International trade is an important component of the global economy, not only for the flow of goods and services between countries but also for the stability of the global monetary system. This has become even clearer over the last 20 years, as trade’s contribution to global GDP has increased from 48 to 60 percent.
To significantly reduce poverty and transform their economies, African countries must increase and diversify their participation in international trade and global value chains. Africa has 1.3 billion people or roughly 17% of the world’s population. It is rich in natural resources and has 60% of the world’s arable land, but it contributes only 3% of global trade value. Nigeria, for example, has a trade-to-GDP ratio of 26 percent, which is significantly lower than the global average of 58 percent, the EU’s 91 percent, or emerging economies like India and Brazil, which have ratios of 40 percent and 33 percent, respectively.
Trade finance, also known as "the grease of the global economy,” enables businesses to be more flexible by bridging the trust gap with foreign partners and alleviating working capital constraints, but it remains relatively inaccessible on the continent. Today, some form of financing or credit insurance supports up to 80% of global trade. According to the African Development Bank (AFDB), only 30% of African trade is financed, with large corporations accounting for the majority of trade finance assets. Small and medium-sized enterprises (SMEs) face the greatest difficulties in obtaining affordable financing, which is especially concerning given their importance as a driver of trade, employment, and economic development.
The continent has an annual trade finance deficit of $120 billion, and if it wants to improve its trade balance and reap the benefits of trade, bank-intermediated trade finance must play a larger role in its trade story. The low level of trade finance penetration is a significant impediment to increasing Africa’s trade participation; there are significant service gaps, and as a result, many businesses are unable to obtain the financial tools they need. Without adequate financing, opportunities for growth and development are lost, and businesses are unable to trade and expand.
Breeze Express & Accelerate.
After deciding if trade financing is what your business needs, the next step is to find the right partner. Breeze offers flexible trade finance products to provide your business with funds to capitalize on opportunities. Through our products, Express & Accelerate, we offer opportunities for businesses to sell their invoices for cash and finance purchase orders for both local and international transactions.
Express: Express is a tool for businesses that need to free up cash locked up in unpaid invoices. Businesses, especially those in the supply chain, usually get paid 30–180 days after the delivery of goods, and this sometimes leaves them short on cash that could be used for operations. Express allows businesses to sell their export invoices for a cash advance of up to $5,000,000.
Accelerate: Accelerate is a financing tool for buyers who need access to funds to fulfill purchase orders. Sometimes businesses do not have enough cash to fulfill larger orders or taking out that much cash could be unhealthy for your cash flow. Accelerate allows businesses to finance their purchase orders.
