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International trade can be intimidating for many companies trying to break into the industry. With extensive regulation and documentary processes, it can seem overwhelming, especially when operating in unfamiliar regions.

That’s why organisations like the European Bank for Reconstruction and Development’s (EBRD) Trade Facilitation Program (TFP) and the International Trade and Forfaiting Association (ITFA) are so important for new entrants into international trade. 

At the 33rd EBRD Annual Meeting and Business Forum in Yerevan, Armenia, Trade Finance Global (TFG) spoke with Marco Nindl, Associate Director, TFP, EBRD and Sean Edwards, Chair of ITFA and Special Adviser to the Global Trade Finance Department, SMBC Bank International plc, UK.

Role and impact of EBRD’s Trade Facilitation Program 

At its core, the TFP provides guarantees to foreign commercial banks on behalf of local partner banks within EBRD’s countries of operation. 

The programme’s significance extends beyond mere financial backing. It often steps in to offer guarantees that mitigate perceived risks and foster a more stable and attractive environment for international trade transactions in regions where political instability and economic crises limit appetites. 

Nindl said, “We provide a guarantee in the background on behalf of our partner bank to a confirming bank. But at the end of the day, it’s a real trade going on. There’s always an exporter and an importer. These exporters and importers profit indirectly from the EBRD’s guarantee in the background.”

This intervention is not just about immediate support; it lays the groundwork for sustained economic engagement and development.

Armenia provides an example of the TFP’s impact. When the EBRD began its activities in the country over two decades ago, trade finance was virtually non-existent, with local banks primarily focused on cash loans. Through the TFP, the EBRD has facilitated the creation of trade finance departments within partner banks, significantly boosting the country’s trade finance capacity. 

Nindl said, “Over the years, Armenia has become one of the most active countries in our program. We have done thousands of transactions so far in Armenia, supporting local companies in their export and import business.”

Technical assistance and export competitiveness

In addition to financial guarantees, the EBRD’s TFP offers extensive technical assistance aimed at enhancing export competitiveness in its countries of operation. 

This technical assistance includes specialised training and consultancy services, and supporting the development of necessary legal and infrastructural frameworks.

One key component of this technical assistance is the EBRD’s small business advisory programme. This initiative provides tailored support to local companies, helping them prepare for international trade by securing necessary certifications, developing marketing strategies for foreign markets, and navigating the complexities of export procedures. 

This programme is vital to the success of the EBRD and their countries of operation. In fact, SMEs make up 99% of the total number of businesses across the countries where the EBRD works.

Such support is crucial for SMEs in developing countries, as they often lack the resources and expertise to enter international markets independently.

Nindl said, “We’ve had great success in Armenia and many countries, providing our special advisory service to hundreds of companies that have then gone global.”

This has led to increased economic stability and growth, as local companies become more competitive on the global stage.

Public-private partnerships and digitalisation

The increasing focus on digitalisation within the trade finance sector underscores the importance of public-private partnerships in driving innovation and efficiency. 

Organisations like ITFA play a crucial role in this landscape by promoting private sector solutions that leverage digital technologies to create end-to-end processes for trade finance.

Edwards said, “What I’m very keen on promoting at the moment is marrying the physical and the financial supply chain and having a seamless end-to-end process from the physical to the financial on the same platform or using the same type of digital instruments.”

One of the primary challenges in trade finance is the lack of interoperability and standardisation across different platforms and systems. 

The collaboration between private sector entities and multilateral organisations such as the EBRD is vital in this regard. By working together, these stakeholders can develop and implement digital solutions that meet the needs of all participants in the trade finance ecosystem. 

Governments and regulatory bodies play a critical role in creating the legal and infrastructural frameworks necessary for digitalisation to thrive. However, these efforts can often be slow and cumbersome. 

Edwards said, “Often, government-imposed solutions don’t work very well. They don’t understand the market, or they’re just not adapted to the needs of the participants. We represent the private side of the formula, but we work very much with multilaterals and with governments on digitalisation.”

In the UK,  the collaboration between trade associations and the government has led to significant legal reforms and the adoption of the Electronic Trade Documents Act (ETDA). 

Similar efforts are underway globally, with organisations like ITFA working to promote digitalisation in trade finance across different markets.

By providing financial guarantees, technical support, and fostering innovation through digitalisation, the EBRD and its partners are paving the way for a more inclusive and efficient global trade finance system.