It’s been an interesting year. The ups and downs of the supply chain, the relentless pressures of stubborn inflation and widespread conflicts across Europe and the Middle East have reshaped the trade finance market forever. What does the concept of ‘security’ look like for global trade in 2025? How do we understand risk, let alone mitigate it?
André Casterman, CEO of the Trade Finance Distribution Initiative (TFDI), is acutely aware of the challenges ahead. At the Trade Finance Investor Day, he sat down with Trade Finance Global (TFG) Editor Deepesh Patel to discuss the role of securitisation in building resilience within the trade finance ecosystem.
Structured credit – addressing the finance gap
The structured credit market plays a crucial role in global trade. An estimated 80-90% of the £20 trillion in global exports require outside financing.
Traditionally, structured credit products take one of three forms:
- Collateralised loan obligations (CLOs)
- Mortgage-backed securities (MBS)
- Asset-backed securities (ABS)
Casterman advocates for ABS because he believes it could help bridge the projected $2.7 trillion trade finance gap. Funding disparities tend to disproportionately affect small and medium-sized enterprises (SMEs), which can struggle to secure financing from traditional sources like banks.
Casterman sees ABS products as a great tool for the democratisation of credit in trade finance. “What we want to do now [with ABS] is to attract institutional liquidity from players who don’t have trade expertise, but appreciate the asset class because it represents the real economy.”
In trade finance, ABS enables the conversion of trade receivables (or owed capital) into structured investments, offering tranching options that cater to varying appetites for risk. “The most exciting thing about ABS,” he said, “is you can, as a liquidity provider, choose the risk level you want to be exposed to.”
For conservative investors, senior tranches offer lower risk documented through higher ratings, while junior tranches offer higher yields to those willing to take on more exposure. For Casterman, ABS offers more flexible, efficient avenues for institutional investors (e.g., pension funds, and asset managers) to participate in a market they may not know much about while providing much-needed liquidity for smaller, cash-light businesses.
Despite its critical importance to the real economy, the adoption of ABS in trade finance remains limited. Casterman says the number of publicly rated trade receivable securitisations is far too limited.
Businesses face tightened credit conditions and rising insolvencies, according to Allianz’s Trade Report. It documented an 11% increase in global business insolvencies this year alone, with a further 2% rise anticipated in 2025.
Risk challenges
With inflationary pressures, rising insolvency rates and geopolitical tensions threatening even the lowest-risk assets, innovative risk management tools are integral to Casterman’s vision for ABS adoption.
“Trade credit insurance (TCI) has proven critical in this environment, helping businesses expand safely into new markets while offering institutional investors protection against default risks,” he said. “For SMEs, TCI is a cheaper alternative to traditional guarantees, enabling more accessible financing.”
By ring-fencing trade receivables and covering non-payment risks, these securities create a secure structure from which institutional investors can operate. “They can take risks where private credit insurers are not, extending their cover,” said Casterman. “This creates a fantastic opportunity to make trade finance more accessible to a broader set of non-specialised players.”
Private securitisations (like ABS) have traditionally been out of reach for smaller companies and outside investors. Casterman understands the risk factor is higher for both parties and wants to see greater involvement from SME-focused stakeholders.
“Development banks and export credit agencies are pivotal players in protecting investors, especially in situations where traditional credit providers hesitate to engage. This is also why ITFA’s TFCOP can become a transformational initiative as it aims to increase the role of multilaterals in covering corporate risk.” The TFCOP, or Trade Finance Conference of Parties, is a summit held to address the gap in trade and supply chain finance, and was held for the first time in October 2024, in Washington DC.
Towards a standardised and inclusive trade finance ecosystem
The future of structured credit products like ABS promises equitable financing for global trade, but not without a range of challenging considerations. Casterman is interested in how innovation and regulation will converge.
“More alignment between policy and technology will be critical as we move forward,” he said. “New laws like the UK’s Electronic Trade Documents Act are paving the way for greater adoption of blockchain and tokenisation.”
For many in the fintech space, tokenisation will play an important role, enabling the digitisation of illiquid assets. Blockchain, not without its challenges, is widely recognised for the greater transparency, accessibility, and efficiency it can provide. While tokenisation has largely been limited to liquid asset classes (e.g. US Treasury bills by Blackrock with Securitize as transfer agent) the expectation is that tokenisation practices will expand into trade receivables and other illiquid assets soon. This shift, Casterman observed, will “create new investment opportunities while aligning with advancements in blockchain technology.”
These advancements are largely targeted at democratising the trade finance market, particularly for those smaller players. But larger considerations are also at play, with environmental, social, and governance (ESG) policies now front and centre for investors, insurers and traders alike.
Casterman welcomes the opportunities that ESG considerations will present. “The appetite for sustainable and socially responsible investments is accelerating in both banking and capital markets. Trade finance must align with these expectations to remain relevant to capital markets. The richness of transaction data in trade flows will help us bring the appropriate level of sustainability to insurers and funders alike.”
Industry leaders have taken note, with Allianz’s Green2Green trade surety programme just one example of this shift towards sustainable trade security practices. The programme concentrates premium funds into certified green bonds, supporting low-carbon projects across sectors such as energy and transport while still delivering returns to investors.
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Structured credit will play a greater role than ever in trade finance operations going forward. With asset-backed securitisation, trade credit insurance, and technological innovations like tokenisation, the sector is well-positioned to address challenges like finance gaps and volatility.
Take it from Casterman; “The journey is just beginning. By building partnerships, embracing technology, and aligning policies with market needs, we can create a more inclusive, sustainable, and resilient trade finance ecosystem.”
