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Major multilateral development banks (MDBs) and international financial institutions have announced a joint initiative to enhance supply chain finance (SCF) access in emerging markets, with a particular focus on small- and medium-sized enterprises (SMEs).
The announcement came during a roundtable discussion at the World Bank Group (WBG) and International Monetary Fund (IMF) annual meetings on 25 October in Washington DC.
The initiative brings together prominent institutions: the World Trade Organisation (WTO), the Asian Development Bank (ADB), the International Finance Corporation (IFC), the African Export-Import Bank (AFREXIMBANK), and the Islamic Development Bank (IsDB), amongst others.
WTO Director-General Ngozi Okonjo-Iweala noted that MDBs have increased their commitment from $30 billion annually before the COVID-19 Pandemic, to nearly $50 billion last year.
She emphasised that total global supply chain finance is now valued at $2.3 trillion, marking it as one of the fastest-growing segments in trade finance. The progress made in trade finance support, Okonjo-Iweala highlighted, has been significant.
Despite this growth, significant challenges persist for SMEs in developing nations. “Only 0.5% of trade in countries like Vietnam and Cambodia is supported by supply chain finance from local financial institutions,” Okonjo-Iweala pointed out.
Operating through the WTO’s Supply Chain Finance Task force, the multilateral initiative outlines five key areas of cooperation:
- increasing financial support via existing SCF programs;
- Strengthening legal infrastructure;
- Promoting common sector-level operating marketplaces;
- Building market awareness; and
- Expanding product diversity through collaboration with financial institutions and fintech companies.
IFC Managing Director Makhtar Diop emphasised the crucial role of supply chain finance in empowering emerging market firms. “By providing access to vital financial resources, it enables these businesses to thrive, fostering growth, and generating quality job opportunities,” he said.
Financing solutions could help with economic growth. WTO research points to a 10% increase in international factoring usage boosting countries’ trade by 1%.
The participating institutions have pledged to create a joint working group focused on leveraging resources for SME support in supply chains. This collaboration will encompass technological infrastructure development, analytics, training, and financing initiatives, to bridge substantial gaps in market access.
The joint statement represents a unified commitment to addressing the persistent challenges facing SMEs in developing nations, particularly in regions with weaker financial and legal infrastructures.
