Beyond Trade Finance

Hong Kong, April 30, 2024 –

In Quinlan & Associates’ latest report, conducted in partnership with eCOM Registry, we examine the intricacies of the trade finance and cargo services ecosystems in Asia Pacific, with a focus on Hong Kong. We look at the barriers hindering access to funding that have contributed to the persistent financing gap in the region and present strategies for lenders to navigate these challenges, including alternative data-driven lending.

Alternative data-driven lending presents an opportunity to bridge the USD 30 billion financing gap in Asia Pacific’s cargo service market

HONG KONG’S TRADE FINANCE GAP

International trade volumes surged post-Covid 19, with APAC accounting for over 40% of the USD 23 trillion global trade market in 2023. Within the region, Hong Kong continues to maintain a unique – and outsized – role, with the market consistently ranking among the top 10 global markets by total trade value. 

However, local trade finance volumes have been on the decline. Largely driven by a combination of macroeconomic and geopolitical headwinds, financial institutions’ cumbersome back-end processes continue to create notable frictions for borrowers, resulting in a USD 7.9 billion local trade finance gap.

THE CARGO SERVICE FINANCING GAP

An important but frequently overlooked enabler of global trade finance activity is the cargo service ecosystem, consisting of an intricate network of exporters, importers, freight forwarders, and shipping lines that facilitate the trade of goods.

Many of these stakeholders face ongoing working capital shortfalls, primarily in the form of mismatches between payable and receivable maturity periods. In more recent years, numerous factors have exacerbated these challenges.

However, despite the clear demand for credit, most banks have shied away from extending their balance sheets to cargo service participants, resulting in a USD 553 million local cargo service financing gap.

THE WAY FORWARD FOR LOCAL LENDERS

Looking forward, we see enormous potential for more innovative lenders to: (1) optimise their existing trade finance processes; and (2) plug the longstanding cargo service financing whitespace in Hong Kong. 

By leveraging alternative data sources from ports, terminals, and customs, lenders can augment many of their traditional practices across the customer journey – from onboarding (e.g. KYC / KYB) to risk modelling (e.g. loan pre-qualification in real time) to credit risk management (e.g. co-lending). 

With such a sizeable trade finance and cargo service financing gap in play, we believe this opportunity is simply too big to ignore.

Download the full report: https://www.quinlanandassociates.com/beyond-trade-finance/

Email us at enquiries@quinlanandassociates.com and info@ecomregistry.com to understand how we can help you tap into the cargo service financing whitespace