Dr. Ngozi Okonjo-Iweala, the Director-General of the World Trade Organisation (WTO), has emphasized the importance of providing small businesses with access to trade finance to help them integrate into global supply chains. Speaking at a session during the annual meetings of the International Monetary Fund and the World Bank, Okonjo-Iweala highlighted the significant trade finance difficulties faced by small traders and women-led businesses in regions such as West Africa and the Mekong. These difficulties, including high rejection rates and costs for financial assistance, discourage traders from seeking support from banks. Currently, only 25% of trade in these regions is supported by trade finance, compared to 60-80% in advanced economies. However, raising the trade coverage to 40% could increase annual trade flows by an average of eight percent.
Okonjo-Iweala called for the dismantling of trade finance barriers to promote inclusivity and diversity within global supply chains. She commended the efforts of development banks in supporting small traders during the COVID-19 pandemic and urged them to utilize their financial resources to empower traders further. Recognizing that 50% of global trade is conducted through supply chains, she emphasized the need to improve the availability of supply chain finance. Studies conducted by the WTO and the International Finance Corporation (IFC) have shown a lack of local supply chain finance in regions such as West Africa and Mekong, putting financial pressure on lower-tier, local producers.
The partnership between the WTO and the IFC on trade finance has produced positive outcomes over the past two years, according to Makhtar Diop, Managing Director of the IFC. He stressed that trade financing is as impactful as direct financial investment, as low-income countries require working capital and access to funds. The high-level discussion also involved senior officials from leading multilateral development banks, who shared insights into trade finance and discussed initiatives aimed at capacity building, narrowing trade finance gaps, and bolstering financing for local supply chains. In conclusion, Okonjo-Iweala expressed appreciation for the trade finance communities and called for increased collaboration within the existing informal WTO-MDB network to support supply chain finance, green finance, and capacity building.
