technology

Blockchain enhances transparency and security in trade finance transactions through a decentralised ledger, reducing the risk of fraud inherent in traditional document-based procedures. Smart contracts on blockchain platforms automate and enforce contract terms, reducing manual intervention, and saving time and costs.


Artificial Intelligence (AI)

AI and data analytics enable lenders to assess the creditworthiness of exporters more quickly, leading to faster and well-informed lending decisions. AI can also analyse shipping documents, identify patterns, and alleviate the time-consuming nature of manual trade processes.

Recommendations for Business and Government

Business Recommendations

  • Increase data collection to boost attractiveness and ESG ratings. Businesses should collect comprehensive ESG data to enhance transparency, demonstrate sustainability commitment, and improve ESG ratings to support financing requests.
  • Engage with non-traditional finance sources. Businesses, particularly SMEs, should explore alternative financing options beyond traditional bank loans, including venture capital, private equity, crowdfunding, and blended finance initiatives.
  • Collaborate with governments on investment protection. Businesses should collaborate with governments to promote investment protection and create a supportive climate for increased trade and investment opportunities.
  • Consider fintech options to drive finance efficiency. Businesses should adopt fintech solutions to streamline administrative processes, reduce costs, and increase efficiency, optimising operations and supporting strategic investments and growth.
  • Regularly review risk ratings and data collection. Banks should regularly review risk ratings and collect more data on underrepresented markets to better assess creditworthiness and manage risks associated with lending. 

Government Recommendations

  • Prioritise all policy and non-policy measures to address the trade finance gap. Governments should treat the global trade finance gap as an emergency, implementing innovative solutions to increase the availability of trade finance instruments and support mechanisms. 
  • Mitigate macroeconomic factors to reduce lending pressure. Governments should stabilise macroeconomic conditions, provide targeted support to SMEs, and foster economic diversification to alleviate pressure on banks and encourage trade finance issuance. 
  • Leverage digital technologies for fintech adoption. Governments should invest in digital infrastructure and regulatory frameworks to support the adoption of fintech solutions in trade finance, enabling innovative partnerships. 
  • Scale up non-traditional finance methods. Governments should expand the availability of non-traditional finance mechanisms, such as export credit and blended finance, to address the trade finance gap on a larger scale.