Asia loses out on hefty trade finance that hit growth – ADB survey

12 March 2013 05:50  [Source: ICIS news]

SINGAPORE (ICIS)--Developing Asia lost out about $425bn (€327bn) in trade finance in 2011 that hit the region’s economic growth, based on a recent survey from a multilateral institution.

The Asian Development Bank (ADB) released the results of its fourth-quarter 2012 survey on Tuesday that showed close ties between trade finance – the lending and guaranteeing that supports import and export transactions and is critical to international trade – and economic expansion.

“Dramatic shortfalls in meeting financing needs of importing and exporting companies are exacting a huge toll on job creation and economic growth in the region,” said Steven Beck, head of trade finance at ADB.

“These trade finance gaps need to be addressed to give developing Asia a boost to create jobs and alleviate poverty,” Beck said.

Based on ADB’s survey of 106 banks, some $2,100bn worth of trade finance proposals were received from Asia but about a fifth of the total was not approved for various reasons, including low country ratings and weak banking systems.

At the global level, $1,600bn or about 35% out of the $4,600bn proposed trade finance was not met, according to the ADB.

The multinational institution has a programme that fills market gaps for trade finance by providing guarantees and loans to banks to support trade. ADB’s trade finance programme (TFP) currently operates in 18 countries, with Bangladesh, Mongolia, Pakistan, Sri Lanka, Uzbekistan and Vietnam as the six most active countries.

The programme is also in the process of expanding to Myanmar, ADB said.

In 2012, the programme supported $4bn in trade through 2,032 transactions involving 1,577 small and medium-sized enterprises, according to the multilateral institution.

($1 = €0.77)

By: Pearl Bantillo
+65 6780 4359

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