The commodity finance market has become increasingly divided in recent years, with traditional banks concentrating their lending at the larger end of the market while smaller traders struggle to access adequate financing facilities.
Launched in 2023 in Switzerland and the Netherlands, TradeQraft is a commodity trade finance platform, originating financing facilities with traders and distributing them among investors. By connecting alternative lenders with those in need of finance, and using a combination of industry knowledge and innovative technology, the company hopes to narrow the trade finance gap in the commodities sector.
GTR speaks to the company’s founder and CEO, Orhan Gunes (pictured below), about the company’s vision, its novel approach to managing risk and its innovative approach to technology.
GTR: What does TradeQraft look like today? What kind of funders and traders are using the platform, and which products are available to them?
Gunes: Our model is originate-to-distribute. We offer all kinds of commodity-focused lending to our clients, including supply chain finance, receivables finance, goods in transit, revolving credit facilities and club loans, from a minimum of around US$10mn to US$250mn.
We also offer other services as a lending enabler, working with banks on their portfolios, risk management and client acquisition. TradeQraft can help clients with credit insurance, sales, discounting letters of credit and so on, and we provide products for FX, cash management and payment solutions.
Finally, we can be a principal on physical trades as well.
Lenders include American investment banks, hedge funds, family offices, private equity, private credit and some specialised lenders, and we provide them with ready-to-finance deals. TradeQraft has already seen strong engagement, with over 26 lenders actively utilising our platform and significant volumes achieved – a clear signal of the trust and momentum we’ve built.
On the commodity trading side, we have a mixture of very sizeable clients and second-tier or smaller entities. Around 60% are active in energy, and the rest are metals and soft commodities.
GTR: Could you tell us about the background to founding TradeQraft?
Gunes: The starting point was that traditional banks are not catering sufficiently for commodity trade finance. If you look at the history of commodity trade finance, going back to the 1970s, banks were focusing on underlying trades: who’s buying what, and what are the metrics and logistics around that.
But over time, the growth of cross-border trade volumes meant competition and requirements from customers increased. The big institutions also had lots of other products, such as investment banking, merchant banking, retail, corporate services, M&A, and started to focus more on compliance, becoming more conservative.
Therefore, they were not able to cater for all clients. There are risks too; commodity finance can have pitfalls if you don’t specialise in it.
However, we know demand is high. We always talk about the US$2.5tn trade finance gap, and we believe it might even be bigger than that, especially with the exponential growth of cross-border trade around the world.
This has created a space for institutions that specialise in commodity trade finance and can provide those solutions. Our model is originate-to-distribute, and we have some creative ideas for how to bridge the gap between demand for commodity trade finance and alternative sources.
The essence of this market is the trade itself, so we always try to be close to those flows.
GTR: How do you make sure you’re close to the actual flows of goods?
Gunes: Being closer to the trade means close to the ports and the logistics, so where the goods are shipped, where they are discharged, where the warehouse is. It might also mean visiting miners, refineries or farmers.
These are the factual, verifiable points around a trade, and understanding those gives you a sense of the pulse of the trade. We will map out a commodity trade, so if crude oil or iron ore is being financed from point A to point B, we would like to see the whole chain and understand who is adding what.
GTR: How central is technology to these processes?
Gunes: The commodity trade finance market is growing exponentially, and technology – from supply chain to cash management to payments – is playing a more and more important role.
Our platform includes an online know-your-customer and financial due diligence tool, and we have developed an AI-powered transaction scoring system for non-bank lenders that might not have in-depth knowledge about transaction commodity flows.
We also see a lot of issues in the payments space. Many financial institutions see commodity trading as a high-risk area, so compliance checks can sometimes disrupt shipments, even where there have been no anti-money laundering or know-your-customer issues, and while goods are on the high seas.
We thought there must be more efficient cash management solutions to address this. One idea we have is using technology partners to carry out pre-checks rather than checks after the payments are made, and we are working on some other solutions as well.
GTR: The non-bank trade finance sector has historically had ups and downs. How do you manage the more difficult or risky aspects of this market?
Gunes: There have been a lot of developments in the market in the last two years, and some funds or non-bank lenders have failed. We carried out a thorough analysis of why that is happening, and what lessons can be learned about it.
I’ve been in commodity trade finance for 20-plus years, and my team and I have worked in some tough environments in the past.
We are also looking to create long-term relationships. Many of our clients have been working with us in some form for decades, and we have witnessed – and hopefully contributed to – their growth.
GTR: You mentioned that TradeQraft is able to become a principal in a trade transaction. Is that part of a wider trend in commodity finance?
Gunes: When we started in this industry, lenders were more of a one-trick pony. We would finance clients with loans or letters of credit, and there wasn’t much creativity there.
Today, lending and trading are converging. Financial institutions are getting more commodities onto their balance sheets, while multinational traders are extending credit terms to their clients. Structures like repo deals, taking goods onto the balance sheet and selling them back, are becoming more interesting.
Our view is that this industry is about agility and innovation. You can’t be a one-trick pony any more; you have to be good at multiple things. At TradeQraft, we’re redefining commodity finance with innovative, out-of-the-box solutions. Looking ahead, we are excited to announce upcoming innovations and new projects in the global payments and funding space, so stay tuned for transformative developments.
