The World Trade Organisation (WTO) has identified access to trade finance as a major driver of a company’s competitiveness in the international market, and a boost to trade growth in Africa
Ngozi Okonjo-Iweala, Director General of the Inter-Governmental Organisation that regulates and facilitates international trade, underscored the importance of trade finance for boosting trade growth in Africa, described trade finance as the lifeblood of trade.
Ngozi Okonjo-Iweala made this known in a video presentation delivered to a trade finance workshop in Kigali, Rwanda, organised by the WTO and International Finance Corporation (IFC), with the support of the Rwandan government.
Okonjo-Iweala, meanwhile, cited a trade finance survey by the African Development Bank (AfDB) which disclosed that the continent rejects about $80 billion worth of requests for trade finance annually.
The WTO Director General pointed out that the significant shortfall in financing has an adverse impact on African entrepreneurs, especially small business owners.
Salvaging the Situation
To salvage the situation, the economist stressed the importance of dismantling financing barriers for small traders in Africa to increase their participation in global trade. She also welcomed the opportunity for dialogue among banks, local government agencies and businesses, noting that this could lead to better cooperation.
Speaking further, Okonjo-Iweala outlined the key findings of the WTO-IFC joint study on trade finance gaps in the four largest economies of the Economic Community of West African States (ECOWAS) – Côte d’Ivoire, Ghana, Nigeria and Senegal, issued in 2022.
According to the Director General, the study revealed that if ECOWAS countries raise the share of trade supported by trade finance to the average African level of 40 per cent, they could gain an extra eight per cent in trade flows annually. She added that in ten years, this would total $140 billion in additional trade.
Commenting on the impact of the Workshop, Okonjo-Iweala asserted that the Kigali workshop is playing an important role in addressing the trade finance gap head-on for small traders, especially women-owned businesses.
“The workshop will improve participants’ awareness of new technologies and banks’ financial requirements for small businesses; Ultimately, more trade finance means greater trade diversification.”
Okonjo-Iweala
Also speaking at the event, Makhtar Diop, Managing Director, International Finance Corporation, disclosed that one of IFC’s top priorities is to enhance small businesses’ access to trade finance through its global trade finance programme,adding that the programme recently committed a record of $6 billion in 74 countries.
“African countries can only fully benefit from the African Continental Free Trade Area by bridging the trade finance gap on the continent. In a fragmented world, trade is what brings us together.”
Makhtar Diop
Diop also highlighted the importance of enhancing the digitalisation of trade finance to improve its reach, increase efficiency and transparency, and reduce processing time and cost for transactions.
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