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According to a joint Multilateral Development Bank (MDB) report, in 2022, global MDBs provided $60.9 billion of climate financing to low and middle-income countries, and $38.8 billion for high-income economies, totalling nearly $100 billion. 

This is just one example of the impact that MDBs have on the global economy. But how did they get to this point, and how else can MDBs impact international trade?

At the 56^th Annual FCI Meeting in Seoul, Deepesh Patel, Editorial Director at Trade Finance Global, was joined on Trade Finance Talks by Steven Beck, Head of Trade and Supply Chain Finance, Asian Development Bank to discuss the role of MDBs in the facilitation of trade and supply chain finance. 

Evolution of multilateral development banks 

From a trade and supply chain finance perspective, the history and evolution of multilateral development banks (MDBs) is intriguing, especially as their roles have changed significantly in the post-Soviet era. 

The first MDB was the International Bank for Reconstruction and Development – the predecessor of the World Bank. It was created in 1945 to assist Europe and Japan recover from the devastation of the Second World War. 

Since the creation of the World Bank, governments have come together to create other MDBs, including the African Development Bank, the Inter-American Development Bank, as well as the European Bank for Reconstruction and Development (EBRD), formed in the 1990s to address the development needs of former Soviet countries. 

This was motivated by concerns of these countries potentially backsliding into communism, with shareholder governments creating the EBRD to seek to ensure that democratic capitalism was fostered in these countries. 

Beck said, “A lot of these countries had a long way to go. But if you look at places like Poland, Romania, and Hungary…today, needless to say, they are quite developed. They are full participants in Europe.” The EBRD’s mandate has since expanded, moving into North Africa, as well as recently adding Nigeria and Kenya to their countries of operations.

Shareholders’ key goals for multilateral development banks

With governments being the ultimate shareholders of MDBs, they need to agree on specific goals. As MDBs are not profit maximising, their mandate is not limited to commercial success, but focusses on development in order to improve people’s lives and drive prosperity – a more difficult task. This is particularly the case in the current environment, where concepts such as sustainable development are difficult to define. Beck said, “the development metrics and the corporate results frameworks are hotly debated. And in fact, the Asian Development Bank is in the process of developing a new corporate results framework.”  The Asian Development Bank has 68 shareholder governments, having been created in 1966. Like other MDBs, it is AA-rated and has a mandate to support the reduction of poverty and foster development. 

Using multilateral development banks to support the commercial sector 

The conventional history of MDBs has been supporting large infrastructure projects through large loans to governments. However, this is now changing with a renewed focus on supporting the private sector in other ways. 

Beck said, “Over time, multilateral development banks realised that the private sector has a very important role to play in development, arguably even more important than governments.” With this progression in terms of the role of MDBs, trade finance programmes also developed in the wake of the global financial crisis.

Korea is one example of how MDBs play a key role in facilitating trade to contribute to economic growth. Beck said, “If we look at the impact of trade, certainly in Korea, it is a country that has gone from being one of the poorest countries in the world to one of the richest countries in the world within one generation. The role that trade played in that development is amazing. You also see that throughout Asia, trade has lifted millions of people out of poverty.” 

As MDBs have continued to cement themselves in the global economy, they looked for other ways to expand their impact. Since the 1990s, MDBs such as the EBRD, ADB, IFC and others have launched versions of trade and supply chain finance programmes, offering another product to benefit the global economy.

The Asian Development Bank’s efforts to address challenges in trade and supply chain finance 

Trade and supply chain finance have experienced significant challenges, even prior to the COVID-19 pandemic. Whilst trade has lifted millions of people out of poverty and plays a crucial role in development, it is not without its issues. Notably, trade and associated supply chains account for approximately 25% of the global carbon footprint. 

If trade and supply chains do not undergo a green transition, this will make achieving climate targets nearly impossible. Another issue often identified is the lack of transparency in trade, with significant issues relating to trade-based money laundering (TBML) in support of crime and terrorism. 

Additionally, inclusivity is another vital factor in developing a better global trade system. Though trade has increased prosperity for many, other SMEs and individuals do not reap the current benefits. 

Beck said, “We need to maximise the development potential from trade by ensuring more people are included in the benefits.”

Finally, the importance of resilience in trade and supply chains was made clear during the pandemic. Beck said, “We are very conscious of just how important it is to ensure that supply chains and global trade are resilient because we need critical goods when and where they are required.”

Importance of and prospects for trade digitalisation 

During the pandemic, the ADB was instrumental in launching numerous digital tools and initiatives in efforts to ensure trade continued. 

Several new exciting developments around trade digitalisation include the ongoing development and implementation of the UN Model Law on Electronic Transferable Records (MLETR). Beck said, “If we can digitalise trade, which is now a totally antiquated process involving mountains of paper; if we can take that paper and transfer it into data, it would be transformative.” 

MLETR can also assist in tackling some of the previously mentioned issues in trade by fostering inclusion and driving better supply chain transparency and resilience. It also has the potential to build an additional layer on top of digitalisation and enable the ability to better monitor environmental and labour standards through trade and supply chains. 

With the digitalisation of trade arguably being the most important priority in the sector, it requires agreement within the trade ecosystem amongst a wide range of stakeholders (exporters, shipping ports, customs authorities, warehousing and logistics, and importers) on the electronic form that paper documents should take. Secondly, governments need to align domestic legislation to transpose the recognition of electronic documents into law, as envisaged by the MLETR. 

The ADB has brought together other MDBs to create a working group seeking to ramp up this work on digitalisation and the adoption of MLETR. Currently, the process of identifying countries and trade corridors of focus is underway in order to drive the MLETR project forward. Beck said, “It is so critical, and we are very excited about moving that much more quickly.” 

The post PODCAST | Steven Beck on the development and role of MDBs in global trade appeared first on Trade Finance Global.

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Trade finance is the lifeblood of global commerce, enabling companies around the world to expand their operations across borders. 

However, the sector faces pressing challenges that can restrict access and impede efficiency. 

To uncover more about how digital innovation is poised to revolutionise this vital field and enhance transparency, security, and inclusivity in global trade, Trade Finance Global (TFG) spoke with Steven Beck, Head of the Trade Finance Private Sector Operations Department at the Asian Development Bank (ADB) and Neil Shonhard, CEO of MonetaGo.

Trade finance challenges and the promise of digitalisation

Two of the most significant challenges facing the trade finance sector today are a lack of financial inclusion and the substantial trade finance gap, which, according to the Asian Development Bank, reached a staggering $2.5 trillion in 2022. 

This gap highlights a significant barrier to access to financial services and particularly affects small and medium-sized enterprises (SMEs) and women-owned businesses, hindering many from accessing necessary financing to engage in international trade.

The status quo has failed to address these challenges. Beck said, “The current system is an antiquated, outdated architecture for trade that we need to tackle.”

While these challenges may seem daunting, advancing digital technologies may hold a solution. 

The drive towards digitalisation promises to streamline processes and aims to make trade finance more inclusive and accessible. It can lower barriers to entry for smaller companies and enhance the transparency needed to tackle issues like trade-based money laundering and other related crimes.

Beck said, “We believe that if we can digitalise trade, it would truly be transformative on a number of different levels.”

This feeling is echoed by many actors in the industry. In the Asian Development Bank’s “2023 Trade Finance Gaps, Growth, and Jobs Survey”, 73% of firms believe that digitalisation will increase their efficiency and access to international trade, and 70% of banks plan to leverage new technologies to increase support for SMEs.

However, adopting new technologies on an industry-wide level can be challenging, particularly given the multi-jurisdictional and heavily paper-based nature of international trade.

Shonhard added, “Trade finance is reliant on data. High-quality and verifiable data. Due to the nature of trade, it’s about enabling the transference of this data across the ecosystem, across jurisdictions, through businesses, banks, financiers, fintech, and many more.”

Given this vast array of stakeholders, successfully digitising the industry will require a degree of alignment to create a standardised ecosystem conducive to digital growth and regulatory acceptance.

DSI and the strategic push for standardised digitalisation

Digitalisation in trade finance is a transformative force capable of reshaping the landscape of global trade, with potential benefits including increased global GDP, enhanced productivity, and lower barriers to entry for smaller companies. 

These advancements are crucial for enabling broader access to the international trading system and fostering greater economic inclusivity, but industry efforts need to be focused to be effective.

This is where initiatives such as the Digital Standards Initiative (DSI) come into play. 

This DSI aims to push trade finance into a new era by standardising around 30 paper-based documents prevalent in trade today, allowing them to be used and legally recognised in electronic formats. 

This initiative by the ICC DSI, called “Key Trade Documents and Data Elements (KTDDE)”, is an important step in creating an industry wide standard for the most commonly used trade documents. By collating agreed upon definitions and best practices, it provides a starting point to move forward to a standardised industry.

But this is just a first step. The DSI is a collaborative effort, which needs actors from across the industry to come together to ensure progress moves forward at a faster pace.

Beck said, “We’re also bringing multilateral development banks together to complement and to boost the work of the DSI, the Digital Standards Initiative, to try to move the needle more quickly to get this done.”

The potential impact of the DSI on global trade is profound. By digitalising trade documentation and gaining legal acceptance for electronic records, the initiative promises to enhance transparency across the trade finance sector. 

This transparency will help address challenges such as trade-based money laundering and other forms of financial crime currently prevalent in the sector. 

Furthermore, many experts expect the shift to digital documentation to reduce processing times, decrease costs associated with trade transactions, and mitigate the risks of document fraud, thereby making trade more secure and reliable.

But simply standardising key trade terms and documents is a moot point without proper legal recognition. According to Beck, an equally important step in this process is working with governments, policymakers and legal experts to ensure there is codified recognition of these documents.

Public-private partnerships for trade finance innovation

Collaboration between the public and private sectors is a critical driver for innovation and security. This partnership is pivotal in leveraging technological advancements and establishing a regulatory and operational framework that supports secure, efficient, and inclusive trade financing practices.

Shonhard said, “It’s important to recognise how public and private are different. The private sector is great at innovating and using technology to solve problems. The public sector is there to ensure that necessary foundations are in place – be it roads and bridges, or regulations and laws – to safeguard a market.”

There are several examples where such collaborations have significantly impacted the trade finance ecosystem. 

In India, for example, MonetaGo’s technology is being used to shut out fraudulent activities from the trade finance market, showcasing a substantial annual growth in secure, fraud-free transactions. 

This use case highlights the efficacy of technological solutions in enhancing security and the essential role of public-private partnerships in facilitating the adoption and implementation of these technologies across different markets.

But India is just one example, in one region. In the last fiscal year, MonetaGo has seen that between 17-37% of lenders suffer duplicate finance fraud in developed markets, and the same fraud is seen as high as 85% in emerging markets.

In addition to private sector innovation, multilateral development banks, like the ADB, play a key role in advocating for and helping governments implement enabling legislation, such as those based on the Model Law on Electronic Transferable Records (MLETR). 

According to the ICC DSI’s MLETR Tracker, There are currently 8 countries, including Bahrain, France, Germany, the United States, and the United Kingdom, where MLETR laws have entered into force. Singapore and the Abu Dhabi Global Market have also adopted MLETR equivalent laws. 

Shonhard said, “Where multilateral development banks are important – if not inspirational – is how they can often bridge the gap between public and private, creating inclusive markets, ecosystems, and economies.”

These laws are crucial for the broader acceptance of digital solutions in trade finance, ensuring that the legal frameworks keep pace with technological advancements and empowering the private sector to continue to create innovative solutions, without fearing that they won’t be legally viable.

Beck said, “If we can accomplish the digitalisation of trade through the standardisation of these documents and through legal systems that recognise those documents, I think then the decision for companies becomes a lot easier.”

Integrating public policy frameworks with private sector innovation through collaborative efforts is indispensable for advancing security and efficiency in trade finance. 

These partnerships foster technological adoption and ensure that innovations are effectively integrated into the global trade system, enhancing regional and global economic stability and growth.

The post PODCAST| It takes a village: ADB and MonetaGo on digital trade and partnerships appeared first on Trade Finance Global.

ADB’s flagship Trade Finance Gaps Survey returns for its eighth edition, confirming expectations that the global trade finance gap – unmet demand for trade financing – has worsened, reaching  $2.5 trillion, an increase of 47% since the last stock-taking which pegged the gap at $1.7 trillion in 2020. 

The gap now represents about 10% of global merchandise trade, and continues to adversely affect small and medium-sized businesses around the world.

Geopolitical and trade tensions, the Russian invasion of Ukraine, and factors such as inflationary pressure coupled with interest rate increases all combine to contribute to the worsening of the trade finance gap. Familiar factors such as financial crime (anti money laundering and countering the financing of terrorism) compliance, along with customer and counterparty due diligence (Know Your Customer, or KYC) requirements continue to be reported as obstacles to the provision of trade financing for SMEs.

This year’s survey sheds light on novel aspects that hold special relevance given the present market conditions. These include the emergence of innovative financing methods like Deep Tier Supply Chain Finance (DTSCF), designed to extend liquidity to the most distant parts of global supply chains. The report also highlights the potential of green, eco-friendly, and sustainable finance to reduce the trade finance gap.  76% of responding firms expressed interest in exploring such innovations.

In its inaugural examination of sustainable trade, financing, and Environmental, Social and Governance (ESG) factors, the ADB’s survey unveiled the following statistics:

• 82% of respondent banks consider ESG and sustainability as strategic imperatives.
• 74% of these banks have plans to transition towards ESG-aligned and sustainable financing.
• In a similar vein, 70% of firms participating in the survey believe that aligning with ESG criteria could enhance their access to trade financing.

This data reflects a broad sense of priority and optimism regarding ESG considerations within the trade financing landscape.

The digitalisation of trade, including through digital documents and improved processes and interoperability, is likewise seen as a potentially important factor shaping the market, with 73% of firms expressing optimism that meaningful digitalisation can enable significant improvements in efficiency. 

Over 63% of banks see significant value in digitalisation, particularly around regulatory compliance and improved understanding of and engagement with SME clients. Both groups however, acknowledge that the cost and complexity around digitising trade poses a significant challenge.

At the same time, key findings from survey respondents signal that awareness-raising and advocacy efforts may be generating positive impact, with linkages between trade, financing, digitisation, sustainability, and sustainable finance presenting a series of areas that have the potential to narrow the trade financing gap, particularly given alignment in perspective on these issues between banks and their clients.

The 2023 survey indicates that there may be some notable developments in the views of businesses around the state of their supply chains. While policymakers, multilateral institutions and others remain concerned about supply chain resilience and transparency, survey respondents seem to be indicating that their supply chains have rebounded well from recent crises. Approximately 12% of responding firms indicated that they are concerned about visibility in supply chain operations and only 14% of firms are concerned about supply chain resiliency. This finding is notable and bears monitoring.

A blueprint for better trade financing

As with past editions of the ADB survey, some consideration is given to potential solutions aimed at narrowing the trade financing gap.

This edition focuses on a few categories of solutions, proposing that we collectively work to create more financing capacity by developing trade finance further as an investable asset class. Additionally, the significant interest in – and potential of – DTSCF should motivate focus on developing this form of financing, including all necessary enabling conditions such as legal frameworks and the actions of various stakeholder groups. 

The transformative attention around ESG and sustainability should also be the subject of proactive attention, in particular, to assure that ESG and sustainable trade, and all related market and regulatory requirements serve to attract more capital in support of trade finance – and not evolve to become an exacerbating factor to the gap because appropriate measures were not taken to align trade and financing with ESG and sustainability requirements.

Digitalisation, in particular, support of the ADB-funded Digital Standards Initiative (DSI), can also help narrow the trade financing gap. Furthermore, progress has been made in several regions towards adopting digital trade practices. This is notably due to governments aligning with the UNCITRAL Model Law on Electronic Transferable Records (MLETR), a trend that should be both encouraged and accelerated..

Finally, trade financing has proven its efficacy in times of crisis, including during COVID-19 , and in country-specific crises such as the recent one which erupted in Sri Lanka. The imperative to assure adequate access to timely trade financing in times of local, regional, or global crisis is clear, and its value in maintaining control of the trade finance gap is clear.

In the end, the importance of tracking – and mitigating – the global unmet demand for trade financing hopefully helps ensure we do not lose economic value, are able to continue to drive trade-based international development, and can regain ground in trade-based poverty reduction from the progress reversed by COVID-19 .

Trade is a powerful tool of economic growth, development, poverty reduction and prosperity. Much of it cannot happen without adequate, timely, and affordable financing. The ADB Trade Finance Gap Survey provides a barometer of the state of the market, and explores solutions as well as emerging developments that can help drive trade financing to where it is most needed.

The post ADB Report: Trade finance gap grows to $2.5tn, and sustainability remains a key strategy appeared first on Trade Finance Global.

Inflation, devalued currencies, and derisking are just some of the conditions affecting the trade finance industry in 2023, but multilateral development banks and alternative programs have a role to play in closing the gaps and reinvigorating growth.

At the International Chamber of Commerce (ICC) UAE’s Trade Facilitation Summit, Trade Finance Global (TFG) spoke with Steven Beck, head of the trade and supply chain finance program at the Asian Development Bank (ADB).

Trade finance in the macroeconomic context

The trade finance industry is facing several macroeconomic problems that are impacting its level of service, perhaps the most pressing of which is inflation.

Effectively, inflation is reducing the real value of trade limits available to financial institutions to support transactions, since the dollar value of each transaction is increasing relative to the underlying assets. 

This is causing a gap that impedes the industry’s ability to create jobs and spur growth. 

Interest rate rises have contributed to the devaluation of local currencies, making it difficult for countries to service their debts and reducing the hard currency available to import necessary items like food, medicine, and fuel. 

However, multilateral development banks, such as the ADB, are working with the private sector to close these gaps, generate growth, and create jobs. 

Beck said, “It is very important for multilateral development banks to step up and support trade, especially in countries where it’s most challenging – and we continue to support transactions in countries like Sri Lanka and Pakistan that are seeing some strain.”

Trade finance programs from governments and multilateral development banks are good crisis response vehicles that function well in times of stress and help the private sector mobilise capital.

Alternative programs like deep-tier supply chain financing, which involves providing financing further down the supply chain than just the tier-one suppliers, allow more capital to reach the small- and medium-sized enterprises (SMEs) that need it most. 

Currencies and capital

Currencies play a crucial role in global trade, with the US dollar being the dominant currency, used for over 90% of all international trade transactions worldwide. 

This ubiquity of the US dollar, even in transactions where the USA is not involved, creates the need to settle in local currencies, which can be challenging for markets with a devalued local currency. 

Beck said, “If we could have more trade settled in a variety of currencies and more diversification in the global trading system, that would help. There are some moves in that direction, but it’s very difficult because the current system is so deeply entrenched.”

In addition to currency challenges, there is a need to bring more capital into trade finance. 

Given the uncertain macroeconomic outlook, banks are increasingly reducing their risk and exposure, leaving a gap that could be filled by capital markets, pension funds, and other investors. 

To help reduce some of the barriers that have historically prevented these potential sources of capital from entering the space, the ICC has created a trade finance register that provides statistics on default and losses in trade finance. 

The hope is that by refining this data to demonstrate that trade finance is an investable asset class, potential investors will be attracted, helping to close some of the gaps in the market. 

However, there have been only minor moves in this direction, and it continues to be an area that needs more attention from the investor community.

Trade is vital for development

Global trade plays a crucial role in economic development by lifting millions of people out of poverty, creating job opportunities, and promoting economic growth. 

Beck said, “Trade is critical to development. It should be of real concern that in today’s political and economic environment, there is a lot of talk about deglobalisation.

I don’t think there are enough of us talking about the importance of trade to the world, to development and its benefits. That being said, trade does have its weaknesses.”

There are losers in trade, and not everyone benefits equally. Also, estimates indicate that international trade and supply chains are responsible for around 80% of the world’s total carbon emissions, which leaves significant room for improvement.

Beck added, “We do not want to eliminate globalisation – trade being the major component of it – so let’s instead acknowledge its weaknesses and work to fix them.”

To address these issues, there is a need to make global trade and supply chains more resilient, transparent, and data-driven. 

Digitalisation can help to make global trade and supply chains more efficient and accessible to SMEs. By increasing efficiencies, it can help to lower the barriers to entry into global trade and increase financial inclusion.

Furthermore, promoting green trade and supply chains is critical to reducing the industry’s environmental impact. Initiatives such as tracking and reporting carbon throughout the supply chain will help reduce carbon emissions and promote sustainability.

The post VIDEO | Deglobalisation and the role of multilaterals – the current state of trade finance appeared first on Trade Finance Global.

Staff at the Asian Development Bank’s (ADB) Trade and Supply Chain Finance Program came across a serious knowledge gap in the early days of the COVID-19 pandemic, when supply chain problems were hindering global procurement of key medical products needed in the fight.

When we heard about the issues with the supply chains, we started asking our bank partners which companies in their portfolios were involved in the supply chains for these products. The idea was that we could help shine a spotlight and get help to where it was needed.

But as it turned out, that information was not available. Even the banks did not have a clear picture of whether the companies they worked with were involved in the supply lines. 

That kind of information was not available in a way that would make it easy for someone to address problems that might arise. We decided to see if that was something we could do.

The solution was the creation of an interactive mapping tool for the supply chains of products vital to those on the frontlines of the battle. These would allow governments, banks, investors, healthcare professionals, and companies to trace the firms that make every component in products such as masks or portable ventilators, down to the metal and rubber that goes into each part.

The information on who makes which part and for which product was available in piecemeal fashion before the ADB effort. But it was information that had never been brought together into one database that would allow for such a quick search.

The TSCFP was in a prime position, firstly to understand the problem, and then to act on it.

ADB and the Trade and Supply Chain Finance Program were already heavily involved in efforts to fight the pandemic. In April 2020, ADB approved a $20 billion package to support its developing members in addressing the impacts of the pandemic and streamlined some procedures to deliver quicker and more flexible assistance. 

Part of those efforts included more flexibility and targeted support for trade and supply chains. Since April, the Trade and Supply Chain Finance Program has supported about 7,000 transactions worth around $5 billion, including about $240 million in medical and pharmaceutical goods.    

By the end of May, the mapping tool was up and running for anyone to use free of charge on the ADB website, where it has been used 13,000 times. There, anyone can search a database of around 20,000 companies involved in supply chains around the world.

Big international banks found they could use the ADB tool to help their clients cut through the noise surrounding efforts to increase production or shipments of pandemic-related products. Companies, academics, and other international organisations also began using the tool. 

As the number of those using the tool has expanded, so has the mapping tool. From the initial seven products mapped, the tool now maps about 33, including the supply chains of vaccines and related goods such as the equipment that keeps vaccines cold en route to where they are needed.

But the uses for the mapping tool don’t stop there. It also incorporates a visual representation of the data in the form of a heat map. A quick glance will illustrate the number of companies involved in the supply chain flows in the market by value, and risks to those flows via factors like trade restrictions or blockages. The distribution flow of the vaccine and cold chain storage will also be represented visually.

The tool may be useful beyond the pandemic, tracking other supply chains vital to development, such as food and agricultural supplies.

ADB’s efforts to offset the effects of the pandemic have also continued to ramp up. In December 2020, it announced a $9 billion vaccine initiative, the Asia Pacific Vaccine Access Facility, to provide funding for vaccine procurement and logistics costs, as well as for successful distribution, delivery, and administration of vaccines. It will also support important investments to build capacity in vaccine delivery, community outreach, and surveillance.

Included in that effort is a $500-million Vaccine Import Facility from the Trade and Supply Chain Finance Program to support its developing members in securing safe and effective vaccines, as well as the goods that support distribution and inoculation. AAA-guarantees available through the programme’s vaccine import facility will mitigate payment risks and facilitate import of these goods.

The post Mapping supply chains amid a global crisis appeared first on Trade Finance Global.

The interactive maps will enable banks, investors, governments, and healthcare professionals to pinpoint key companies in the supply of portable ventilators, N95 respirators, face shields, goggles, aprons, surgical masks, and gowns. The maps consider the elements of each product down to its component metals and fabrics.

“To fix any supply chain problems, we need an in-depth description of what goes into these products and which companies are involved,” said ADB’s Head of Trade and Supply Chain Finance Steven Beck. “Mapping these supply chains means that if help is needed, banks, investors, and governments can use the data to quickly relieve bottlenecks and ramp up supplies.”

PODCAST: ADB -Development Banks step up in the fight against COVID-19 (S1 E36)

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The mapping project feeds data that already exists from many sources into an algorithm that sorts the information by applying various industry and product codes. Until now, that data has existed in multiple forms on a variety of separate databases, but never brought together in a user-friendly format. A future phase of this initiative will look at blockages at ports, tariff requirements, and other impediments to the efficient functioning of supply chains for these critical goods.

ADB announced on 13 April a tripling in the size of its response to the pandemic to $20 billion. The package expands on the $6.5 billion initial response announced on 18 March, adding $13.5 billion in resources to help ADB’s developing member countries counter the severe macroeconomic and health impacts caused by COVID-19.

The post ADB Study Maps Supply Chains for Key Products in COVID-19 Response appeared first on Trade Finance Global.

The supplies, to be purchased by SPC with the loan, will include personal protective equipment such as N95 medical masks, surgical masks, as well as medicines to treat people who have tested positive to COVID-19.

ADB’s Trade Finance Program guaranteed 85% of the trade loan extended by Standard Chartered Bank to the state-owned People’s Bank and onwards to SPC to support its import of these critical medical goods.

“This assistance will help the State Pharmaceutical Corporation to purchase urgently needed medicines and protective equipment for frontline health workers and patients,” said Investment Specialist at ADB’s Trade Finance Program Roberto Leva. “Our partnership with Standard Chartered Bank has made it possible to deliver this assistance in a timely manner.”

With many economies severely impacted by the pandemic, this trade loan will enable SPC to fulfill its mission to ensure the flow of safe, effective, and high-quality medical supplies in Sri Lanka.

“Providing timely assistance in such unprecedented times is critical,” said the Chief Executive Officer of Standard Chartered Bank, Sri Lanka, Bingumal Thewarathanthri. “We are committed to Sri Lanka where we have been present for over a century, especially as the country tackles this global pandemic. Through our long-standing partnership with both People’s Bank and ADB, we are pleased to jointly support the import of these essential medical items to combat COVID-19 in Sri Lanka.”

ADB announced on 13 April a tripling in the size of its response to the pandemic to $20 billion. The package expands on the $6.5 billion initial response announced on 18 March, adding $13.5 billion in resources to help ADB’s developing member countries counter the severe macroeconomic and health impacts caused by COVID-19.

PODCAST: ADB -Development Banks step up in the fight against COVID-19 (S1 E36)

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ADB stands ready to provide further financial assistance and policy advice. Visit ADB’s website to learn more about our ongoing response.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

The post ADB’s Trade Finance Program Supports Medical Supplies to Combat Pandemic in Sri Lanka appeared first on Trade Finance Global.

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Season 1, Episode 36

Host: Deepesh Patel, Editor, Trade Finance Global

Featuring: Steven Beck, Head of Trade & Supply Chain Finance, Asian Development Bank

The impact of COVID-19 on trade finance is hard to gauge at this current point in time, as the situation changes day by day. But the requirements for multinationals and development banks has never been more important in keeping supply chains running. TFG heard from Steven Beck, Head of Trade & Supply Chain Finance at Asian Development Bank, joining from Manila.

TFG spoke to Asian Development Bank’s Head of Trade & Supply Chain Finance, Steven Beck, about the wider impact of the coronavirus crisis on global supply chains, particularly those stemming out of China.

Beck talked about ADB’s rapid response by providing an additional $200mn USD into their supply chain finance programme, for those providing medical and ventilation equipment, face masks and test kits for COVID-19.

ADB are also responding to the crisis by mapping out complex supply chains for companies that produce and distribute critical goods like test kits, or in 95, masks and ventilators.

The COVID-19 outbreak has certainly caused a short term shock on the supply and demand side, which is where development banks are working together to help ensure liquidity is getting to correspondent banks, and keeping supply chains working.

The paramount importance to rapidly innovate, use digital technologies, and rethink paper-based processes (that are suddenly near impossible to enact) is also accelerating the move towards digital as they move their operations online.

Read Steven Beck’s 2020 Predictions for Trade Finance

Read now

The post PODCAST: ADB -Development Banks step up in the fight against COVID-19 (S1 E36) appeared first on Trade Finance Global.

We heard from Steven Beck, Head of Trade Finance at the Asian Development Bank, giving his musings on 2019, a year of uncertainty in trade, and what 2020 might bring for trade and supply chain in Asia.

In this 2020 interview series, TFG spoke to 20 experts in trade, receivables and supply chain finance.

An Interview with ADB

Name: Steven Beck

Position: Head of Trade and Supply Chain Finance

Organization: ADB

Interviewed by Nikhil Patel (NP), Analyst, Trade Finance Global

2019 – Navigating Uncertainty

Nikhil: In 200 words, what were the key highlights and opportunities of 2019 from an industry perspective in trade, receivables and supply chain finance?

Navigating uncertainty is how I’ll remember in 2019. Uncertainty around trade, wondering how growth will suffer if we’re headed down from the top of an economic cycle. Social and political issues also fed into uncertainty and contributed to dampened economic activity. That said, growth proved more resilient than I feared would be the case.

In some ways, this uncertainty was reflected in our business. While ADB’s trade business did 5% more transactions than in 2018, the dollar value of 2019’s 4,700 transactions was down to $5.5 billion from $6.2 billion the
previous year.

For our fledgeling supply chain finance business, our focus in 2019 was to place the business on a more solid footing with clearly defined risk acceptance criteria and internal strategic alignment with risk management. We’re ready to take this business to the next level in 2020.

On tech, AI replaced Blockchain as the most talked about technology in 2019 that could influence the trade and supply chain finance business, drive efficiency, and address problems.

In 2019 ADB’s trade finance business automated internal procedures. This resulted in faster product delivery for clients, and we’re planning more innovations in 2020.   

NP: What are your top predictions for trade, supply chain and receivables in 2020?

Ongoing trade tensions and decoupling of value chains will add to intra-Asian trade growth, already fueled by high growth rates compared to the rest of the world. 

2020 Predictions in Trade and Supply Chain Finance – An ADB Perspective

NP: In 200 words, what are the biggest challenges in trade, receivables and supply chain finance you predict for 2020?

The conscious or unintended consequence of deterring economic activity, including value chains and the free flow of goods and technology on a global basis, will have adverse consequences for the world. Decoupling is a threat to global trade, prosperity, and possibly even peace.  

It’s incumbent on all of us to ensure that this scenario does not happen.  Creating global digital standards and protocols – I refer to the Digital Standards Initiative below – to drive interoperability, the interconnectedness of systems and platforms on which trade will move in the future is important to ensure global trade continues to deliver peace and prosperity.

Trade-based money laundering will become an area of increasing focus.  The industry will need to work closely with regulators to address concerns and improve our ability to detect and prevent crime in our transactions. Decoupling inhibits international cooperation and creates more space for bad actors to use the financial system. ADB, an active member of the Financial Action Task Force’s (FATF) Trade-Based Money Laundering (TBML) Working Group, is well-positioned to play a convening role and will continue to do so.

Making choices about what IT initiatives to undertake and purchase will become even more difficult.  Technology becomes obsolete quickly. It requires tremendous resources and operational upheaval to implement. Inter-operability always an issue.  

NP: What are the key priorities for ADB in 2020?

• Deliver excellence in client service
• Innovate supply chain finance transactions
• Kick off the Digital Standards Initiative in partnership with Government of Singapore and International Chamber of Commerce
• Lead initiatives to tackle challenges in anti-money laundering and counter-terrorism financing

NP: What’s your top prediction for a technology that you think will truly kick off / have the most success in 2020?

Artificial Intelligence. Why? Because human intelligence needs all the help it can get!

Read our trade finance 2020 predictions here

The post Is AI the top technology trend for 2020? An Asian Development Bank Trade perspective for the next decade appeared first on Trade Finance Global.

We caught up with the Head of Trade Finance at Asian Development Bank, Steve Beck. We talked about the newly published Trade Finance Gaps, Growth, and Jobs Survey. This year’s survey found that the global trade finance gap remains at around $1.5 trillion, nearly 60% of respondents expect the gap to increase over the next 2 years. Another key finding was that women-owned firms face greater challenges accessing trade finance than do men-owned firms. Meanwhile, small and medium-sized enterprises (SMEs) also face considerable barriers with more than 40% of SME trade finance applications rejected by banks. However, there is growing optimism that FinTech and digitization are potential solutions to bridge the trade finance gap, particularly for SMEs.

Featuring: Steven Beck, Head of Trade Finance, Asian Development Bank

Host: Deepesh Patel, Editor, Trade Finance Global

My name is Steve Beck. I head the Trade and Supply Chain Finance businesses at the Asian Development Bank. I’m living in Manila where the ADB is headquartered. I’m Canadian.

And also, you’re a world-renowned trade geek?!

World-renowned trade geek. I’ll put that on my business card.

What keeps you up at night?

Well, these trade tensions are concerning. Some of the discussions I’ve been having with clients and partners over the past couple of days here at Sibos has indicated that everyone sort of shares this concern around trade tensions and what it’s doing to the availability of finance for small and medium-sized businesses and their ability to grow the companies, employ more people and create growth in the economy. So that’s a concern. And we need to work together to try to ensure that some of these tensions don’t impede our efforts to create growth and jobs. Yeah, improve people’s lives.

Tell us about what the Asian Development Bank does some of the markets it serves?

So the Asian Development Bank is owned by 68 different governments. And those governments created the bank back in 1966, to improve people’s lives – most of the world’s poor are in Asia – and the bank’s core mandate is to improve people’s lives and reduce poverty. So my role is to help close market gaps for trade finance. The United Nations put out a report on Development for Finance and stated very clearly that there’s a link between trade finance and achieving the Sustainable Development Goals. So it’s really important that the Asian Development Bank, working with its partners, commercial banks, and others, ensures and so on, and tech is able to close these gaps so that we can achieve our Sustainable Development Goals – and improve people’s lives of course.

And I guess, going into bit more detail on the mention of gaps ADB recently released its report, Trade Finance: Gaps, Growth and Jobs just a few weeks ago. Can you give us a quick executive summary of the report?

Yeah, yeah, sure. So, I mean, we found it important to try to quantify what the market gaps are for trade finance and why they exist. So we’ve estimated a $1.5 trillion market cap globally for trade finance, and it may come as no surprise that the bulk of that gap is in the small and medium-sized business market segment. And women-owned businesses have an even harder time accessing finance to support their trade ambitions. So that’s basically what the report found, and of course, there is a concern as expressed in the report that without sufficient levels of financial backing, especially the small and medium-sized entities, we’re not going to create the growth and jobs that are necessary to reduce poverty and improve people’s lives.

Yeah, yeah. And I guess going into that kind of SME space, what are some of the products that you are able to offer to SMEs at the ADB to help them grow?

Well, the Asian Development Bank is like a wholesale bank. So we don’t have branches and staff dispersed in all of our developing member countries. So it’s very difficult for us to interact directly with SMEs. So what we do is we operate through partner banks and other kinds of institutions to get to those SMEs.

We provide guarantees and loans to banks to support trade, including for SMEs. In fact, most of the 4500 transactions we did last year were in support of small and medium-sized businesses, we do that in partnership with banks. Yeah. We’ve also started a Supply Chain Finance business, which we’re in the process of growing, again, partnerships with banks. And their focus is on supporting SMEs in supply chains, again, with guarantees and loans. In addition to financing, we provide capacity building and technical assistance to provide companies and banks in our developing member countries with the knowledge that they need to acquire the resources to grow and create more jobs.

Another question that’s very close to our hearts is the diversity gap in the trade finance sector. What is ADB doing to support its partners to help promote diversity?

Well, I’ll speak to the trade part. I mean, the gender agenda, gender agenda is very important to the Asian Development Bank. Of course, women are more than 50% of the population. And it’s not just about women, it’s about economic growth overall, everyone benefits by having women more fully participating in the economy. So it is extremely important. And one just needs to look around Sibos to see that the vast majority of people here are men. So what we’ve done on the trade finance business, is we approached our partner banks and asked them if they would be interested in volunteering their HR, their human resource policies for assessment, and 19 banks participated. And we took those human resource policies and we had them assessed by gender specialists to understand how those policies could be enhanced so that they would result in attracting, retaining and promoting more women in banking, you know, and 50 of the recommendations were implemented. So it’s a, it’s been a really successful little pilot. It’s been a lot of fun working with the banks to do this, you know, and we’re in the process of expanding that to a number of different areas to work on the gender front.

Innovation is another very exciting aspect of trade, particularly around the digitalization of trade. We see a lot of innovation, particularly in receivables finance coming out of Southeast Asia, what’s your perspective of this and what is the ADB be looking at in terms of digitization? 

Yeah, tech is very exciting in terms of its ability to close market gaps, but you know, in the research that we’ve done, while there have been marginal gains, certainly there hasn’t been any sort of gain that has moved the needle in terms of closing gaps through tech. And that’s where we need to go. We need to support tech. So that it really does make a material difference in closing those gaps.

And I think there are three main things that are missing in terms of the sort of fundamental architecture for tech. What’s holding it back from being able to make that kind of a significant contribution. One is their lack of laws. So for example, you may know that most countries don’t have digital Bills of Lading something as basic as that codified in law.

It becomes very difficult to digitise trade if you know it’s not recognised in law. So we need governments to adapt UNCITRAL, there’s a UN body that creates laws for trade. We need governments to adapt some of those laws. So that we can, we can see tech, playing a much stronger role in that space. Second thing is we don’t have digital standards. We have lots of silos, and individuals sort of pilots and the blockchain or whatever it is operating independently from each other. And so what we’re in the process of doing now is creating with the Government of Singapore, a body that’s going to be housed in the International Chamber of Commerce. So it’s going to create the digital standards and protocols that enable interoperability between all of these different tech pilots. And then the third thing is around identity. We’ve been promoting the Legal Entity Identifier. Yeah. Which I think is really critical to moving the needle on gaps through tech. So if you have like an ocean of metadata that’s created by having a lot of transactions being recorded, including by SMEs, recorded digitally, you’re not going to be able to get the information that helps you lend more financing to SMEs, unless you’re able to take, you know, through an identifier, a unique digital identifier. To identify a grain of sand let’s that’s the SME in that ocean of metadata. So we’re very keen on the legal entity identifier being adopted globally.

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