Trade, which is a cornerstone of economic development, is expected to contract for the first time in three decades. This threatens to set back decades of progress in emerging markets and in tackling poverty.
As a result of the financial crisis, banks around the world have reduced lending to emerging markets and cut trade finance lines to importers and exporters. The availability of trade finance has decreased and its cost has increased. This has carried the impact of the financial crisis to businesses across the developing world.
It is anticipated that there will be a gap in trade finance of approximately $100 billion to $300 billion. This gap means essential goods cannot be imported, and presents a threat to the businesses of exporters in developing countries. Smaller banks and their customers, particularly small and medium enterprises, are likely to be disproportionately affected.
In response, IFC has expanded its existing trade finance program to $3 billion and worked with governments and development finance institutions to launch the Global Trade Liquidity Program. These efforts aim to deliver solutions that are timely and targeted and address the immediate needs of businesses in developing countries.
