Trade Barriers: How connecting lenders and educating trade practitioners can help close the trade finance gap

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Our mantra is ‘trade finance without barriers’ – providing access to information, education and finance, helping to close down the oft-cited $1.5 trillion USD trade finance gap.”

Trade Finance Global is a platform which assists companies to access trade and receivables finance facilities through 270+ banks, funds and alternative finance houses. Also providing educational insights and guides, the organisation aims to help close the oft-cited $1.5 trillion trade finance gap. Mark Abrams, Trade Finance Director, and Deepesh Patel, Partnerships & Marketing Director, spoke to tradeXplain about their work at TFG, the trade finance gap, blockchain, and their predictions for 2020.

Q: What does Trade Finance Global do?

Mark Abrams (MA): Hi Pouya, thanks for having us on tradeXplain! Trade Finance Global (TFG) is a platform which assists companies to access trade and receivables finance facilities through 270+ banks, funds and alternative finance houses. We have around 4.1m impressions per month – that’s 120k readers and 11k businesses from 187 countries using TFG.

On the education side (you may have heard about ‘Trade Finance Talks’), we publish insights and guides, research and magazines, as well as a podcast and video series to help educate the market on all areas of trade, receivables and supply chain finance.

The aim of our operation is to provide cross-border trading companies (manufacturers, traders, distributors) with greater access to appropriate financing structures, to facilitate an increased volume of trade (purchase, manufacture and/or sales).

Our mantra is ‘trade finance without barriers’ – providing access to information, education and finance, helping to close down the oft-cited $1.5 trillion USD trade finance gap. Broadly speaking, there are three sides to our business:

  • Education – various media channels, which provide free information and education with leading partners, through podcasts, magazines (Trade Finance Talks), video (Trade Finance Talks TV), reports and other ungated channels.
  • Finance – we have built relationships with hundreds of specialist global lenders, which are leaders within their specific niches of trade. These include banks, funds and alternative lenders.
  • Technology – our back-end tech platform intelligently matches liquidity providers with mid-market companies, based on risk, tenor, jurisdiction, product and a number of other factors. On the education/publishing side, TFG looks at market and user behaviour to dynamically produce content-on-demand, based on search trends and market movements.

Q: Given that you work with lots of liquidity providers and corporates looking for finance, how has the trade finance industry changed over the past year?

MA: Over the last year (pre-coronavirus), we saw more liquidity providers entering the trade market. We have found that the best way to facilitate the flow of this capital into the market is via partnerships with funds, asset managers, media and technology companies. Some companies have developed best in class technology while others have access to pots of liquidity, and we’ve found that collaborating can produce some incredible results.

PJ: As you know I started tradeXplain after struggling for years to find any adequate educational resources to learn about trade finance. Do you believe there is a trade finance education gap?

Deepesh Patel (DP): Yes, there’s certainly a trade education gap. And I think that is why both you and I are members of the International Trade & Forfaiting Association’s (ITFA’s) Emerging Leaders committee – aimed at providing trade professionals and emerging talent with access to networking, trade education and learning.

I certainly think that trade is perceived as a bit of a dark art – and I think that it’s important to demystify and democratise trade finance. From both the ‘financed’ and the financier perspective, breaking down the barriers and clearly explaining how pre- and post-shipment financing works can help boost trade.

So what’s the problem? According to the World Trade Organization (WTO), between 80-90% of world trade relies on some form of short-term trade finance, which typically comprises private banks, export credit agencies and development banks. However, financing trade hasn’t been so straightforward for MSMEs since the 2008 financial crisis, largely due to AML/KYC, but also due to credit ratings from an obligor’s country or the company itself. The result: a predicted $1.5 trillion trade finance gap.

At TFG, we believe that educating businesses about some of the opportunities, and financing structures, will help overcome this gap.

PJ: What is Trade Finance Talks?

DP: Good question! Trade Finance Talks is our publication and multimedia offering at TFG. A lot of trade practitioners, business owners and traders don’t have a huge amount of time to digest tonnes of content, so I guess we decided to break things down.

Trade Finance Talks is the brand name for our magazine, podcast and video platform, where our only rule is ‘under 30 minutes’. In fact, for videos, they have to be under 10 minutes. We speak to big names in trade, trade finance, supply chain and receivables, be that from the technology side, to the banks, the regulators, policymakers, ambassadors and industry experts. We ask the tricky questions, break down complex topics and feature inspirational stories from the unsung heroes in trade.

PJ: Deepesh, you recently wrote a piece on blockchain for trade finance. What were the key findings and what are you seeing in the market?

DP: Yes, but I can’t take all of the credit here! Emmanuelle Ganne at the World Trade Organization (WTO) and I co-authored the recent publication: ‘Blockchain & DLT for Trade – A Reality Check?’ which we launched back in Geneva in 2019 (wow, it feels like a long time ago).

In this paper, TFG, along with the WTO and ICC (International Chamber of Commerce), interviewed over 200 actors in international trade and trade finance, looking at the potential opportunities for blockchain within trade, trade finance, supply chain, receivables and insurance, as well as the challenges, and current market landscape.

This is our periodic table of DLT projects, which differentiates the 39 different initiatives, companies and projects within trade.

As you may know, Dmitri Mendeleev’s periodic table was initially made with intentional blank spaces, intended to one day be filled with elements that were predicted to exist. Although it’s often hard to visualise the minutiae and nuances of each individual actor, hopefully, this is a starting point.

So as you can see, we’ve categorised the projects into four broad initiatives; trade and supply chain finance, which extends to receivables and factoring, trade credit insurance, supply chain related projects and network of networks.

We’ve then split this out further which you can see by the different colours, such as shipping and freight-related projects, or trade documentation digitisation projects.

With this, we’ve then added the various underlying technologies, such as Hyperledger Fabric, R3’s Corda and Quorum to help readers differentiate the key tech infrastructure.

Finally, we’ve analysed most projects in terms of the current actual stage of maturity for the various DLT (Distributed Ledger Technology) projects. From the conceptual ideation phase to the proof of concept and production phases, right through to fully live and running. What’s interesting here is that, in our opinion, none of these actors are fully live and running, or well established in the market. Yet. In fact, most are in between the pilot phase and entering into production. Which shows that the industry is still very early in terms of adoption, and there’s much more to come.

It is clear that this is an exciting time for DLT in the receivables finance industry; a time ripe with opportunities (not to be confused with how you want to receive your avocado shipment).

There were two main take-homes:

  1. Perhaps the most cited opportunity for DLT in this space is its ability to streamline tedious processes, driving efficiency and slashing costs. The cost savings for this digitization is twofold: automating the current labour-intensive processes and reducing risk from illegal practices such as invoice fraud, double payment, and Trade Based Money Laundering (TBML).
  2. Secondly, DLT is a catalyst for change and innovation, even if DLT itself isn’t the end solution for the digitalisation of receivables! DLT has ignited the technological engine that could power huge changes throughout the trade industry. This is perhaps even more important than its function.

Our white paper does however call for a reality check. Dreams aside, it’s important to take a step back and understand the real problems and challenges that block the path ahead. According to our surveys and research, the most pressing challenges facing the industry today surround technical issues like interoperability, and others like standardization, legal concerns, and privacy.

PJ: Mark, what does a typical day look like for you?

MA: Most of my day is spent on the phone or on emails. This usually starts with calls to Singapore, HK, UAE, Australia and later turns to Europe and the US. I am usually speaking with liquidity providers (Heads of Trade, corporate bankers and Portfolio Managers), who we are working with. I will also be speaking to current or potential borrowers across various industries, to understand their trade flows, financial position and requirements. We aim to have a team meeting each day, depending on our travel schedules.

I also have other regular meetings with internal teams within TFG to understand updates and developments.

PJ: What are your predictions for trade finance for 2020?

MA: In a post-Covid environment, governments will focus on stimulating growth through facilitating trade. Therefore, over the next 24 months, global trade and access to trade finance will be in the spotlight, like never before.