DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
27
billion to $500 billion of liquidity by accelerating the cash conversion cycle for suppliers
and extending days payables outstanding for buyers.”
Source: Supply Chain Finance: From Myth to Reality, McKinsey, 2010
Just as trade has long been identified as an important enabler of international development
and poverty reduction, trade finance is now understood to play an important role in
supporting the trade flows required to succeed in international development activity, and
during the course of the global crisis, the importance of accessibility to timely and equitably
priced trade finance for SMEs in developing economies, was the subject of significant focus and
comment from numerous stakeholders (World Bank, IMF, WTO and others).
“The [Asian Development Bank Trade Finance] program delivers tangible and
measurable development impact. For example, in 2009 and 2010, TFP provided trade
support for more than 540 SMEs. Supporting SME growth is a priority for ADB
because smaller firms employ the largest number of people in most Asian countries.
Increased trading activities and cross-border relationships enabled by TFP are
helping to boost economic integration and cooperation in challenging Asian markets,
which should, in turn, spur faster economic growth and help reduce poverty. In 2009
and 2010, nearly half of the TFP portfolio supported trade between ADB’s
developing-member countries (south-south trade).”
Source: Trade Finance During the Great Trade Collapse, World Bank, 2012
1.6. Key Providers of Trade Finance: Private, Public and International
Sectors
1.6.1. Banks
Banks currently provide the majority of traditional trade finance across the globe, and their
activities in supply chain finance are growing rapidly, suggesting that the role of these financial
institutions will grow also in trade flows involving open account transactions.
The global financial and economic crisis of 2007 and beyond has resulted in pronounced
reaction in leading financial centres – the imperative for banks to “get back to basics” in their
return) investment banking activity, to the more conventional, core activities around deposit-
taking and lending, and related areas now often grouped under lines of business called
Transaction Banking.
Banks active in trade finance typically maintain dedicated trade finance departments, with
transactional/operational units specialized in the issuing and processing of traditional
instruments like documentary collections or documentary credits, together with “front office”
client relationship and sales functions. Additionally, the more advanced institutions will
maintain product development and product management functions, commonly referred to as
“middle office” activities.