Newark, May 08, 2023 (GLOBE NEWSWIRE) -- The Brainy Insights estimates that the USD 45 billion in 2022 global trade finance market will reach USD 73.30 billion by 2032. The government of India is proposing and implementing initiatives aimed at reaching trillion dollars in exports through its Make in India scheme. The government plans to make India the global manufacturing hub in pharmaceuticals, textiles and engineering products. The country's significant production of cereals and cash crops also contributes to the rising export potential. Furthermore, the country's small, micro and medium enterprises are gaining from several government initiatives aimed at providing funding, faster clearance and compliance regulations to promote their growth and development. Similar favourable government initiatives by other developing nations are facilitating international trade. The exponential growth of international trade in the forecast period will augment the global trade finance market's growth.
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Key Insight of the global trade finance market
Asia Pacific is expected to rise the fastest during the forecast period.
Consumer demand is rising in the region due to the region's expanding population, which is mostly driven by China and India, as well as the population's rising disposable income. Top producers of numerous commodities reside in China and India. International trade is fueled by the region's sizable consumer market and suppliers. The presence of SMEs also facilitates the expansion of the region. The existence of numerous trade financing providers is boosting the Asia Pacific market's growth.
In 2022, the letters of credit segment dominated the market with the largest market share of 44% and market revenue of USD 19.80 billion.
The product type segment is divided into letters of credit, export factoring, insurance, bill of lading, guarantees and others. In 2022, the letters of credit segment dominated the market with the largest market share of 44% and market revenue of USD 19.80 billion.
In 2022, the supply chain finance segment dominated the market with the largest market share of 43% and market revenue of USD 19.35 billion.
The finance type segment is divided into structured trade finance, supply chain finance, and traditional trade finance. In 2022, the supply chain finance segment dominated the market with the largest market share of 43% and market revenue of USD 19.35 billion.
In 2022, the banks' segment dominated the market with the largest market share of 55% and market revenue of USD 24.75 billion.
The service provider segment is divided into banks, trade finance houses and others. In 2022, the banks' segment dominated the market with the largest market share of 55% and market revenue of USD 24.75 billion.
In 2022, the importers and exporters segment dominated the market with the largest market share of 40% and market revenue of USD 18 billion.
The end-user segment is divided into importers and exporters, banks and financiers, insurers and export credit agencies and others. In 2022, the importers and exporters segment dominated the market with the largest market share of 40% and market revenue of USD 18 billion.
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Advancement in market
December 2022 – Tata Power received a 450-crore sustainable trade finance facility from Japan's MUFG. The two solar power plants owned by TP Kirnali Limited, a 100 MW project in Parthur, Maharashtra, and a 120 MW project in Mesanka, Gujarat, would be purchased using the financing provided by MUFG under documentary trade finance. TPKL, a sustainable energy platform founded in 2020, is a wholly-owned subsidiary of Tata Power Renewable Energy Limited (TPREL). Tata Power has pledged to achieve carbon net-zero status by 2045. MUFG has stated that it intends to achieve net-zero emissions in its activities by 2030 and in its financial portfolio by 2050.
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Market Dynamics
Driver: The rising demand for trade finance from MSMEs.
The growing importance of small and medium-sized businesses in world trade has brought to light their inability to obtain the legal trade finance available to them. Small and medium-sized businesses create millions of jobs while supporting the growth of national economies worldwide. They serve as the fundamental cornerstones of the world economy and propel progress and expansion everywhere. Given their expanding business, they can now reach the global market and supply their goods to other economies. However, SMEs have trouble getting the trade financing they need for smooth business transactions. The government, SMEs, banks, and other stakeholders have come together to hold discussions and offer benevolent rules and regulations to increase their access to trade financing because of the significance of SMEs to the national economy. Similarly, international organisations like the United Nations and the World Trade Organisation are trying to create an environment conducive to growth to improve trade finance for SMEs and close the trade financing market gap in poor nations. As a result, the growth of the global trade finance market will be driven by the SMEs' rising demand for trade financing.
Restraint: Increasing geopolitical uncertainties.
Tensions have increased due to the shifting geopolitical landscape during the past ten years. The ongoing trade conflict between the USA and China has recently worsened due to the suspected Chinese spy balloon, which caused a diplomatic crisis in their relationship. The trade war is also anticipated to worsen due to the Taiwan problem. The Western sanctions against Russia caused similar supply chain problems after it invaded Ukraine. The difficulties at the EU-UK-Ireland frontiers have brought similar misunderstandings and increased tensions regarding trade across these borders. These phenomena are predicted to persist and negatively affect global commerce. Wars, trade wars, and other conflicts make it harder to finance international trade and hamper the market's growth.
Opportunity: The growing adoption of new technologies like blockchain.
The usage of blockchain in trade finance results from the global trend towards increased automation and digitization. Given the multiple advantages it provides for service providers and customers, the use of blockchain technology in trade financing is gaining popularity on a global scale. Blockchain will simplify the procedure and offer faster access to a client's transactional and other pertinent data. Blockchain technology in trade finance will reduce costs, boost accountability and compliance, and increase the security and safety of client data, information, and transactions. Additionally, it lessens manipulation and errors. As a result, the market participants will have attractive prospects over the forecast period due to the application of blockchain in trade finance.
Challenge: The complex documentation and regulatory approvals.
Trade finance involves a transaction that facilitates international trade. There are overseas banks involved. Therefore, the list of documents, necessary verification steps and authentication stages are extensive, overlapping and complex at times. These steps or stages cause delays which can challenge the market's growth. Furthermore, every nation has its regulatory framework governing the trade, banking and finance sectors, which makes integration difficult and time-consuming.
Some of the major players operating in the global trade finance market are:
• Asian Development Bank
• Bank of America Corporation
• Citigroup Inc.
• DBS Bank Ltd
• Euler Hermes Group
• HSBC Holdings PLC
• JPMorgan Chase & Co
• Mitsubishi UFJ Financial Inc.
• Standard Chartered PLC
• The Royal Bank of Scotland Group plc
Key Segments cover in the market:
By Product Type
• Letters of Credit
• Export Factoring
• Insurance
• Bill of Lading
• Guarantees
• Others
By Finance Type
• Structured Trade Finance
• Supply Chain Finance
• Traditional Trade Finance
By Service Provider
• Banks
• Trade Finance Houses
• Others
By End User
• Importers and Exporters
• Banks and Financiers
• Insurers and Export Credit Agencies
• Others
By Region
• North America (U.S., Canada, Mexico)
• Europe (Germany, France, the UK, Italy, Spain, Rest of Europe)
• Asia-Pacific (China, Japan, India, Rest of APAC)
• South America (Brazil and the Rest of South America)
• The Middle East and Africa (UAE, South Africa, Rest of MEA)
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About the report:
The market is analyzed based on value (USD Billion). All the segments have been analyzed worldwide, regional, and country basis. The study includes the analysis of more than 30 countries for each part. The report analyses driving factors, opportunities, restraints, and challenges to gain critical market insight. The study includes Porter's five forces model, attractiveness analysis, Product analysis, supply, and demand analysis, competitor position grid analysis, distribution, and marketing channels analysis.
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