Friday, March 15, 2013

Trade finance gap in Asia is estimated at $425 billion

Based on a survey conducted in the fourth quarter of 2012 to identify and quantify gaps in trade finance, the Asian Development Bank (ADB), in its latest brief, estimates that $1.6 trillion of demand for trade finance is unmet (Asia’s share of unmet global trade finance is $425 billion).

Furthermore, it estimates an increase of 5% in availability of trade finance could result in an increase of 2% in production and 2% more jobs. Trade finance affects trade volume, business expansion, and job creation.

For international banks, the main factors that was perceived to aggravate the trade finance gap are
  • Previous dispute or unsatisfactory performance of issuing banks
  • Issuing bank’s low credit ratings
  • Low country credit ratings
  • Basel regulatory requirements
  • Issuing bank’s weak capacity
  • Lack of dollar liquidity
  • High transaction costs or low fee income