EA miles away from tapping the potential of trade finance
Arusha. The East African Community (EAC) bloc is miles away from tapping the potential of trade finance to boost exports and enhance intra-regional trade.
The financial instrument has not been adequately used for trade for what trade experts attribute to not being “well understood by business people” in the seven nation bloc.
This emerged here on Thursday at a Webinar on trade finance at EAC organised by the East African Business Council (EABC), a regional apex body of private sector associations based here.
The growth of small and medium enterprises (SMEs) have also been impacted by the anomaly as they cannot access markets for their tailor-made goods.
EABC chairman Nicholas Nesbitt insists that the drawback must be addressed through collaborative effort between the public and private trade credit insurance institutions.
Ideally, trade finance signifies financing for trade and it concerns both domestic and international trade transactions, linking sellers and buyers of goods and services.
Various intermediaries such as banks and financial institutions can facilitate the transactions by financing the trade.
To the general public, however, trade finance manifests itself in the form of letters of credit (LOC), guarantees or insurance, usually provided by intermediaries.
Mr Nesbitt cited high interest rates, bureaucracy in delivery, high collateral requirements as among the barriers inhibiting the use of the tool to boost trade.
Others are limited trade finance instruments tailored for SMEs, lengthy approval process and inadequate capital as among the barriers firms face in the management of the tool. Collaborative efforts should also be made in the adoption of appropriate technology in order to mitigate risks and drive uptake of trade finance by the private sector.
EAC director of Trade Rashid Kibowa said improved competitiveness and digitalisation of trade operations would boost the uptake of trade finance in the region.
Ms Lightness Mlay, a trade finance sales manager with KCB Tanzania argued for more capacity building on trade finance for the private sector and easing of regulations on security “to increase uptake of trade solutions”.
Dr Caiphas Chekwoti, Head of Trade Policy Training Centre in Africa (Trapca) called for innovative and flexible trade finance solutions “that will further boost the competitiveness of EAC exports”.
Ms Waturi Matu, a senior advisor on private sector development in the EAC rooted for collaborative efforts to craft innovative mobile money trade finance solutions for SMEs, citing Micro export credit.
She urged the EAC partner states to develop an enabling legal framework on trade finance and upgrading trade infrastructure such as the warehouses and cold storage facilities.
Other interventions have to include enhancing SMEs competitive advantage and eligibility for trade finance products which, according to her, would boost the uptake of trade finance.
EABC executive director Mr. John Bosco Kalisa said the regional business body has rolled out the Mansa platform to improve access to business information in partnership with Afreximbank.
He stated Know Your Customer (KYC) data was important for businesses to acquire trade finance and also transact across continental and international borders.
The Webinar was organized by the EABC in partnership with the European Union - one of the bloc’s leading development partners, funding cointless projects and programmes in the region - through Africa Rise window.
A senior official of the European economic bloc Mr.Gonzales Jose-Luis reiterated EU’s support and partnership to improve trade and investment in the EAC region.
