Easing Trade Finance For Small Businesses
Organizations are using several tools & technologies across the world to further accelerate & improve their supply chain processes, ranging from producing, distributing to marketing their services at an uninterrupted pace. But since the global pandemic of Covid-19 hit the world economy, organizations have understood the importance of deploying the latest & most effective techniques available throughout the processes to remain in the competition. As more & more manual processes are being transformed with automation, it has forced industries around the world to think about how they can best utilize technologies to operate their business without any disruptions. While some industries are already on their way to going paperless, for example, Wärtsilä participates in paperless trade finance experiments , mitigating documentation, and cutting back processing times, others are still looking forward to it. One sector that is required to to speed up its conventional & rigid activities is Trade Financing.
Just like any other financial service industry (FSI), trade finance is also associated with a bunch of compliance and regulatory requirements that need to be done before they adopt any technology. However, unlike FinTech which is being appreciated by most FSIs, trade finance is an umbrella term when it comes to services.
According to the Asian Development Bank (ADB)’s Trade Finance Program (TFP), there were 8,950 transactions assessed at around $8.3 billion ($4.7 billion of which was co-financed) since 1 April 2020. However, in its September 2019 Trade Finance Gap, development and job evaluation, the global trade finance gap amounting to USD 1.5 trillion has become a tremendous global challenge that roadblocks economic development and disturbs efforts to mitigate poverty globally.
It has also been shown by the survey report that small and medium-sized enterprises (SMEs) struggle the most when it comes to applying for trade finance. These SMEs have their huge contribution to the majority of businesses and job opportunities in Asia and the Pacific’s emerging economies.
As per an estimation, around 45% of trade finance requests by SMEs wait to get rejected by the banks, compared to 39% for mid-and-larger-sized companies and 17% for multinational companies. The common explanations behind this situation include complex processes, strict requirements, and client familiarity procedures especially on traditional trade financing requests to banks, with several SMEs unable to meet the application criteria.
Recommended Read: Trade Finance & SMEs - Reasons Why SMEs Opt For Trade Finance
Meanwhile, various technologies like Blockchain are helping organizations mitigate the high fixed costs of engaging in difficult procedures of the global supply chain. For SMEs, blockchain is helpful in terms of decreasing costs, making it easier for them to enter into global trade transactions.
Launching RYTE, a cross border digital trade facilitation platform
To assist in the process of easing trade financing’s complexities, GUUD, a Singaporean tech platform has introduced RYTE, along with an advanced trade financing technology platform that links corporates to both banks and alternative financiers and allows them to choose more suitable trade finance solutions to fulfill working capital requirements.
As per Desmond Loh, CEO of GUUD Finance, the financing arm of the GUUD Group, “RYTE will help organizations streamline & standardize processes to further easily submit documents. Through this trade financing platform, companies will be empowered to get the essential digital information or documents through safe repositories like the Networked Trade Platform (NTP) or from digital trade facilitation channels functioned by GUDD such as trade declaration services. ”
Companies that are using RYTE can get their hands on a variety of financing options as per their suitability, including supply chain financing, within a single platform. This platform allows them to connect with a financier to guide them with their needs.
Desmond also adds that the thing which is making this trade finance platform different & more favorable is that it accounts for the power of data to ensure a better experience for users as well as fast & safe services via a reliable network. Clients can explore their activities electronically and ultimately can save their time, costs, and unwanted mistakes.
At the time of introduction, Lim Cheng Khai, Executive Director at the Monetary Authority of Singapore (MAS), said, “The RYTE platform is dependent on digitization to deliver a comprehensive and better experience for trade finance solutions. It is an encouraging initiative to Singapore’s trade financing ecosystem and reestablishes Singapore’s proposition as an advanced financing center. MAS will keep working closely with the financial, technology, and trade sectors and legal partners to provide a smooth, digital, reliable trade and trade financing ecosystem in Singapore. ”
Last year, another trade financing platform was introduced. Contour, a digital trade finance network powered by R3’s Corda, connects buyers, sellers, and banks on the world’s first global, decentralized, digital trade finance platform that can be accessed by all geographies and businesses. Contour is helping decrease the end-to-end processing time by 90% or more and easing processes that have brought new business opportunities for banks, businessmen, and trade ecosystem players.