By Nathalie Louat
When a farmer in Ghana can’t import fertilizer to grow maize or a pharmacy in Pakistan runs short of antibiotics, the barrier is rarely the price of the goods themselves. More often, it’s a lack of access to trade finance.
Trade finance involves using financial tools, like letters of credit or guarantees, and techniques to help support cross-border trade transactions. But in high-risk markets, banks are reluctant to confirm letters of credit and private lenders are quick to pull back. The development cost of this isn’t just disrupted shipments, it’s crops that never get planted, medicines that never reach patients, and economic setbacks that ripple far beyond a single transaction.
These consequences can be far-reaching, as trade is one of the most powerful engines of economic development. It expands markets by connecting local businesses to regional and global value chains, enabling them to grow, thrive, and create jobs. But trade depends on trade finance. Without it, many are locked out of opportunity. While trade and supply chain finance may not make headlines, it’s one of the most effective tools to encourage economic growth, especially in vulnerable contexts. It reduces the risk of non-payment, frees up working capital, and ensures goods move when and where they’re needed.
Despite trade’s potential to drive economic growth, the global gap between the supply and demand for trade finance is estimated at $2.5 trillion. In fragile and conflict-affected countries, the deficit is especially severe, leaving small and medium-sized enterprises (SMEs), the backbone of these economies, without the resources they need to operate. For many of these businesses, trade and supply chain finance is the only financing available and it plays a critical role in supporting the flow of essential goods like food and medicine. When trade finance disappears, shelves empty, supply chains collapse, and job creation weakens.
Because trade is a key engine of economic growth, jobs, and value‑chain integration, the trade finance gap is far more than a financial problem—it is a development and inclusion problem. And as many global lenders retreat from emerging market risk, the International Finance Corporation (IFC) continues to lean in to keep supply chains connected, small businesses open, and local economies resilient.
The reach of IFC’s flagship trade finance platform, the Global Trade Finance Program (GTFP), is unmatched, with 233 active issuing bank partners in 68 emerging market countries. Local businesses rely on these banks to support their ability to import and export critical goods.
IFC is also growing its trade and supply chain finance business through risk-sharing deals with global financial institutions. Our backing allows these large banks to expand into new high-risk markets and/or increase the amount they are willing to lend.
Beyond financing, IFC invests in building long-term capacity in the countries we support. Over the past year, we provided trade finance training and capacity-building services across 23 countries, reaching 71 local banks, SMEs, and trade associations. Many of these projects were done in partnership with other World Bank Group organisations as well as the World Trade Organization and Proparco. Through these initiatives, we are helping to strengthen financial institutions, increase SME competitiveness, and build more resilient, self-sustaining trade systems globally. Seven new credit lines were activated with new GTFP issuing banks last year as a direct result of this work.
Despite a projected decline in global trade in the coming year, demand for trade finance products is expected to hold steady, particularly in fragile and low-income states hardest hit by macroeconomic turbulence. This is because trade finance instruments help mitigate risk, and emerging market trade tends to carry higher risk, so even if overall trade volumes shrink, more of the remaining trade will still require financing.
Also, while global trade growth may slow overall, emerging economies’ trade remains strong, especially intra-continent. In times of volatility, IFC’s ability to step in and provide stability is more critical than ever. One example is IFC’s African Trade and Supply Chain Finance Recovery Initiative, which is helping restore trade flows in fragile African markets by supporting transactions that private lenders deem too risky—especially for inputs like fertilizer, machinery, and packaging.
Supply chain finance is expected to be particularly scarce due to a combination of financial, structural, and regulatory factors, including the continued withdrawal of banks from markets or segments seen as high risk and ongoing fragmentation of supply chains. IFC’s Global Supply Chain Finance program enables small suppliers in sectors like agribusiness, apparel, and light manufacturing to receive early payment based on the financial strength of their global buyers, freeing up working capital and preserving jobs across complex, multi-country supply chains.
Looking ahead, expanding access to trade finance will be essential to keeping businesses afloat, protecting jobs, and ensuring the continued flow of goods, even when uncertainty looms. We remain committed to making this a reality.
