2022 part2

79/ DG Okonjo-Iweala underlines need to help African small businesses access trade finance

23 MAY 2022

Director-General Ngozi Okonjo-Iweala underscored the pressing need for trade finance in African countries, especially for small businesses, at a workshop organized jointly by Côte d’Ivoire, the WTO and the International Finance Corporation (IFC) on 23 May. She said the event provided an opportunity for dialogue between businesses and banks, with the aim of helping small traders reduce trade-related transaction costs and better integrate into world trade.

Established at the request of Côte d’Ivoire, the workshop was attended by small importing and exporting companies and their representative organizations in Côte d’Ivoire as well as trainers from four international institutions — the WTO, IFC, the African Development Bank and the Export-Import Bank for Africa.

DG Okonjo-Iweala highlighted Cote d’Ivoire’s proposals to the WTO on improving access to trade finance for small businesses in Africa and underlined the acute financial constraint, notably the lack of trade finance, that sub-Saharan Africa is facing.

The DG said: “Global surveys show that, while around 30% of international trade finance goes to SMEs, banks reject some 40% of applications from such companies. This rejection rate is higher than for any other type of companies. According to the African Development Bank, the rejection rate for letters of credit applications increased by 30% during the pandemic.” She stressed that the pandemic had accentuated trade financing gaps in Africa, which, prior to the pandemic totalled about USD 80 billion per year, representing about 20% of the African trade finance market.

DG Okonjo-Iweala said the lack of availability of trade finance or its availability at higher costs than the world market are major obstacles to the integration of African countries into world trade.

She concluded: “For countries to be successful in international markets, their logistics, transport, border-crossing and trade-finance costs must be competitive. Controlling these costs requires expertise and training, which eventually reduces transaction costs.” The workshop will contribute to achieving this goal, she added.

Source: wto.org