Trade Finance, An Unmet Market Demand

ME’s have been scouting the global international markets and managing the flow of goods, services, and money with the help of several intermediaries. Transactions done by small and medium enterprises are of high risk, including the paper-intensive and complex procedures which are tied up with complex regulations. Small and medium enterprises of global countries are known to be bold, which diversify geographically and innovative. SME’s in international countries are often solution driven businesses that are necessary to crack international markets.

Due to the rapid increase in international global opportunities, there is tremendous growth in this segment over many years. This growth assists to build businesses sustainable in the economy for a long time. Nowadays, these segments are playing a pivotal role in shaping the international economy by providing employment opportunities and advancing technology across and around the geography of the nations. A recent EY report states that small and medium enterprises of US account for 45% of the total output of the US and these enterprises employ 40% of the US workforce.

Role of SMEs in the International economy

The young population of the nation expects delivery of significant demographic dividend. Moreover, with the double life expectancy, the literacy rates in the US have quadrupled, and the health conditions have got improved substantially in the US. There is fast emerging substantial growth in the middle class with the help of global trade finance services. All these improvements and factors collectively put a positive impact on economic productivity and demand for goods and services.

Role of SMEs in the International economy

It is even estimated that small and medium enterprises contribute to the gross domestic product of the country, which will increase to 22% in the year 2020. A recent report of Boston Consulting Group even stated that there is an increase in the role of Small and medium enterprises and MSME of international countries as the customers of bank capital. This role as the bank customer has increased from 20% to 25%.

This increase in their role has been driven by their growth and the withdrawal of large companies to the wholesale market. Small and medium enterprises segment more than deserving of their access to capital. It will help SME’s of the US to forge links with international businesses. The growth of the economy and employment opportunities of the US depends upon it.

Trade finance and technology to address barriers to SMEs growth

In the international markets, every business prospect involves complexity and challenges in their business activities with a local supplier and buyer.

Trade finance and technology to address barriers to SMEs growth

According to WTO, a shortage of trade finance is the obstacle comes in expanding the global trade. Also, infrastructure is the first problem that comes in the way while growing global business. Access to online trade banking finance is always expensive and limited. However, there is no exception to US regarding it. With the help of many global trade banking services withdrawing from the remote geographics, it becomes even more difficult for small and medium enterprises to gain a foothold in a remote country.

It is harder to get access to credit for small and medium enterprises in spite of the rapid increase in their importance. Though it is easy for the large corporate. Small and medium enterprises get 57% times more rejection than the 10% rejection to the large corporations for demanding trade finance.

International banking industry trade finance solutions are taking steps to make the trade finance processes easy and simple by developing the block-chain technology. This technology can save billions of dollars in speed up the transaction time. The technology has added the benefits for providing the information on the history of all transactions and reducing the uncertainty and risk.

Moreover, the inefficiencies coming from the manual processes are underlying the most transactions that have even been called out by International businesses as a roadblock or obstacle in their business’s growth. According to OECD, 15% of the overall value of the goods that are traded around the world are comprising a hidden cost. Most of this hidden cost is a result of the manual processes which translate into the costs of $100 billion every year.

This hidden cost of manual processes can only be resolved by using the technology and the digital solutions Which not only make access to capital more accessible and simpler for all the businesses across the international board but also bring efficiency and unparalleled transparency in the marketplace.

Decoding roadblocks for small and medium enterprises

A few trade finance solutions offer a solution to the needs of trade finance of the international businesses. There is an increase in the non-banking entities that are getting into the space of trade finance. A recent report of ICRA shows that the share of non-banking finance companies for giving credit to the micro, Small medium enterprises will increase to 22 to 23% by March in 2022 as compared to the 16% in the month of March in the year 2017. These non-banking finance companies are offering funds to small and medium enterprises because banks are not able to do so because of some procedural issues.

The digital economy of the nation is becoming a new reality is the second thing that needs to be considered for this. Online technology solutions are making much easier on boarding of a business customer. The reward that the customs get from this is the same that the ability to track all his trades around geographics.

At last, we will say that as new age technology platforms are based on blockchain, these techniques are offering a real verification of the international and domestic trade. As a result, the technology support the US exporters with all the key ingredients that every trader seeks in international trade in the right way.

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