2023-10-17 02:33:50
While recent studies have revealed low participation of small traders in international trade due to difficulties in accessing financing, the World Trade Organization (WTO) is calling on multilateral development banks to better position themselves for inclusive trade. Ngozi Okonjo-Iweala discussed this at the annual meeting of the World Bank Group and the International Monetary Fund in Marrakech, Morocco, on October 13, 2023.
Sylvestre TCHOMAKOU
From Marrakech (Morocco) where she participated in the annual meeting of the World Bank Group and the International Monetary Fund, the Director General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala presented to world leaders, the challenges linked to inclusive global trade, which takes into account the different components of the planet. Indeed, presenting key findings from recent joint WTO-IFC studies on the West Africa and Mekong regions, which reveal significant trade finance challenges faced by small traders and business-led businesses of women, the head of the WTO urged multilateral development banks to redouble their efforts to reduce the gap between demand and supply of financing. This, in a context where “rejection rates above 40% and high costs of making requests discourage traders from seeking financial assistance from banks”. According to Okonjo-Iweala, “only 25% of trade is supported by trade finance in these regions, compared to 60-80% in advanced economies.” However, according to calculations by WTO economists, “increasing trade coverage from 25% to 40% would increase annual trade flows by 8% on average, reaching 80% in 10 years”. Seizing the opportunity, she also highlighted the need to remove barriers to trade finance in order to make global supply chains more inclusive and diversified. She welcomed the efforts of development banks to support small traders during the COVID-19 pandemic and urged them to leverage their financial resources to further empower traders. “Collectively, you represent a significant countercyclical force representing $40 billion in trade finance,” she noted.
Inclusion through trade finance
Noting that 50% of global trade occurs through supply chains, she also stressed the urgent need to improve the availability of supply chain finance. According to him, the WTO-IFC studies on trade financing, including one carried out in West Africa and an upcoming one on the Mekong region (Cambodia, Lao People’s Democratic Republic and Viet Nam), revealed a lack financing of the local supply chain.
Present at this meeting, Makhtar Diop, Director General of the International Finance Corporation (IFC), praised the strong partnership established between the WTO and the IFC in trade finance over the last two years and the results obtained in a short time. He reiterated that IFC is committed to addressing critical challenges and will continue to increase its financing for the benefit of trade and the supply chain. “Trade finance has the same impact, and sometimes even more, than direct financial investment. It is as noble as any type of investment, because businesses in low-income countries need working capital and access to funds,” he said. It is noted that senior officials from major Multilateral Development Banks (MDBs), including the African Development Bank, the African Export-Import Bank, the Asian Development Bank, the Bank for International Settlements, the European Bank for Reconstruction and Development and the International Islamic Trade Finance Corporation of the Islamic Development Bank participated in these discussions. Opportunity for them to exchange views on trade finance and discuss ongoing initiatives aimed at building capacity, reducing trade finance gaps and strengthening financing for local supply chains.
Legend: Ngozi Okonjo-Iweala, DG/OMC and Makhtar Diop, DG/SFI
QA October 17,
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