192/ WTO prepares for new Aid for Trade work programme, hosts workshop on MSMEs’ access to finance
5 November 2019
On 5 November 2019, WTO members started the process of developing a new Aid for Trade work programme for 2020-2021 in the Aid for Trade session of the Trade and Development Committee. Members also discussed how new technologies can enhance access to finance for micro, small and medium-sized enterprises (MSMEs).
At the Committee on Trade and Development (CTD) Aid for Trade session, the chairperson, Ambassador Chad Blackman of Barbados, proposed a process to develop a new Aid for Trade work programme for 2020-2021. He highlighted the continued relevance of economic diversification as a policy objective for developing countries, in particular least-developed countries (LDCs). He also highlighted some themes emerging from the July 2019 Aid for Trade Global Review. These included inclusivity and empowerment, digital connectivity, and diversification in a green growth context. Other relevant issues that were touched upon include Aid for Trade approaches for fragile and conflict-affected states and the growing engagement of South-South partners.
Aid for Trade is a multi-stakeholder initiative seeking to mobilize resources to address the trade-related constraints identified by developing countries and LDCs. More information can be found here.
Several WTO members and observer organizations (the World Bank, the Enhanced Integrated Framework, the Standards and Trade Development Facility, and the International Trade Centre) provided updates on Aid for Trade activities. China announced that the eighth China Roundtable on Accessions will take place in Moscow on 4-5 December 2019. Japan reported on the outcome of the Seventh Tokyo International Conference on African Development, which took place from 28 to 30 August in Yokohama, highlighting its commitment to expand Japanese private investment in Africa. Other members took the opportunity to provide overviews of the Aid for Trade elements in their Trade Policy Reviews.
An Aid for Trade workshop held on the margins of the CTD explored the role Aid For Trade can play in promoting access to finance for MSMEs. It discussed how new technologies, such as blockchain, can bridge the MSME financing gap.
Key points emerging from the workshop included the essential role of standards to ensure that new technological systems can communicate with each other and the importance of facilitating information exchange between the real economy and the financial sector. The workshop also underlined the need to overcome regulatory constraints to scaling up financial technology innovations, the potential of blockchain technology to broaden financial access, and how lack of finance is a constraint to getting online and developing the e-commerce market.
The gap in finance for MSMEs is USD 5.2 trillion, said International Trade Centre Chief Economist Marion Jansen, citing an estimate from the International Finance Corporation. Two-thirds of rejected trade finance applications are from MSMEs, said the Geneva Representative Director of the International Chamber of Commerce, Crispin Conroy. Among the challenges that must be addressed, he cited the profitability of such transactions for banks, difficulties in finding local lenders, and the lack of knowledge among MSMEs about finance opportunities.
According to the Asian Development Bank Economist, Kijin Kim, complicated paper-based requirements and high costs of regulatory compliance for both banks and firms are likewise blocking trade finance flows. Moreover, MSMEs in LDCs are confronted with limited Internet access and weak regulatory frameworks, said Cecile Barayre-El Shami, Program Manager at the United Nations Conference on Trade and Development.
To address this, speakers recommended using Aid for Trade initiatives to strengthen the capacity of MSMEs and thus make them more attractive to funders and more informed about finance opportunities. Also under focus were innovations such as blockchain systems to reduce paperwork, artificial intelligence for credit scoring, and a global register to identify businesses. New finance technology platforms, furthermore, can help pool large numbers of small firms in such a way that their aggregated finance requirements become attractive to large lenders.
Policies will be needed to encourage the adoption of these new technologies, said Andre Casterman of the International Trade and Finance Association Board. Some examples include international standards for new technologies to ensure interoperability of various systems, legislation recognizing paperless transactions and government programmes to strengthen state-run export credit agencies. New technologies are here to stay and it is up to regulators to ensure MSMEs are able to take advantage of these, WTO senior analyst Emmanuelle Ganne said.
Next meeting
The next CTD Aid for Trade session is scheduled for early 2020.
Source: wto.org
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