In the wake of the 2008 Global Financial Crisis (GFC), a wave of new financial and regulatory measures was ushered in to fortify the financial system. This included governments backstopping banks, tightening of lending regulations, and introduction of new supervisory structures, bodies and agreements to reduce the likelihood of a repeat. As a result of these regulations, the export finance market players, particularly commercial banks and corporates, experienced new hurdles in facilitating business across borders.
This effect on small and mid-size enterprises (SMEs) and less-connected countries was immense. National Development Banks (NDBs) play a crucial role in filling the trade finance gap resulting from the heightened regulation, given their developmental mandates, deep relationships with local private sectors, and strong ties to SMEs.
Momentus (formerly IFCL) conducted desk research to publish this paper exploring the role of NDBs in bridging the trade finance gap, thereby allowing SMEs and corporates to do business across borders. It provides an overview of new regulations and their impact on trade finance, the impact on SMEs and least-connected countries as a result of the trade finance gap, and the role of NDBs in addressing the gap.