At the heart of vibrant Marrakesh during the esteemed annual assembly of the World Bank Group and the International Monetary Fund, a pressing issue found its way to the forefront of discussions: the critical need to expand access to trade finance, especially for small and women-led businesses striving for a foothold in the global market. WTO Director-General Ngozi Okonjo-Iweala, a key speaker at the event co-hosted with International Finance Corporation (IFC) Managing Director Makhtar Diop, articulated a compelling call to action for multilateral development banks. Her message was clear — bridging the daunting finance gap between supply and demand is imperative for fostering inclusive global trade.
Recent WTO-IFC explorations into the trade landscapes of the West African and Mekong regions have unearthed stark challenges. Small traders, particularly those led by women, are encountering significant barriers, with over 40% facing rejection and prohibitive costs in their pursuit of financial backing. "In stark contrast to the 60-80% trade support seen in advanced economies, a mere 25% of trade activities receive financial backing in these regions," Okonjo-Iweala pointed out, underscoring the disparity. Yet, there's a silver lining — WTO economists project that elevating trade finance coverage to 40% could potentially boost trade flows by an average of 8% annually, with a leap to 80% achievable within a decade.
As global trade dynamics evolve, the emphasis is shifting towards more diversified and inclusive supply chains. The Director-General commended development banks for their resilience and support mechanisms during the COVID-19 crisis but emphasized that this momentum should propel further initiatives. "With a collective capability that facilitated a substantial USD 40 billion in trade finance during challenging times, your institutions are a formidable force for counter-cyclical support," she asserted.
The discourse took a nuanced turn as Okonjo-Iweala highlighted a critical aspect often overshadowed — supply chain finance. Despite half of the global trade being routed through supply chains, studies reveal a glaring deficit in localized supply chain finance. This financial crunch is notably palpable among lower-tier, local producers in regions like West Africa and the Mekong.
IFC's Diop acknowledged the milestones achieved through the WTO-IFC partnership in trade finance, affirming their continued commitment to tackling these pressing challenges. "Trade financing can be as impactful as direct financial investments, if not more. It's pivotal, especially for companies in low-income nations that are in dire need of working capital," he emphasized.
The dialogue was enriched by insights from senior representatives of major multilateral development banks (MDBs), who shared their initiatives focused on capacity enhancement, bridging finance gaps, and reinforcing financing for local supply chains.
In her closing remarks, Okonjo-Iweala applauded the concerted efforts of the trade finance community and advocated for intensified collaboration within the WTO–MDB network. She proposed an ambitious agenda, extending support to supply chain finance, green finance, and capacity building, with a comprehensive review anticipated at the WTO Aid for Trade Global Review in June 2024.
The International Trade Council, in resonance with these sentiments, recognizes the urgency of these initiatives. "This converging of minds and resources marks a pivotal chapter in making global trade a more inclusive landscape. The Council lauds these efforts and reaffirms its commitment to advocating for policies and initiatives that foster a more accessible and equitable global market," a spokesperson commented. This meeting underscores a collective stride forward in recalibrating the mechanisms of global trade finance.