Ngozi Okonjo Iweala, World Trade Organization, Director-General and Makhtar Diop, IFC Managing Director agreed to enhance cooperation between the two organizations in order to explore ways to improve the availability of trade financing for regions in need.
In a joint statement, the two pledged to enhance existing cooperation to improve the analytics, identification, and detection of trade finance gaps in order to better direct capacity building and other resources where unmet demand is greatest, particularly in Africa.
“Trade is the lifeblood of the global economy but without trade finance, there can be no effective trade,” Diop said. “By expanding our knowledge of trade finance gaps and bolstering traders’ capacity, IFC and the WTO can help small enterprises in developing countries integrate into the global economy.”
“Our developing country members regularly identify a lack of trade finance as a major obstacle to participating in global trade – all the more so for micro, small, and medium-sized enterprises, and businesses led by women,” Okonjo-Iweala said.
“Working together, experts from our two organizations will be able to better analyse, detect, and explain trade finance gaps with a view to directing finite resources where they are needed the most. I believe that a significant share of trade finance gaps results from knowledge gaps.”
Most trade is not paid cash-in-advance. The short-term payment risk involved in international trade is mitigated by a credit, guarantee or credit insurance, present in up to 80 percent of global trade transactions. The sum of these facilities provided by financial and other institutions is known as trade finance.
In their joint statement, the WTO and the IFC agreed to work with small traders and financial institutions at the local level to better understand the ecosystem of trade finance.
The heads of the two organizations also pledged to improve access to trade finance training programs in emerging markets, mainly in Africa, strengthen the ability of local financial institutions to meet compliance challenges, and facilitate knowledge and awareness for exporters and importers of trade finance support available from development financial institutions.