The multi-donor funded program

IFC Trade Finance Facilitation Program

Constraints remain despite efforts by International Financial Institutions (IFIs)

The Global Competitiveness Report 2012-2013 by the World Economic Forum lists access to finance as the second or the third top constraint to SME growth in almost all developing countries.

Tremendous work has been done by our development partners (IFC, EBRD, AfDB and ADB) in providing enhanced liquidity to enable businesses to gain access to financing. But the challenge remains that all these provisions still do not reach SMEs as they cannot meet the bank underwriting conditions to access finance. In other words, in many cases banks have the possibility to lend, but they can’t find qualified borrowers.

A recent International Finance Corporation (IFC) study places SMEs’ financing gap in developing countries at $2 trillion. The report called “Closing the Credit Gap for Formal, Informal, Micro, Small and Medium Enterprises, ” shows over 200 million formal and informal SMEs in developing countries do not have a loan or overdraft, or have a loan or overdraft but still find access to finance a constraint. A sizeable number of exporters or potential exporters fall into this category. On the other hand, on average, about two-thirds of full time jobs in developing economies are provided by small firms, therefore urgent action is essential in meeting their financial needs, supporting their growth.

ITC Activities in Access to Finance for SMEs

For the International Trade Centre (ITC), the support of job-creating SMEs, their growth and their entry in the multi-lateral trading system is paramount. Today, thanks to the progress in Information Communication Technology, trading across borders is only a matter of will for qualified SMEs. Through the Internet, an African SME can contact a client in northern Europe using the same steps as it does to contact a client next door in Africa itself.

Distances have shrunk and the opportunity of trading internationally needs to be made available to all SMEs which produce quality products. However, much capacity building is needed on how to conduct an international transaction and how to protect both transacting sides’ commercial interests, utilizing trade finance and trade facilitation tools.

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Popular Q&A

Where can an East african Company source trade finance backed by bank guarantees for its activities?

Rating of East African countries and companies are poor.There are more defaulters.Many are blacklisted.You have to get finance from banks in East Africa.It will be easier get credit from Citi bank if they are there.

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