$1.5 trillion is the estimate from the Asian Development Bank for the trade finance gap between demand and the inability of businesses to secure trade finance. Between April 2018 and January 2019,
BNY Mellon and the
International Chamber of Commerce (ICC) conducted a global survey of more than 100 trade finance providers about how to address the gap. 13% ranked the use of distributed ledger technology (DLT) to enhance transaction management as the most effective solution. But 43% cited DLT as the least useful.
A third of organizations surveyed noted that the
trade finance gap had widened concerning their own business. In other words, the difference between the demand for trade finance and their provision of funding had increased. But for regional and domestic banks the figure is far higher at 64% compared to 32% for specialist trade providers and 24% for global banks.
Part of the questionnaire focused on the causes of the trade finance gap. 34% gave poor quality know your customer (KYC) as the primary reason, but KYC ranked in first or second spot for 71% of the 84 question respondents. The number two cause is poor credit quality (21%) followed by limited capacity (13%), reduced correspondent bank relationships (13%) and geopolitical risks or economic factors (13%).
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