World Trade Board opens talks on how to help MSMEs

world-trade-board-opens-talks-on-how-to-help-msmes

The World Trade Board has launched a consultation around a new framework that would increase access to trade for micro, small and medium-sized businesses (MSMEs).

The framework, Financial Inclusion in Trade Roadmap, was developed through the contributions from major industry bodies and international stakeholders. It identifies five key areas where coordinated action can make a significant impact.

At its core, the roadmap aims to accelerate the pace of change by providing a holistic framework for public and private sector collaboration.

According to the World Trade Board, MSMEs account for around 90% of businesses around the world. However, they only accounted for 23% of applications for trade finance in 2020. Despite their low representation, MSMEs still accounted for 40% of rejected trade finance applications.

This mismatch in demand and supply is adding to a trade finance gap, which was estimated at $1.5trn in 2018 and $2trn in 2022.

World Trade Board deputy chair Michael Vrontamitis said, “Difficulty accessing finance means MSMEs are greatly under-represented in global trade. Many good ideas to increase financial inclusion have been put into action, but to accelerate progress we need to harness the knowledge and technology available to us into collective action.

“Our framework aligns diverse stakeholders towards a common vision, with clear lines of responsibility in a results-driven approach. We now invite the industry to provide feedback that will improve the Roadmap, then partner with us on implementation.”

There are five pillars to the Financial Inclusion in Trade Roadmap. The first is digital infrastructure. It aims to accelerate the adoption of digital identities, such as the Legal Entity Identifier (LEI) and Decentralised Identifiers, through mandated utilisation in the financial services sector.

Pillar two is legal and regulatory infrastructure. The roadmap aims to support the adoption and alignment of legal frameworks.

The next pillar is data infrastructure. The body hopes to help gain access to trade receivables-related data points to update traditional credit-decisioning methods.

Pillar four focuses on technical assistance. It will support technical learning amongst financial institutions and MSMEs on matters related to legal, digital and data infrastructure.

Finally, pillar five is aimed at finding new funding sources. The framework would help to develop an infrastructure to encourage investment in credible MSME trade finance assets.

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