Results from the International Chamber of Commerce (ICC) Global Survey 2014: Rethinking Trade and Finance indicate that 68% of respondents believe the availability of trade finance has increased by value compared to the previous year.
While the trade finance gap remains a challenge, the ICC Global Survey 2014 clearly shows reason for optimism, according to the report’s authors. Following a low of 2% growth in Q1 2013, states the survey, global trade is expected to gradually strengthen through 2016, with a projected annual growth of 5.1%.
“We are cautiously optimistic, although aware that this optimism is framed within a fragile international trade environment,” says Vincent O’Brien, member of the ICC Banking Commission executive committee.
The ICC Global Survey – the largest and most comprehensive ever for the trade finance industry, including data from 298 banks across 127 countries – suggests that this cautious optimism is, in part, due to emerging market growth. South-south exports now represent 46% of global exports, and 40% of respondents identified Asian markets as the primary focus for their trade opportunities.
That said, it is the emerging markets that are most impacted by continued constraints in the availability of trade finance. Some 41% of respondents reported that they perceive a shortfall of trade finance globally.
“This gap remains a major challenge, especially for SMEs,” says O’Brien. “Without access to trade finance – now widely acknowledged as an engine of growth – SMEs will not be able to contribute substantially towards economic recovery and development.”
The Survey also outlines the challenge posed by Basel III regulations. Some 65% of respondents stated that Basel III regulations have affected the cost of funds as well as the liquidity of trade finance, while 69% also said it had led them to increase the price they are charging customers. That said, most respondents to the survey (72%) agreed that Basel III has made them more innovative as an organisation.
“The ICC Global Surveys provide meaningful statistical data to stakeholders and policy-makers, and over the past six years the ICC Banking Commission has played a key role in influencing regulatory reform,” says Tan Kah Chye, chair of the ICC Banking Commission. “This study has reached a higher level of participation than ever before, and its broad geographical reach enhances the richness of the data collected. As such, we trust that the impact of the results on trade finance regulation, and the subsequent change it triggers, will be the most significant to date.”