Countries can initiate new efforts to support access to trade finance for their small and medium enterprises (SMEs) to help them grow into global markets, according to a study released by the World Trade Organization (WTO).
It considered a lack of trade finance as a significant nontariff barrier to trade, with up to 80 percent of trade financed by credit or credit insurance.
The study found that SMEs in developing countries face even greater challenges in accessing trade finance. The estimated value of unmet demand for trade finance in developing Asia is $700 billion.
Gaps in trade finance provision are highest in new "frontier" countries for trade, where trade opportunities are increasing as global production patterns evolve, it said.
"Bridging these gaps in provision would unlock the trading potential of many thousands of individuals and small businesses around the world," it said, noting that the availability of finance is, thus, essential for a healthy trading system.
The study stressed that various steps are already being taken to tackle this issue through encouraging global financial institutions to remain engaged and to ensure that regulations are not prohibitive; increasing the capacity of local financial institutions; and providing support measures to increase the availability of trade finance through multilateral development banks.
Apart from these, further steps could be taken, including enhancing existing trade finance facilitation programs to reduce the financing gap by $50 billion; and reducing the knowledge gap in local banking sectors for handling trade finance instruments by training at least 5,000 professionals over the next five years.
The study further said countries can also maintain an open dialogue with trade finance regulators to ensure that trade and development considerations are fully reflected in the implementation of regulations; and improve monitoring of trade finance provision to identify and respond to gaps.
It said new efforts to support SMEs' access to trade finance "could have a very significant, positive impact."
"With so many businesses deprived of the support that they need to grow, action is needed to address these trade financing gaps," it added.