Developing Asia’s Trade Financing Gap Threatens Growth, ADB Says

Companies in developing Asia face difficulties getting loans and guarantees for trade transactions, hindering job creation and economic growth, according to the Asian Development Bank.

A survey of companies and banks by the lender last quarter showed that about $425 billion of requests for financing for import and exports transactions in developing Asia were rejected in 2011. Globally, $1.6 trillion of proposed trade finance wasn’t met, the report showed.

Poor payment records by correspondent banks, low country ratings in developing countries, and weak banking systems were among reasons cited by the 106 banks surveyed for the shortfall, the ADB said in a press statement. A 5 percent increase in trade finance support would result in a 2 percent increase in both production levels and staffing, according to the survey of 138 companies, the lender said.

“Dramatic shortfalls in meeting financing needs of importing and exporting companies are exacting a huge toll on job creation and economic growth in the region,” Steven Beck, head of trade finance at the ADB, said in the statement. “These trade finance gaps need to be addressed to give developing Asia a boost to create jobs and alleviate poverty.”

The ADB said in July it will start supporting deals denominated in the Indian rupee and Chinese yuan in addition to those denominated in U.S. dollars, yen and euros, as it extends its trade finance program to bolster regional commerce. The Manila-based lender’s trade finance program supported $4 billion in trade in 2012, according to today’s statement.

To contact the reporter on this story: Sharon Chen in Singapore at schen462@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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