Market volatility and uncertainty tend to reduce the availability of bank-led trade finance, with the effects particularly acute in developing regions, a first-of-its-kind study has found.
The study, carried out by economists from the World Trade Organization (WTO) and the International Finance Corporation (IFC), examined data from the ICC Trade Register, spanning more than 20 global banks, over 100 countries and up to US$2tn in trade finance flows each year.
It marks the first time that Trade Register data has been used for external economic analysis, following a data-sharing agreement between the ICC, WTO and IFC, and covers the period since 2011.
The study found that a one-point increase in a country’s level of financial development – measured using a World Bank index – corresponds to a 10% rise in bank-led trade finance flows.
However, it found that economic uncertainty typically results in a decline in trade finance growth, particularly in Asia Pacific and African markets. As a result, reduced access to trade finance tends to “amplify downturns”, and products can be considered “sensitive” to volatility.
“Financial conditions matter for access to trade finance both globally and at the country level,” it said.
The data “supports a policy response that seeks to ease access to trade finance during crisis episodes, and to strengthen local capacity in the medium-to-long run, particularly in emerging and developing economies to improve shock resilience”, the study said.
“Broader access to trade finance would boost a country’s capacity to access global markets. This has a real economic impact since trade and growth are positively correlated long term.”
Globally, the level of demand for trade finance that is not met – referred to as the trade finance gap – has stood at around US$2.5tn since 2023, according to research by the Asian Development Bank.
A WTO report published in 2024 found that around half of trade finance requests from smaller businesses were rejected by lenders, and when facilities are provided they often cost more than for larger borrowers.
In light of these issues, the organisation has increasingly sought to encourage multilateral development banks to expand the availability of products such as supply chain finance, particularly in low-income and fragile countries.
