Tradeteq, the London-based provider of technology and software solutions to the trade finance industry, has today published a whitepaper titled Trade Finance in 2020: Asset Distribution – A Macro-economic Necessity. The paper highlights the need for a greater distribution of trade finance assets to non-bank investors to help SMEs in the Covid-19 pandemic.
In light of the shutdown of trade caused by the Covid-19 outbreak, Tradeteq has identified SMEs amongst the worst hit by lockdown measures. As these businesses are less likely to receive Letters of Credit from banks during this period, the need for other options must be considered. Tradeteq’s solution to distribute trade finance assets to non-bank investors will help both banks and businesses continue to function in this uncertain climate.
The paper also emphasises how distributing assets to alternative investors has the potential to unlock millions of dollars in liquidity, helping to plug the trade finance gap which currently stands at least US$1.5 trillion. This in turn will greatly reduce the risks banks have on their balances, creating new avenues for growth in the market.
The distribution of assets to investors comes as a natural extension of Tradeteq’s credit scoring service. The machine learning and Artificial Intelligence (AI) tools that enable Tradeteq to provide a rigorous, evidence-based credit score are also subsequently applied to gauging the risk of trade finance assets for investors when they purchase.
This also coincides with the rapid growth of the Trade Finance Distribution Initiative (TFDI), for which Tradeteq is the technology infrastructure provider and which has nearly doubled its membership to 30 since launching in 2019. Through growing the members of the TFDI, the trade finance industry is making yet another vital step towards the improving the accessibility of liquidity to small businesses.
Christoph Gugelmann, CEO of Tradeteq comments, “With lockdowns around the world limiting the operations of businesses everywhere, many SMEs will find more barriers to securing trade finance than ever before. But we believe technology can play a pivotal role in easing these hardships. For us, distributing trade finance assets to alternative investors provides a win-win solution everyone – banks are able to operate with less risk, and businesses access trade finance much more easily. This paper aims to highlight the points that will not only support SMEs during lockdown, but allow them to thrive afterwards.”