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A Plan to Reboot the $5 Trillion Engine That Powers Global Trade

A Plan to Reboot the $5 Trillion Engine That Powers Global Trade

This year’s product shortages and supply chain snarls revealed the fragility of the $5.2 trillion trade finance network that helps fuel the global economy, according to a new report produced by McKinsey & Co.

For millions of small businesses -- particularly in the developing world -- the current system of trade finance is overly complicated, inaccessible and imposes a significant barrier to participation.

Banks and exporters can help improve this system by fully digitizing their decades-old processes and adopting an international framework of trade finance standards, according to the study, which was co-authored by the International Chamber of Commerce and Fung Business Intelligence.

Ultimately, the goal is to help the world’s small businesses obtain the necessary funding to ensure the smooth functioning of global supply chains and cross-border trade. Without it, there will be a “two-tier system that separates the haves from the have-nots,” the report said. 

The report acknowledged that it may take a decade to see the full benefits of a fully reformed global trade finance ecosystem. Nevertheless, a more equitable distribution of benefits could be accelerated if the “global trade finance community can be inspired to cooperate.” 

©2021 Bloomberg L.P.