• Linkdin
Maximize your media exposure with Fibre2Fashion's single PR package  |   Know More

New roadmap for sustainable and inclusive global economy: Report

25 Nov '21
3 min read
Pic: Milkos | Dreamstime.com
Pic: Milkos | Dreamstime.com

A new roadmap has been published to reconceive global trade finance for a more sustainable and inclusive global economy, as per a recent report by McKinsey & Company. The report is a year-long effort aimed at raising awareness and addressing the challenges faced by micro, small and medium sized enterprises (MSME), particularly in the emerging markets.

The report by McKinsey & Company in association with the International Chamber of Commerce (ICC) and Fung Business Intelligence outlines a new vision for the global trade finance ecosystem.

The construct set out in the report would be built on three main logical blocks: first, digital trade enablers, which would be standards enabling digitisation of both trade finance and global trade at large; second, standards enabling specific digitisation of the trade finance industry; and third, best practices for trade finance interoperability. Governance could be provided by a single global industry entity or by a consortium, McKinsey & Company said in the report.

The report is based on over 150 interviews with end-users and subject matter experts in 12 countries, and an ideation and review process covering leaders from trade, finance and technology.

“The difficulties faced by small businesses in accessing trade finance have almost become an accepted facet of international commerce since the global financial crisis. Today’s report is a direct challenge to this status quo — setting out a roadmap for systemic change to address the root causes of the estimated $1.7 trillion trade finance gap. If we want to enable trade as a real vector of peace and prosperity in the wake of COVID-19, it’s time to stop applying sticking plasters and tackle the need for wholesale reform and effective digitalization of a market which is currently unable to serve the needs of the real economy,” John Denton, Sec Gen of the ICC, said.

According to the Asian Development Bank, the trade financing gap reached $1.7 trillion in 2020, an increase to 10 per cent of global goods traded, from 8 percent in 2018.  MSMEs account for 40 per cent of trade finance application rejections by banks.

Today’s trade finance system is characterised by a complex web of decades-old manual processes, and more recent, isolated ‘digital islands’—closed systems of trading partners formed to address specific pain points. The report therefore sets out a road map for digitally connecting and facilitating interoperation among existing networks through sets of shared standards, processes, protocols, and guiding principles.

“With global trade under enormous strain, there is an urgent need to overhaul and modernise financial systems that support the lifeblood of the world economy. Buyers and suppliers would like to see more liquidity, lower costs, less transaction complexity, and greater availability to credit markets. The entire trade ecosystem has to become far more efficient and benefit from digital innovation,” Victor Fung, co-chair of the ICC ATF, said.

 “We are proposing real-world solutions, many of which already exist in some form, to address long-standing issues in global trade finance: the report sets out a global framework for existing and future standards, protocols, and principles, with the goal of connecting all those who participate in the global trade finance ecosystem to both present and future networks. This will be a complex project. But its benefits would be both wide and deep, with the prize being a global economy that is more sustainable and inclusive,” Bob Sternfels, global managing partner of McKinsey said.

Fibre2Fashion News Desk (RR)

Leave your Comments

Esteemed Clients

Woolmark Services India Pvt. Ltd.
Weitmann & Konrad GmbH & Co. KG
VNU Exhibitions Asia
USTER
UBM China (Shanghai)
Tuyap Tum Fuarcilik Yapim A.S.
TÜYAP IHTISAS FUARLARI A.S.
Tradewind International Servicing
Thermore (Far East) Ltd.
The LYCRA Company Singapore  Pte. Ltd
Thai Trade Center
Thai Acrylic Fibre Company Limited
X
Advanced Search