Trade finance for sustainable development in Asia and the Pacific

Over the years, the Asia-Pacific region has maintained its global lead position as the largest user of trade finance. Actively involved in international trade, Asian and Pacific small and medium-sized enterprises have been important contributors for sustaining the region’s lead position. Juxtaposed to the interregional high position enjoyed by the Asia-Pacific region as the largest user of trade finance in the world market, trade within the region is facing a persistent demand-supply mismatch and widening of trade finance gaps. Small and medium-sized enterprises, despite being the largest contributors to Asian international trade, are more adversely affected than large companies, giving rise to operational constraints and challenges. This has prompted some policymakers, national governments and international organizations to address the issues, invite suggestions to halt the persistent trend of the widening of trade finance gaps and take suitable measures to ease the flow of trade finance. Recognizing the importance and significant role of trade finance as an engine of growth, this paper reviews the status of and constraints to easy access to trade finance in Asia and the Pacific; assesses trade finance gaps estimated by institutional surveys; and identifies emerging issues and challenges, especially those faced by the small and medium-sized enterprise sector. Analysing the resultant policy implications, the paper finally brings to the forefront a set of remedial measures, presents recommendations together with a road map for policymakers to consider for implementation. The recommendations are innovative and suggestive of national action and regional cooperation.