Small Firms Shut Out of Trade Finance by Fragmented Rules
Micro, small, and medium-sized enterprises across Organisation of Islamic Cooperation member states cannot obtain affordable trade finance. High collateral requirements, transaction costs, and lengthy administrative procedures block these businesses from funding, Federal Minister for Commerce Jam Kamal Khan reported at the closing session of the 42nd ministerial meeting of the Standing Committee for Economic and Commercial Cooperation in Istanbul, tribune.com.pk reported.
The shortfall in trade and MSME finance represents one of the largest unmet credit needs in the global economy, according to data from the Asian Development Bank cited by assurelocker.com. That global trade-finance gap climbed from roughly $1.7 trillion in 2020 to about $2.5 trillion in 2022. Small-ticket borrowers face severe hurdles because conventional collateral-led processes cannot assess borrowers with thin credit files or no prior banking relationship, and manual verification can hold disbursal for weeks.
Five Priority Areas for OIC Cooperation
Khan outlined five priority areas to close the trade finance gap during the ministerial meeting. The proposals begin with harmonised national legal, regulatory, and supervisory frameworks to ease cross-border transactions. The second priority focuses on diversifying trade financing instruments, strengthening export credit guarantee mechanisms, and tailoring financial arrangements to exporters and technology-driven firms. Third, Khan urged member states to promote Shariah-compliant trade financing through institutional capacity and risk-sharing arrangements. Fourth, he called for faster digital transformation via customs and banking integration. Fifth, he sought targeted financing facilities and financial literacy programs for women- and youth-led enterprises, tribune.com.pk reported.
Agriculture, Food Security, and Private Sector Investment
The 42nd COMCEC ministerial session also addressed agricultural productivity, food security, transport connectivity, and sustainable tourism. Khan sought research cooperation, technology transfer, and investment in resilient food systems to secure long-term food supplies across member states, tribune.com.pk reported. He described the private sector as a central partner for industrial development and employment.
In domestic markets like India, MSMEs generate roughly 30 percent of gross domestic product and account for about 45 percent of exports, supporting over 110 million jobs across more than 60 million enterprises, according to government reports cited by assurelocker.com. Regional disparities compound the problem, as formal trade finance concentrates heavily in metropolitan corridors while tier-2 and tier-3 cities face severe inclusion deficits.
Implementation Challenges and Unresolved Questions
COMCEC must convert recommendations into measurable outcomes through project support mechanisms and institutional cooperation, Khan stated in Istanbul. He emphasized that the success of the ministerial session will be measured by practical implementation rather than the adoption of recommendations alone. Vice-President of Türkiye Cevdet Yılmaz chaired the session, which brought together delegations to address export competitiveness across member economies, tribune.com.pk reported.
Questions address global trade finance gaps and collateral rules
What caused the global trade-finance gap to widen?
The global unmet trade finance demand grew by about 47 percent from $1.7 trillion in 2020 to $2.5 trillion in 2022, widening sharply post-pandemic, with SMEs rejected for trade finance at materially higher rates than large corporates, according to Asian Development Bank data cited by assurelocker.com.
What specific sectors did Jam Kamal Khan highlight for collective action at COMCEC?
Alongside trade finance, Khan identified intra-OIC trade, transport connectivity, sustainable tourism, agricultural productivity, food security, poverty alleviation, and digital transformation as key areas for cooperation, tribune.com.pk reported.
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