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Trade Finance for Sustainable Development in Asia and the Pacific

Author

Listed:
  • Sailendra Narain

    (Chairman, Centre for SME Growth and Development Finance, India)

Abstract

The flow of bank intermediated trade finance is falling short of meeting the growing demands in the Asia-Pacific region. While the Asia-Pacific region has been in the lead in the world as the largest user of trade finance globally, the persistent trade finance gaps in the recent past have been inhibiting business development, job creation and growth, especially for SMEs. Even with its large presence and making a sizable contribution to the Asia-Pacific economy, the SME sector has been more negatively affected than the large companies (ADB2014). This phenomenon, particularly visible after the Great Recession of 2008/09, has become a continuing feature of the Asia-Pacific financial sector and is persistent. Despite most of the central banks’ timely responses and adopting need-based realignments in their banking policy, as well as other remedial measures taken both at national, regional and international levels, the problems are continuing and the gap is widening. This has attracted the attention of some of the policymakers to identify the road blocks and find ways and means to meet the challenges. This paper reviews the status of trade finance in the Asia-Pacific region, highlights the specific issues (obstacles and the needs) faced by SMEs with regard to accessing trade finance, and presents a set of recommendations for national action and regional cooperation. Recognizing the importance and significant role of trade finance as an engine of growth, this paper proceeds with a review of the trade finance in Asia-Pacific region-its status and constrains, followed by an assessment of trade finance gaps identified by the institutional surveys, the resultant policy implications, emerging issues and the challenges, especially those faced by the SME sector, and finally brings to the forefront a set of recommendations along with a road map for consideration of policymakers. In addition, a few major issues will be presented for thinking ahead. The recommendations are innovative and in the nature of both financial and non-financial inputs, calling for much-needed conceptual, systemic and operational changes to be implemented comprehensively at the national level with built-in regional cooperation mechanism.

Suggested Citation

  • Sailendra Narain, 2015. "Trade Finance for Sustainable Development in Asia and the Pacific," MPDD Working Paper Series WP/15/04, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    • Handle: RePEc:unt:wpmpdd:wp/15/04
    as

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    File URL: http://www.unescap.org/sites/default/files/4-ESCAP-Trade%20Finance-July2015_share_2.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financing; trade finance; sustainable development; Asia Pacific.;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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