Simplifying trade financing for smaller enterprises

As more manual processes become automated, industries are looking to see how they can implement them best without disrupting their business. While some industries have chosen to go paperless, reduce forms, and shorten processing times, others are still trying to achieve this. One sector that is looking to speed up traditional and complex processes is trade financing.

Just like any financial service industry (FSI), trade financing is also bound to various compliance and regulatory checks before they can implement any use of technology. However, unlike fintech, which is being applied by most FSIs, trade finance covers a broader range of services.

According to the Asian Development Bank (ADB)’s Trade Finance Program (TFP), there were 8,950 transactions valued at approximately $8.3 billion ($4.7 billion of which was co-financed) since 1 April 2020. However, in its September 2019 Trade Finance Gap, Growth, and Job Survey, the global trade finance gap numbering USD 1.5 trillion has become a huge global challenge that impedes economic growth and hinders efforts to reduce poverty worldwide.

The survey report also notes that small and medium enterprises (SMEs) face the biggest challenges obtaining trade finance and. These SMEs account for the majority of businesses and employment in Asia and the Pacific’s developing economies.

An estimated 45% of trade finance applications by SMEs are rejected, compared to 39% for mid-and-larger-sized firms and 17% for multinational corporations. These are due to complicated processes, stringent requirements, and customer familiarity procedures especially on traditional trade financing applications to banks, with many SMEs failing to meet the application criteria.

At the same time, technologies like blockchain are helping reduce the high fixed costs of engaging in complex procedures of the global supply chain. For SMEs, blockchain helps them in terms of reducing costs, making it easier for them to participate in international trade.

A pilot boat guides a container ship to dock at the port of Singapore on June 14, 2021. (Photo by ROSLAN RAHMAN / AFP)

Introducing RYTE, a cross border digital trade facilitation platform  

To help ease the complexity in trade finance, GUUD, a Singaporean tech platform, launched RYTE, and an intelligent trade financing technology platform to connect business users to both banks and alternative financers. RYTE is expected to allow businesses greater opportunities to access funding options as well as meet working capital requirements.

Desmond Loh, CEO of GUUD Finance, the financing arm of the GUUD Group, said through RYTE, processes are streamlined and standardized allowing businesses to easily submit documents. The trade financing platform also enables businesses to pull the required digital data or documents through secured repositories like the Networked Trade Platform (NTP) or from digital trade facilitation platforms operated by GUUD such as trade declaration services.

Businesses using RYTE will have a myriad of financing options revolving around their flow, including supply chain financing, within a single platform. The platform enables them to link up with a service provider that will assist them with the requirements.

Desmond explained that what made the platform stand out is that it utilizes the power of data to not only deliver a better experience for users but also quick and secured services via a trusted network. Users can navigate their workflows digitally and simply, saving time, costs, and unnecessary errors.

During the launch, Lim Cheng Khai, Executive Director at the Monetary Authority of Singapore (MAS), said, “The RYTE trade financing platform harnesses digitalization to deliver a more inclusive and efficient experience for trade finance solutions. It is a welcome addition to Singapore’s trade financing ecosystem and reinforces Singapore’s proposition as a smart financing center. MAS will continue to work closely with the financial, technology, and trade sectors and government partners to facilitate a seamless, digital, trusted trade and trade financing ecosystem in Singapore.”

Last year, another trade financing platform was launched. Contour, the trade finance network powered by R3’s Corda, unites buyers, suppliers, and banks on the world’s first global, decentralized, digital trade finance platform open to all geographies and industries. Contour has proven to reduce the end-to-end processing time by 90% or more as well as simplifying processes that have enabled new business opportunities for banks, corporates and trade ecosystem players.

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