5 Exciting Global Trends in Trade Finance

Businesses thrive under pressure. And while every year brings its own set of challenges, it also brings its new sets of opportunity. Thus, as we look forward to the final quarter of 2017 and the beginning of 2018, it is exciting to consider potential innovations in trade finance.

Here are some trends to look forward to in the next few years. While they will prove to be challenging, they also prove to be exciting opportunities for those looking to invest in trade.

Faster Manufacturing

Just as trade finance played a role in the early development of international trade, it’s also played a role in its innovation. One incredible way in which this has happened was through the creation of a faster rate of manufacturing.

International trade has encouraged a number of companies to develop faster mechanisms of development. This has allowed more products to be put on the market at a faster rate due to technologies such as 3D printing.

While these technologies have provided a number of challenges to manufacturers, in the long run, they will result in increased capacity for businesses. This is good news for investors and customers alike.

The Role of Robotics in Trade Finance

A 3D Printer in action
3D Printing, Robotics in Trade Finance

Like 3D printing, robotics is a relatively new trend in the economy that’s bound to cause a few challenges. For investors, it’s also an unavoidable reality.

The best thing you can do is take advantage of the robotics movement. That could involve deeper investment in manufacturers or taking advantage of the wide variety of robotics ETFs on the market.

Either way, smart investors will treat this as an opportunity for growth.

The Continued Rise of E-Commerce

E-commerce has been growing for over a decade. And that trend is continuing on an international scale today.

For investors, this means there is time to develop a strategy that situates around the continued growth of this consumption method. It’s clear that e-commerce is so much more than just a passing trend: so make sure you give it the financial respect that it deserves.

The Role of Blockchain

Blockchain is going to play an absolutely tremendous role in trade. Blockchain companies offer a number of opportunities to the discerning investor. Whether it’s the ever-constant benefits of operating as a digitized company or the elimination of unpaid settlements, Blockchain’s growth is an exciting trend for trade investors around the world.

Combatting a Trade-Hostile Environment

While the current environment offers a number of opportunities to investors, it is not perfect. Between the EU’s imperiled existence and the rise of trade-hostile politicians around the world, there are policy dangers in the current business environment.

While weaker investors will flee, this is not a smart choice. The best option is to stay on top of the news and look for ways to thrive in the current market. By making these choices, you are far more likely to ensure your success.

Get Ahead Of The Curve

If you want to succeed in a challenging business environment, you will need to innovate. We’re here to help you with that.

We’re committed to helping traders around the world succeed. Whether it’s through commodities or global trade, we can play a role in your success.

For more information on what you can gain by working with us, contact us today!

4 Current Commodity Tips You Need to Know About

 

Commodities are an incredibly strong investment choice. A great way to build a diverse portfolio, they lack the volatility of stocks while providing great room for financial growth.

But investing in commodities without knowing what you’re doing is a bad idea.

If you want to make this investment, you’ll need to develop an intelligent strategy. Here are some commodity tips to help you make that move.

Commodities Explained

Before you read any other commodity tips, you need to understand the concept. Commodities are structured trades around the delivery, sale, import, and export of a particular good. Popular commodities include oil, gold, and soybeans.

The most popular strategy for investing in commodities is signing a futures contract. These ensure that you will own the commodity for a set amount of time before selling it on a certain date at a specific price.

Here are a few tips for making the most out of your commodity trades in 2017.

Why ETFs Are A Good Choice

If you’re looking for an effective way to invest in commodities, one of the best ways to do it is through ETFs. ETFs, or Exchange-traded funds, can either monitor a commodity or a specific market index.

ETFs can be a great way for beginners to invest in commodities. They are easy to manage and involve a lot less red tape than a futures index. While investing in ETFs is not the only way to make a profit off of a commodity investment, it is the best way to get acquainted.

How To Use a Short Position

Many have a strong preference for the simple game of going long on their commodities. But this can be a mistake. There’s a lot of money to be made off of the short sell, and it also isn’t particularly difficult.

If you detect a market depreciation, you should sell shares in a commodity. Let the commodity depreciate in value: when you feel it has bottomed out and will experience a resurgence in value, you should buy shares.

This will allow you to minimize the cost of purchasing valuable commodities while profiting off of purchases of a commodity at a low value. Every trader should stop worrying and love the short.

Read The News (Financial and Otherwise)

Commodities are very complex. But in a way, they can also be relatively simple to understand. As a matter of fact, indexes for every commodity from corn to currency will appear in the newspaper. And not just in the business section.

Staying on top of everything from policy to boardroom rumors can help you make the right decision. So devote at least an hour to the news each day.

Be An Oil Skeptic

Oil is one of the most popular commodities. And while it can perform well or poorly in various technical analyses, an essential part of risk mitigation involves taking a look at the international political environment.

Whether it’s through long-term transformations in the energy market or instability in OPEC nations, the future for oil is questionable. In the name of risk mitigation, we would advise approaching oil with caution.

Beyond Commodity Tips: Work With Us

Tips can take you far. But you can go even further by working with seasoned financial professionals.

We’re experts in various areas of trading. One of these areas is commodities trading. But whether you’re looking to succeed at the trading of commodity ETFs or to continue boosting an already thriving portfolio, we’re the best people to work with.

Contact us to take your trading strategy to the next level.

Adam Smith Associates at CIIs’ Banking Colloquium on 16 September, 2017

As the economy moves towards digitization and cashless regime and single market structure under the reform measures of GST and demonetization, Indian Banking sector is going through a sea change.

The recent merger of the State Bank of India with its associate banks has set the path of consolidation for other banks as well. India has the world’s highest stressed asset ratio and RBI is working prudently for management of stressed assets made up of bad loans, restructured debt and advances to companies that cannot meet servicing requirements.

The microfinance industry and the non-banking financial institutions need to work for a change in their financial transactions, a major chunk of which was based on cash transactions till recently.

The new Insolvency and Bankruptcy Code, which lays down timeline to recover from defaulters and capping of bank loans to conglomerates, is promising a new Indian banking landscape by bringing transparency in the system and effective resolution to bad loan.

The issue of cyber security for the banks is now a pressing issue for the economy since the wave of digitization has set in.

Against this backdrop, CII Eastern Region is organizing the 10th edition of “Banking Colloquium” on Saturday, 16 September, 2017 at The Lalit Great Eastern, Kolkata.

The Conference will have an Inaugural Session on Recent Policy Measures, Visionaries’ Roundtable and Technical Sessions on Insolvency and Bankruptcy Code for NPA Management, Digital Banking and the future and Session on Alternative Modes of finance.

Adam Smith Associates Pvt Ltd, a leading trade finance service provider with presence around the globe will be leading the discussion during Technical Session on “Alternative Mode Of Finance” at CIIs’ 10th Banking Colloquium on Saturday 16th Septmber 2017 at Kolkatta.

Mr Rudra Kundu, Managing Director of Adam Smith Associates Pvt. Ltd. will be moderating the session on Alternative Mode Of Finance wherein Mr Rudra will touch upon

  • Infrastructure Finance
  • Capital controls and global free flow of capital
  • PE Funding
  • Housing Finance
  • Term Financing & Working Capital Finance

 

Panelist for this session will be

Mr Arup Rakshit
Head – Treasurer Advisory Group
HDFC Bank Limited

Mr Santosh Nayar
Ex-CMD, IIFCL

Mr Debasish Mallick
Deputy Managing Director
Export Import Bank of India

Mr Supratim Sarkar
EVP & Group Head (PA & SF), SBI Capital Markets Ltd.

Mr Manish Jaiswal
MD & CEO, Magma Housing Finance Ltd

This event is organized by CII

How Is Brexit Affecting Trade and Export Finance?

 

The Brexit vote will take another couple years to go into effect, but that doesn’t mean businesses can’t start anticipating the changes.

While the details of the Brexit deals’ impact on export finance aren’t clear yet, there are several areas that will likely be impacted in one way or another.

In this post, we’ll examine how the Brexit deal will impact future trade and export finance.

What Brexit Means for Export Finance

What Brexit Means for Export Finance

The world of United Kingdom export finance is currently up in the air, but there are key areas which will likely be affected. The changes will be contingent on the final trade agreements the UK makes with the European Union and other nations. Check out the list below to see what might change:

Lower Export Prices

Prices for exported goods could witness a drop.

Depending on the nature of the UK’s future trade deals, prices for exported goods could witness a drop.

If the UK continues to export to countries within the European Union, for example, producers might have to lower their prices to make their products more attractive to importers. Alternatively, if the UK enters into trade agreements with different countries, concerns regarding tariffs will be minimized.

Different Export Markets

The Brexit deal might end up changing what countries the UK does business with, depending on the final trade deals reached.

The UK already has access to expansive export markets located in United States, Canada, Japan, China, and the United Arab Emirates. This list could expand, however, if there’s enough global interest from free markets. In fact, the UK is currently promoting that idea with its “Exporting Is Great” campaign.

Many free market countries are already showing interest in entering into a UK trade deal, actually. The UK could leverage its strong ties with India, for example. Other interested countries include Australia and South Africa.

Pound Exchange Rates

Pound Currency

The impact on export finance and market access is clouded with uncertainty and primarily revolves around potential trade agreements made with the European Union. Exchange rates for the Pound, however, is a more cut and dry issue. Currently, the Pound is proving stable, though, as investors have accounted for the impact of Brexit talks.

Export Tariffs

Export tariffs will become an issue, but mainly for businesses that choose to continue doing business with the European Union as their leading market.

Obstacles in this area exist because the European Union will have to ensure its regulations are met while preserving its member’s benefits. This could translate into the previously mentioned lower prices.

Larger companies will be able to take that hit to their profits. Smaller companies, however, will likely have more trouble maintaining their profit margins.

Watching the News

The final outcome of the Brexit vote has yet to be seen.

The final outcome of the Brexit vote has yet to be seen. But don’t fret just yet. The result might actually be in your favor. To find the latest developments on this ongoing story, check out the Adam Smith Associates blog.

Adam Smith Associates At GTR Asia (Singapore)

Building on its reputation as the largest and most popular trade finance gathering anywhere in the world, the conference returned to Singapore on September 5-8 at Marina Bay Sands. With over 100 speakers, 45 exhibitors, 60 sponsors & partners the event provided an effective and impartial marketplace for all involved in trade, commodity and export finance.

Officially completing its 9th year, attendance exceeded the 900 plus delegates of 2016’s event and welcomed over 1,000 delegates, affirming that GTR Asia Trade & Treasury Week as the essential place to be for anyone involved in international trade and treasury.

Topics discussed include:

  • Protectionism vs multilateralism, realignment towards China, economic trends and scenarios
  • Trade finance gaps in 2017: The impact on trade, growth and jobs
  • The Belt & Road Initiative: The jewel in Asia’s crown?
  • Great expectations: How is the industry preparing for the era of fintech-enabled trade finance?
  • Trader perspectives on the commodity rebound and challenges in structured commodity finance ›› Country profiles: Vietnam, the Philippines, India, Bangladesh and Sri Lanka
  • Understanding potential threats to trade and economic stability in Asia
  • The role of insurers in managing and mitigating risk in uncertain times
  • Managing and financing Asia’s supply chains and the importance of working capital optimisation
  • Achieving sustainable trade: The challenges ahead
  • Are more investors accessing the trade finance market? What are they looking for?
  • ‘The business of treasury’: Operational challenges and the strategic environment

Mr Rudra Kundu, Managing Director was a panelist at the at the “Trade & Commodity Finance” stream from Adam Smith Associates Pvt Ltd.  Wherein the interview was conducted by Mr Rudra on topic

Are more investors accessing the trade finance market? What are they looking for?

Clement Schappler, Chief Risk Officer, EFA Group & Pankaj Kumar, Chief Executive Officer, Riqueza Capital were interviewed
by Rudra Kundu, Managing Director, Adam Smith Associates Pvt. Ltd.

● Examining the key factors in new kinds of investors looking at trade finance assets: How has this manifested itself in Asia? Is a different outlook required from that of traditional investment banking?
● What are investors looking for? Is it the type of yield or whether the asset is backed by insurance? Are we seeing more long-term interest? How difficult is it to get the right level of trade expertise?
● To what extent can supply chain finance play a role in handling investors and underwriting investments? To what degree have legal concerns been addressed?

News & Updates On Trade Finance Around The World

Trade finance moves toward digitization

R3, the blockchain-focused consortium of banks and tech developers, has developed an app on its DLT Corda platform focused on trade finance. The app will work in the same way as standard letters of credit, in recognition of how effective these are at mitigating risks. It was developed with a specific test group of 12 mainly Asian and European banks, including Bangkok Bank, HSBC, Intesa Sanpaolo, and Mizuho.

The banks are now looking to pilot the app with clients, and hope to make it widely available from 2018. The app development group includes tech platform CGI, which was able to bring in its own trade finance domain knowledge and work with the banks to capture the best generic industry practice for implementation within the app, and design the user interface

Source: https://www.euromoney.com/article/b14khbrfy340jh/trade-finance-moves-toward-digitization?copyrightInfo=true

Fintech Firms Nimbly Moving Into Rather Massive Global Trade Financing Market

The ongoing digital transformation of business-to-business (B2B) payments has been well chronicled by Mercator Advisory Group. Part of that transformation can be found in the advancement of alternative cash cycle finance capabilities, led by nonbank financial technology (fintech) vendors during the past 10 year.

There is much debate about the actual opportunity for supply chain finance, probably as much as is there is confusion around the definitions. In the view of Mercator Advisory Group, the market is globally robust with a more than trillion dollars of estimated available open account financing still ripe for working capital improvements on either side of the supply chain.

Source: https://www.benzinga.com/pressreleases/17/09/p10007162/fintech-firms-nimbly-moving-into-rather-massive-global-trade-financing

Trade finance startup Traydstream names Citi veteran Sameer Sehgal CEO

London-based (Trade Finance) FinTech firm, Traydstream has appointed Citi Bank’s ex – Head of Trade for Europe, Middle-East & Africa (EMEA), Sameer Sehgal, as its Chief Executive Officer (CEO). He brings over 22 years’ expertise in Trade, having held several senior roles over the years.

Traydstream’s Co-Founder and Chief Operating Officer (COO), Uzair Bawany, said of the hire, “In Sameer we have one of the leading figures in global Trade Finance; his appointment is invaluable to us in charting a course for the exciting future for our business”. Sehgal will lead Traydstream through a crucial period for the company, with its first programmes beginning with banks over the third and fourth financial quarters of 2017.

Source: https://www.finextra.com/pressarticle/70524/trade-finance-startup-traydstream-names-citi-veteran-sameer-sehgal-ceo
Bank of Georgia seals US$75mn trade finance facility

Bank of Georgia has signed a US$75mn trade finance club deal. The one-year facility was arranged by Citi with Asian Development Bank (ADB) and IFC. ADB supported the facility with a guarantee through its trade finance programme (TFP), and IFC provided funding through its global trade liquidity programme (GTLP), together with Citi.
This is the fourth such deal arranged by Citi for Bank of Georgia.

The funds will be used to support import and export transactions for corporate clients in key sectors including agribusiness, transportation and energy.

“We are pleased to be at the forefront of providing much-needed trade finance products to our corporate and SME clients. The facility will not only diversify and strengthen our client base, but also serve to contribute to sustainable economic growth in Georgia,” says Bank of Georgia CEO Kaha Kiknavelidze.

Source: https://www.gtreview.com/news/europe/bank-of-georgia-seals-us75mn-trade-finance-facility/

Maersk seeks role in trade finance as banks retreat

Maersk Line, the world’s biggest container shipper, is venturing into trade finance, as it seeks to fill a lending gap left by indebted banks pulling out of the crisis-hit shipping industry.

Moving into traditional bank territory and further down the shipping value chain, Maersk Line, part of A.P. Moller-Maersk (MAERSKb.CO), is offering to finance shipments and remove the paper trail from financing deals.

Maersk says it has no need to ask for collateral – one of the biggest headaches for banks and customers in trade finance deals – because it is carrying the goods on its vessels.

Source: https://www.reuters.com/article/us-maersk-results-trade-finance/maersk-seeks-role-in-trade-finance-as-banks-retreat-idUSKCN1AW1E5

U.N. role in world finance
GROWING global interdependence poses greater challenges to policymakers on a wide range of issues and for countries at all levels of development.

Yet, the new mechanisms and arrangements put in place over the past four decades have not been adequate to the growing challenges of coherence and coordination of global economic policymaking. Recent financial crises have exposed some such gaps and weaknesses.

Although sometimes seemingly slow, the United Nations (UN) has long had a clear advantage in driving legitimate discussion on reform because of its more inclusive and open governance. Lop-sided influence in the current international financial system is a principal reason why many countries lack confidence in existing arrangements.

Rebuilding confidence in such arrangements will require that all parties feel they have a stake in the reform agenda. But the UN is also suited to drive the discussion because of its long tradition of reliable work on international economic issues.

Source: https://www.nst.com.my/opinion/columnists/2017/09/275431/un-role-world-finance

TradeCap Closes $500K Trade Finance Facility With Colorado Toy Company

TradeCap announced the recent closing of a $500,000 Trade Finance Facility with a fast growing,
Colorado based toy company.
The Company experienced exponential growth in FY 2016 and sales through 2Q2017 had already surpassed that of the prior year. In the midst of booking orders for its upcoming holiday season, the Company received a sizeable order from a new customer. The increased order was incremental to the normal seasonal needs and created an inventory finance need over and above what the Company’s existing working capital base could support.
Source: http://www.abladvisor.com/press-releases/12478/tradecap-closes-500k-trade-finance-facility-with-colorado-toy-company

Afreximbank, finance professionals to meet on structured trade finance

The African Export-Import Bank’s (Afreximbank) says it is committed to boosting African trade by enhancing the capacity of African professionals on international trade and trade-related project financing issues.

The bank said that as part of its efforts in this regard, it is organising a workshop for stakeholders on Structured Trade Finance in Cape Verde from Nov. 6 to Nov. 9.

The bank said in a statement in Lagos that the workshop was being organised in collaboration with the Ministry of Finance of Cape Verde.

The statement quoted Dr Benedict Oramah, President of Afreximbank, as saying that the workshop was also an important platform for African bankers and other trade finance practitioners to make major contributions that would boost African trade.

Source: http://thenationonlineng.net/afreximbank-finance-professionals-to-meet-on-structured-trade-finance/
Trade Trends: Blockchain provides opportunity for ‘radical’ trade automation

It’s no secret that the process of global trade is overly manual and could be made more efficient if both the corporations that import and export and the governments that regulate trade were to implement better platforms and processes
.
The open-source, distributed ledgers known as blockchains are now mature enough to be considered as a viable part of the technology stack for global trade. While implementing it now would be like going to the supermarket via a space shuttle, blockchains are an increasingly relevant part of conversations that surround trade technology, and trade practitioners should take note.

Blockchain was originally designed to support the development of Bitcoin by an individual or group using the pseudonym Satoshi Nakamoto. Blockchain maintains permanent, tamper-proof lists of records, bundles them into blocks, and chains them together where they are distributed through a peer-to-peer network. When changes are made to the information, or ledger, those changes are recorded across the blockchain.

Source: http://www.americanshipper.com/main/news/trade-trends-blockchain-provides-opportunity-for-r-68819.aspx

BBVA joins Singapore-based trade finance platform
BBVA has recently joined the Singapore-based Capital and Credit Risk Manager (CCRM) platform as a full member bank.

CCRM is a Digital Market Place providing a secondary market for trade and working capital risks, owned by Tin Hill Capital and supported with a grant from the Monetary Authority of Singapore (MAS) Financial Sector Development Fund.

The trade finance asset distribution business helps improve portfolio risk and efficiency by releasing liquidity, as well as enhancing service to clients. The market-place model of participation of the different financial entities in the platform facilitates benchmarking and negotiation and will help create a sufficient critical mass in this secondary market.

Source: https://www.finextra.com/pressarticle/70321/bbva-joins-singapore-based-trade-finance-platform

UAE Exchange in talks with blockchain brand Ripple

One of the UAE’s oldest money exchange houses says it is in talks with US blockchain start-up Ripple, over a tie-up to streamline payments.

UAE Exchange is eyeing a deal with Ripple to help it introduce real time, cross-border payments using blockchain technology.

Blockchain is an electronic transaction-processing and archive system that allows parties to track information in a secure network with no need for third-party verification.

It is the underlying technology that facilitates the use of virtual currencies or ‘crypto-currencies’, such as Bitcoin and Bitcoin Cash, which are becoming increasingly popular around the world.

UAE Exchange claims incorporating blockchain into its processes would help it cut the speed and cost of money transfers for its customers. The remittance house has already invested in two other blockchain-related companies within the past six months.

Source: http://www.arabianbusiness.com/content/377336-uae-exchange-in-talks-with-blockchain-brand-ripple

Two senior staff leave Mitigram to set up advisory firm

Chris Hyde and Jaime Gimeno have left Swedish fintech company Mitigram to found Avant Trade Solutions, a trade finance advisory firm.

The firm will help corporates and banks navigate the rapidly expanding fintech domain, while also helping fintech firms steer the complex world of trade finance.

Source: https://www.gtreview.com/news/on-the-move/two-senior-staff-leave-mitigram-to-set-up-advisory-firm/

Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic and international clients. Above news update and trends are sourced from internet and are purely meant for reading on the related subject and for information. Adam Smith Associate is not responsible for any of the content and nor it is meant for any commercial benefits

 

Using Blockchain Technology Companies for Trade Finance

One of the most propitious industries for blockchain technology is trade finance. Many of the world’s largest banks are putting time into its research and development.

Thanks to a consortium of 71 global financial leaders, R3CEV, much has been uncovered about potential uses of blockchain technology.

Since 2016, R3 has executed several pilot runs in the marketplace to complement their research. They will continue to improve these strategies until ready to fully enter the market.

Block chain
Here’s the future of trade finance with blockchain technology companies.

So, what are some of their findings of potential use? Here’s the future of trade finance with blockchain technology companies.

Monitor Real-Time Status and Condition

One of R3’s members, CBA, is a leading contributor to the research of blockchain technology. Currently, they are undergoing 3 different projects to analyze blockchain use.

They are conducting a trial run with exporters who ship cotton. A humidity monitor is placed inside the canister, which is linked to IoT and GPS.

This monitor allows consumers to track their shipments with real-time status. Also, they are able to evaluate the condition of their product as it travels through.

Other national blockchain technology companies are running pilots, similar to this study. In Singapore, Hellosent is conducting similar tests. However, they’re studying the import of French wine.

Framer
A growing issue for grain farmers is a financial loss due to trade insolvencies.

Eliminate Unpaid Settlements

A growing issue for grain farmers is a financial loss due to trade insolvencies. An estimated $50 million was lost in 2014 because of this activity.

It takes roughly 4-6 weeks for a farmer to receive payment for their shipments. At that, often times conflict arises between farmers and buyers over payment complications (failing to pay the appropriate amount, late payment, etc.).

Australian start-up, Full Profile, has taken matters into their own hands.

Their blockchain platform allows farmers to now receive automatic payment upon delivery of grains. This will significantly reduce the risk of dispute between farmers and buyers.

Once Full Profile’s application is fully functional in a domestic setting, they will expand on external trade.

Digitize 

The use of blockchain technology can also be beneficial to reducing financial loss and risk. Upon further development, it will be able to digitize sales and legal arrangements.

Trade finance is an unwieldy industry, that relies heavily on settlements and contracts. Currently, most of these agreements are handled the old-fashioned way: paper copies.

Blockchain technology will remove the need for this paper-based system. This ultimately reduces the risk of financial loss as documents are often lost, mishandled, or tarnished.

Electronic documentation can be tracked much more efficiently. Also, it cuts out the need for a third-party verification system.

Interested in Learning More About Blockchain Technology Companies?

Blockchain technology creates transparency in financial trade between buyers and sellers. From the moment an order is made up until payment, blockchain is capable of simplifying the trade process.

Are you based out of India and looking to jump into the world of international trade? You’re at the right place.

At Adam Smith Associates, we aid our clients through all of their trade finance needs. Contact us to learn how we can help you!

News & Updates Around The World On Trade Finance

HashCash Redefines Global Trade Finance with HC TRADE built on Ethereum Blockchain

HashCash® today introduced HC Trade Finance, a blockchain technology product that brings a breakthrough for global banks and financial organizations in the business of financing corporate trade.

Traditionally, the business processes around financing a corporate trade activity is a paper intensive process. The risk of fraud is typically high for the financial organization underwriting it. Manual processing of documents also leads to reconciliation or book keeping inconsistencies and audit hassles. This soars up cost for the financial organization and creates barriers to supply chain financing for corporates.

All this in turn leads to inefficient working capital management and affects the overall economic output.

Source: https://www.benzinga.com/pressreleases/17/08/p9958908/hashcash-redefines-global-trade-finance-with-hc-trade-built-on-ethereum

Deutsche Bank to beef up trade finance in emerging markets

Deutsche Bank plans to beef up its trade finance business in the developing world, creating new jobs and investing in technology, it said on Wednesday.

The focus is on Africa, Latin America, the Middle East, Asia, and central and eastern Europe, Germany’s largest bank said. It plans to hire between 20 and 30 people for those locations and will invest “a middle two digit million euro figure” in information technology over the next three years, it said.

Daniel Schmand, who heads the bank’s trade finance division, told journalists that he sees unmet demand for trade financing in particular for small and medium-sized companies.

Source: https://www.reuters.com/article/us-deutsche-bank-emerging-idUSKCN1AW0WP

Video: What to do and not to do in trade finance transactions

https://www.txfnews.com/News/Article/2938/Video-What-to-do-and-not-to-do-in-trade-finance-transactions

Bangladesh secures trade finance and infra packages

Development banks have extended infrastructure and trade finance packages to Bangladesh. The Asian Development Bank (ADB) approved a US$200mn loan package to improve the country’s urban infrastructure, while the International Finance Corporation (IFC) has signed a US$40mn working capital loan with Bank Asia, a local lender.

In the case of the ADB, the finance will fund 600km of road builds and improvements, 300km of drains and install 180km of pipes for water supply, with 60,000 metered household connections. It will fund priority infrastructure in the pourashava (municipalities) of Bangladesh, where populations are dense and facilities are generally basic and overstretched.

Source: https://www.gtreview.com/news/asia/bangladesh-secures-trade-finance-and-infra-packages/

UN endorses ICC Uniform Rules for Forfaiting

In a historic moment, the ICC Uniform Rules for Forfaiting—ICC Publication no. 800 (“URF 800”)—were officially endorsed by the United Nations Commission on International Trade Law (UNCITRAL) in its 50th plenary session held in Vienna on 14 July 2017.

Forfaiting is a trade financing technique based on without recourse discounting of an instrument representing an exporter’s receivables payable at a future date, such instrument evidencing a payment claim or a debt obligation of an importer or a bank / financial institution pursuant to a letter of credit, standby letter of credit, guarantee, aval, bill of exchange or a promissory note created under an export transaction.

The URF 800 are the first ever global rules for forfaiting—the result of three-and-a-half years of joint effort by ICC and the International Trade and Forfaiting Association (ITFA)—developed after taking into account feedback from major trade finance banks, forfaiting companies and exporters. The aim of URF 800 is to create a standard set of rules that can be applied within the forfaiting markets worldwide.

Source: https://iccwbo.org/media-wall/news-speeches/un-endorses-icc-uniform-rules-forfaiting-urf-800/

HSBC and IBM develop cognitive trade finance tool

HSBC and IBM have developed a cognitive solution to automate and digitise trade finance documentation.

The solution, which is already in use in Hong Kong and the UAE, uses IBM robotics technology to analyse documents, digitising and extracting the relevant data before feeding it into HSBC’s transaction processing systems.

The aim is to remove the labour intensity from trade finance. HSBC’s global trade and receivables financing (GTRF) team processes more than US$500bn in documentary trade each year, meaning more than 100 million pages must be manually reviewed and processed.

Source: https://www.gtreview.com/news/global/hsbc-and-ibm-develop-cognitive-trade-finance-tool/

A GAP IN GLOBAL TRADE FINANCE OF AROUND $1.6 TRILLION PER YEAR

Latest survey results and analyses by the Asian Development Bank (ADB) point to a gap in global trade finance of around US$1.6 trillion annually—much of it in developing markets, particularly in Asian developing countries. The concern is that, according to “2017 Rethinking Trade & Finance”, the latest report of the International Chamber of Commerce (ICC): “It is increasingly clear that banks will be unable to materially close this gap in Trade Financing, and that there is a misalignment in the availability of funds and liquidity”.

With worldwide trade developing at a fast speed, trade finance is the “oil in the engine” of international commerce and tool number one for treasury managers. The banking sector has recovered from the last financial crisis, and liquidity seems to no longer be an issue.

However, banking regulations have pushed banks to fund the needs of supposedly less risky multinationals and large corporates in developing countries. Risk-weighted asset regulation within Basel II, along with capital-adequacy ratio or solvency ratio requirements, have driven banks out of the micro, small and sometimes even medium-sized enterprise (MSME) segment. Banks are being challenged by capacity constraints, developed protectionist rhetoric coupled with trade-restrictive initiatives in key G20 economies, which are having a dampening effect on expectations of trade-driven growth and leading to a slowdown in import-based economic activity globally.

Source: https://corporatefinance.co/finance/gap-global-trade-finance-around-1-6-trillion-per-year-2/

Maersk seeks role in trade finance as banks retreat

Maersk, the world’s biggest container shipper, is venturing into trade finance, as it seeks to fill a lending gap left by indebted banks pulling out of the crisis-hit shipping industry.

Moving into traditional bank territory and further down the shipping value chain, Maersk Line, part of A.P. Moller-Maersk , is offering to finance shipments and remove the paper trail from financing deals.

Maersk says it has no need to ask for collateral – one of the biggest headaches for banks and customers in trade finance deals – because it is carrying the goods on its vessels.

Source:  http://timesofindia.indiatimes.com/business/international-business/maersk-seeks-role-in-trade-finance-as-banks-retreat/articleshow/60087830.cms

Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic and international clients. Above news update and trends are sourced from internet and are purely meant for reading on the related subject and for information. Adam Smith Associate is not responsible for any of the content and nor it is meant for any commercial benefits

Trade Finance as a Business Development Strategy

Without trade finance, there wouldn’t be Indian spices, clothes, or jewelry in the United States. Or Apple’s iPhones in China, much less any other international product at any respectable distance from its origin.

In fact, according to Investopedia, the World Trade Organization (WTO) estimates that international world trade has expanded 80%-90% thanks to trade finance.

For this to continue, companies need to include trade finance in their business development strategies.

How do you do that? Learn how you can incorporate trade finance into your business development strategy.

Incorporate Inland Trade Finance in Market Penetration and Market Development

Market penetration and market development are key parts of a business development strategy. Market development involves selling more of your service or product to repeat customers.

While market penetration is about expanding your product or service to other cities and provinces, it can involve inland trade finance. As you may have to renegotiate local and provincial trade deals.

For instance, let’s say you sell jewelry. A business from a neighboring city may purchase your jewelry and sell it to its customers.

You have a long history with this client. And know that your product is selling quickly in your customers’ shop. In which case, you could propose selling the client more jewelry for a bulk price.

After negotiating, the client agrees. However, despite the long, positive history you’ve had with the client, the client may not feel comfortable paying you before you export the jewelry.

This is where a trade financier or banking institution comes in, providing a letter of credit promising that you will export the jewelry upon payment.

Consider the Internet and Brick-and-Mortar Stores

If you’re already selling more of your product or service to clients, perhaps it’s time to branch out to another channel such as the Internet?

If you run a successful e-commerce store, maybe it’s time to start a brick-and-mortar store as well?

That way, your customers have more options where to buy your products.

Especially when it comes to brick-and-mortar stores, trade finance can help you secure new import and export trade deals—especially when there are multiple currencies involved.

Creating a New Product or Service for Repeat and New Customers

With repeat customers, you’re doubling the number of products the repeat client is importing.

And, with new clients, your new product or service will expand your client base. It’s important that you first create new products for your repeat customers before jumping to new customers, as it involves more risk.

Again, trade finance can help cultivate more trust during this period of growth. Since trade financiers or banking institutions can create letters of credit, laying out the terms the importer and exporters must follow.

Final Thoughts About Your Business Development Strategy

Know that growth doesn’t happen in a day; it’s harder for businesses to jump from market penetration to supplying new products to new clients.

This is why we recommend that you approach growth slowly. However, know that trade finance may help increase the number of clients you trade with, no matter where they are.

What’s your take on trade finance? How has it helped your business? Check out our blog for more information.