Trade finance is the financial backbone of global commerce. It provides the tools — letters of credit, bank guarantees, trade loans, and documentary collections — that enable importers and exporters to do business across borders with reduced risk.
The fundamental problem trade finance solves: an exporter in Japan does not trust an importer in Brazil to pay, and the importer does not trust the exporter to ship. Banks step in as trusted intermediaries, guaranteeing payment to the seller and delivery to the buyer through instruments like letters of credit.
Global trade finance supports over $19 trillion in annual trade — roughly 80% of world trade relies on some form of trade finance. The WTO estimates a $1.7 trillion trade finance gap in developing countries, limiting their participation in global commerce. Blockchain and fintech solutions are emerging to close this gap.