evolution of supply chain finance

Published in Trade Finance Talks: ‘A pathway towards sustainable trade finance’ — Spring 2021
LONDON, March 16, 2021.  Trade Finance Global

Authors: John Bugeja and Lionel Taylor

As MSMEs are weaned off fiscal support, a radical new attitude to how they access working capital will be needed more than ever.

COVID-19 has had a severe overall effect on global trade, with disruptions to supply chains and government-enforced lockdowns damaging business across the globe. According to OECD reports, global GDP was projected to fall by 4.5 percent in 2020 with a pick-up of 5 percent in 2021. However, as countries are being hit by new waves of the virus, the expected 2021 recovery will be slower than forecast. MSMEs, who by their nature have limited capital and personnel resources, are overrepresented in sectors such as wholesale distribution, which have been heavily hit by this downturn in business activity.

Monetary and fiscal measures provided by governments across the globe to ease the burden on MSMEs have provided some relief, but this is not sustainable and as support is reduced, it is expected that the level of insolvencies will increase. This will shake business confidence at a time when any increase in economic activity translates for the surviving, but financially weakened, MSMEs into a more immediate need for working capital finance, as they look to take advantage of a recovering order book.

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