DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
25
Figure 7: Trade Settlement and Finance: Market Sizing
Source: Trade Finance During the Great Trade Collapse, World Bank, 2012
Finance and risk mitigation solutions provided by export credit agencies supported
approximately 10% of global trade flows in 2012 according to industry estimates (Berne
Union, 2013).
The importance of financing to the conduct of international trade was compellingly
demonstrated over the course of the global crisis of 2007/2008 and beyond.
“While most firms have reported a tightening in trade financing since September 2008,
SMEs were the most affected. The most often cited constraints relate to the increase in
cost of trade financing instruments, banks’ more stringent selectivity and guarantee
requirements, and delays in payments from buyers. […] Even firms that have not been
relying extensively on the banking system for trade finance have also been affected.
These firms usually use open account with self-financing, cash in advance and accounts
payable. The scarcity of trade finance originated from the slower demand from their
export markets and the consequent drop in revenues, delays in payment terms by
buyers, and shortening payment terms by suppliers. This has in turn squeezed the
capital base of exporters and importers, their working capital and capacity to self-
finance their transactions.”
Source: Trade and Trade Finance Developments in 14 Developing Countries Post
September 2008, World Bank, 2009
In addition to illustrations of the importance of traditional trade finance and export credit
support, it is instructive to look at growth rates in cross-border factoring volumes, which by
definition involve foreign receivables and therefore relate to trade flows.