DRAFT Improving the SMEs Access to Trade Finance
in the OIC Member States
51
the BPO proposition, to directly allow for engagement of corporate end-user clients. That said,
the BPO exemplifies numerous elements of the industry’s attempt to advance the evolution of
trade and supply chain finance. Interest and adoption levels related to the BPO are rising, and
many of the world’s top trade banks have already signed on to the program.
The applicability of the BPO to development-related trade is a notion that merits careful
consideration.
Given that the BPO can operate with a single bank acting in support of a transaction,
developing markets may, through simple awareness-raising, be able to propose a BPO-based
settlement option to a large international buyer, for example, whose bank has signed on to the
BPO, has the necessary technology in place, and is prepared to help execute a transaction
based upon the BPO.
In the medium-term, developing markets could conceivably designate a local institution to lead
the adoption of the BPO, with development funding and technical assistance support aimed at
enabling the deployment of the necessary technology and the understanding of the product
and its related transaction flows. Developing economies can also quickly adopt the Uniform
Rules for Bank Payment Obligations (URBPO), the rules akin to the UCP, that aim to guide the
use of BPO instruments globally.
It may be feasible for an IFI to act as a provider of BPO-based solutions, collaborating with
international banks to enable access to BPO by stakeholders in emerging and developing
markets. It is instructive to note that the first commercial, “live” transaction completed using
the BPO involved a transaction between China and Canada, facilitated through the Bank of
China and Bank of Montreal.
2.6. SMEs and International Commerce
The increasing focus (initially, from political circles, but now more broadly) on the importance
of SMEs in economic value creation and the attractive growth prospects of emerging
economies, will both fundamentally influence the evolution of trade finance in the medium
term.
The paradox that is the key role of SMEs in many economies around the globe, and their
consistent difficulty in accessing affordable financing and liquidity is in full evidence in the
context of trade finance, as much due to the limited knowledge of SMEs as due to the limited
focus on this segment of business, by trade and commercial bankers. According to the World
Bank (2012), about 44% of entrepreneurs and small businesses in emerging markets identify
“access to finance” (i.e. lack of it) as a major obstacle to growth. There is undoubtedly a parallel
– perhaps even worse – reality in terms of access to trade finance, despite the valuable work of
IFIs and multilateral development banks in this respect.
At the same time, it appears from empirical observation and discussion with financiers and
government service providers, that small businesses are initiating international activity,
earlier in the lifecycles of these companies, and increasingly, even in the earliest phases of
operational start up, as entrepreneurs realize the importance of market diversification.