Absa, a pan-African financial institution, has said digitisation is a key enabler in democratising trade finance.
It noted in a statement that the global pandemic had accelerated the need for wider adoption of digital trade finance solutions by small and medium enterprises and corporates.
Absa identified trade financing as critical financial issue as it has the capacity to deliver higher impact in Africa in particular.
The Head, Trade Finance and Financial Institutions Trade Sales, Absa, Oladapo Adeigbe, highlighted some of the impediments to accessing financial products by SMEs.
According to the statement, while technology-driven solutions are becoming more relevant, much of the trade finance sector is still very paper-driven with manual processes slowing down access to finance.
Adeigbe said, “Financial inclusion across Africa is yet to peak as most SMEs operate in the informal sector and are largely unbanked. Hence, their viability cannot be ascertained or assessed directly by financial institutions.
“The hurdles that impede growth in the informal market have not been effectively tackled. For example, an average transaction that involves, for instance, customs clearance in the local ports requires tons of paper documents which slow down trade activities by forcing unnecessary supply chain bottlenecks.”
The statement said the bank noted that to digitise trade finance, the entire ecosystem needed to support and participate in re-imagining how it unlocked value.
This, according to the statement, includes integrating activities of all role players: the regulators, the logistic companies, banks and other non-bank financial institutions, which will eventually drive the digital trade ecosystem.
It also said facilitating the secure exchange of data between the partners within the ecosystem would catalyse the sector.
Absa expressed its commitment to accelerating trade finance solutions on the continent and to be an enabler of the Africa Continental Free Trade Agreement, which it described as a critical step to building a healthy SME ecosystem for Africa.
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