Securitization could close the trade finance gap
Trade finance is gaining momentum as a securitized asset class – the resultant increased liquidity may offer corporates access to trade finance much more easily and quickly, especially as digital solutions streamline the process. Will SMEs, which have traditionally found it harder to access the market, be able to reap the benefits as well?
Until recently, trade finance has been more or less off-limits for institutional investors. The market was almost exclusively the business of bankers able to decode difficult trade finance deals.
But low and even negative yields in traditional investments coupled together with new digital platforms that encourage standardization across the trade finance industry have shifted opinion around the asset class.
Christoph Gugelmann, Tradeteq
Institutional investors are now looking at how they can access trade finance assets to enhance returns. And if they can get more involved, this could create a deeper, more liquid trade finance market that will facilitate access to trade finance for corporates that have struggled to access cash in the past.
According to the International Chamber of Commerce (ICC), the trade finance gap – the gap between the amount of capital required for businesses to run as efficiently as they can and the amount of finance provided – stands at $1.5 trillion a year. So programmes that support broader access to trade finance are very welcome.
“We are still in the early stages but we see a new and dynamic market emerging, which will have benefits for corporates at many different levels,” says Christoph Gugelmann, CEO and co-founder of Tradeteq, an online platform which allows investors and originators to transact trade finance investments.