Trade Finance: A Catalyst for Asian Growth

Claude Lopez
Authors registered in the RePEc Author Service: Jakob Wilhelmus

MPRA Paper from University Library of Munich, Germany

Abstract: This report first assesses the state of trade finance market in Asia, then it identifies the latest trend. Finally it provides a synopsis of the necessary steps that will help sustain trade growth in emerging Asia and insure its impact on GDP growth. The key points are as follows: (i) the impact of trade liberalization on countries ‘growth is very short lives in absence of financial deregulations, (ii) trade in Asian countries relies heavily on letters of credit (L/Cs) which leaves a lot of unmet credit needs, especially for SMEs, (iii) several alternatives are slowly emerging, from banks (factoring, supply chain finance), but also from non- banks (Global and Regional Value chains and inter-firm trade credit), (iv) on the investors’ side, trade receivable assets (via securitization or direct investment) is considered as an possibly attractive alternative due to new financial regulation and low interest rate, (v) trade receivable assets offer attractive alpha yield opportunities, consistent returns, low volatility, “real Economy” investment and lower defaults rates than any other interest based asset class, and a behavior uncorrelated to the market. Policy recommendations to help expanding lenders and investors/capital pool: streamlining the trade finance process, uniformisation of international regulations, strengthening of the institutions helping to mitigate risk, dematerialization of the process (use of technology)

Keywords: trade finance; securitization (search for similar items in EconPapers)
JEL-codes: F1 F13 F3 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ger and nep-sea
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https://mpra.ub.uni-muenchen.de/68156/1/MPRA_paper_66250.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66250

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