The World Trade Organization (WTO) and the International Finance Corporation (IFC) have been working together to improve access to supply chain finance, as highlighted by WTO Director-General Ngozi Okonjo-Iweala. Over recent years, efforts have included developing principles for green trade finance, digitizing trade finance, and providing technical assistance.
Supply chain finance helps unlock working capital and reduce financial strain on suppliers in global value chains. This involves arrangements such as invoice discounting by banks or financiers, enabling businesses to borrow against outstanding invoices.
Director-General Okonjo-Iweala noted that multilateral development banks increased their trade and supply finance support from $30 billion annually before the COVID-19 pandemic to nearly $50 billion last year. This increase has helped ensure the availability of essential imports like food and medicine. The global supply chain finance market is now valued at around $2.3 trillion.
Despite this growth, small businesses in developing countries face challenges such as weak legal frameworks and high costs that prevent them from fully benefiting. In Viet Nam and Cambodia, only 0.5% of trade is supported by local supply chain finance institutions.
Okonjo-Iweala emphasized the potential for small businesses to expand through better access to supply chain finance: “WTO research shows that a 10 per cent increase in the use of international factoring can boost countries' trade by 1 per cent,” she said.
During a meeting, she highlighted commitments by multilateral development banks to coordinate activities aimed at increasing financial support through existing programs. These efforts include enhancing legal, policy, and operational frameworks necessary for market development.
Mr Diop commended the partnership between WTO and IFC in addressing challenges faced by small businesses: “Supply chain finance is crucial for empowering emerging market firms... By providing access to vital financial resources, it enables these businesses to thrive,” he stated.
Senior officials from leading multilateral development banks participated in discussions about expanding supply chain finance and strategies for narrowing trade finance gaps. Participants included representatives from the European Bank for Reconstruction and Development (EBRD), African Export-Import Bank (Afreximbank), Asian Development Bank (ADB), Islamic Development Bank (IsDB), and IDB Invest.
The meeting concluded with a joint statement pledging enhanced cooperation among these institutions to support SMEs in supply chains through technology infrastructure improvements, analytics, training, and financing initiatives.