The trade finance gap is the difference between the demand for trade finance and the amount that banks and financial institutions are willing or able to provide — especially in emerging markets. It represents creditworthy businesses, often SMEs, whose financing needs are rejected or unmet.
While the issue is complex, the drivers are consistent:
- High perceived risk
- Low credit ratings or lack of collateral
- Country-specific instability
- Regulatory constraints
- And crucially — the high unit cost of processing small, low-margin transactions
From a bank’s perspective, funding a $25,000 SME shipment often costs as much as a $5 million corporate transaction — but with far less return. This makes small-ticket trade unattractive at scale, even when risk is acceptable.
Digitalisation offers a way forward. By enabling fully digital documents and automating verification, it reduces friction and processing costs — making smaller transactions more commercially viable. But technology alone won’t close the gap.
That’s why many call for a combined approach:
- Public sector guarantees to absorb part of the credit risk
- Private sector infrastructure to deliver at scale
- Digital tools to lower cost and increase reach
Together, these could unlock more inclusive trade finance — and with it, more resilient global trade.