On any given day around the world there are around $43 trillion of accounts receivable or accounts payable on the books of businesses, of which, banks only finance around $3 trillion of the total (Kemper, 2016). On a more granular level, there is a gap in global trade finance of around $1.6 trillion, most arising from Asian companies (Asian Development Bank, 2016). The International Chamber of Commerce refers to trade financing as the ‘oil’ in the engine of international commerce and highlights the unmet demand for such financing (International Chamber of Commerce, 2017).
This gap is a result of a misalignment in terms of the demand for trade related credit and the liquidity of funds provided. It is disproportionately available to multinationals and large corporates – the top end of the market – and consistently absent in the SME segment (International Chamber of Commerce, 2017). Simply said, SMEs are faced with little choice but to accept their large customer’s payment terms, no matter how onerous they may be.
Financial Technology (FinTech) companies have come up with solutions to this gap in global trade finance. However, in the absence of new instruments and marketplaces that connect and bring together different trade actors, new ventures have been unable to make a major difference, yet.
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