In The News
Trade financing, though low risk is not completely shielded from the risk that international markets shocks offer. Approximately 80% of international trade depends on finance; credit or insurance for short term. Understanding the relevance of this financing option and the possible challenges to the economy upon reducing trade finance, supply chains have arranged globalized finance options along with production of commodities. An organized value chain finance process is empirical for trade including small and medium organisations in the international arena.
Developing nations are hit hard by the deficient finance options available to them, as they are the victims during estimation of liabilities and shortcomings that arise as part of economic crisis. Trade organisations are working towards the revival of finance inflow into the markets through increased networks and relations among stakeholders thereby reducing causal factors for reduced trade flow.
Current scenario in developing nations
While the developing nations have managed to survive the recent financial crisis, the overall pressure has affected the credit supply into trade. Re-financing the supply has proved challenging, owing to the re-assessment of risks related to an unwelcoming global market.
A rift has formed among the major players in trade finance; moreover, a few bodies have experienced difficulty in their funding capacity in the past years.
Liquidity issues regarding trade finance has seeped in to the third world countries that constitute for approximately 33% of global trade. These nations are facing financial credit and related issues in the domestic trade arena as well. Statistics shows thatflow of finance into these nations have dropped by approximately 6% per year for a couple of years now i.e.; more than the decrease in trade flows in these areas itself.
Limitations in financing trade will encourage a further slowdown in global trade and productive results.