Across the continent banks have their work cut out for them to assist businesses, particularly small enterprises, to improve their access to bank-intermediated trade finance.
“Currently bank-intermediated trade finance is far below what Africa needs, falling short by at least US$100bn, with access particularly difficult for SMEs, according to the African Development Bank,” says Sola David-Borha, Chief Executive of Standard Bank’s Africa Regions.
She says digital solutions that increase the efficiency and reduce the cost of trade would make it easier for SMEs to access trade finance. “Currently, trade finance in Africa remains heavily paper-based, and disconnected by national borders,” says David-Borha.
Standard Bank is active in this area and among other things, is developing digital solutions to simplify and broaden access to trade finance for small and medium enterprises; partnering with businesses and regional organisations to implement digital platforms to bring down costs and improve the efficiency of intra-African trade.
Encouragingly, she reveals, African governments are beginning to promote digitisation as a way of boosting domestic and global trade in markets that lack traditional domestic and cross-border trade infrastructure.
There is potential for further digitisation of the physical supply, the financial supply and the documents chain, she maintains. By way of example, Standard Bank’s contribution to digitising the financial supply chain has included working with regulators supporting price discovery and risk management in the tea industry in Kenya. The bank has also been working to digitise documents chains, including proof of concept tests using blockchain to digitize bills of lading. In addition, it has identified the development of digital solutions that simplify and broaden access to trade finance amongst Africa’s SME segments in key markets as a strategic focus for the bank.
“Supporting trade in Africa also means working with clients to manage multiple categories of risk, including counterparty credit risk, country risk, FX risk, and operational risk,” says David-Borha. “A key element in this is helping clients match responses to real rather than perceived risk, by partnering with Fin-Tech firms operating trade contingent and asset risk distribution services, for example.”
She adds that Standard Bank is also providing support and strategic guidance to regional organisations working to reduce trade barriers, speed up the clearing and release of goods, increase the predictability of landing costs, and support compliance to minimise the disruption and costs of legitimate trade, though the use of digital platforms.