London, 25 July, 2023 – In a significant move to bridge the trade finance gap, Trade Finance Global (TFG) has launched TFG Distribution Finance.
The initiative aims to drive liquidity into the trade finance market, from institutional capital, banks, and credit funds, facilitated by TFG and its partners.
As a leader in data-led origination, TFG’s mission is to break the barriers to trade by identifying and addressing the unmet demands in the trade finance market.
The $2 trillion global trade finance gap – which has risen from $1.7 trillion in 2020 – is a significant barrier to international trade, particularly impacting mid-market companies and small to medium-sized businesses (SMEs).
TFG Distribution Finance will not only work with global banks, but also invite traditional institutional investors, non-bank lenders, and alternative credit funds to participate in the trade finance market.
By introducing new sources of structured capital into the market, the initiative aims to increase the availability of liquidity and service the unmet demand for private credit from companies on TFG’s platform.
TFG has partnered with industry leaders including Enigio, Allianz Trade, Sullivan and ITFA’s DNI Initiative.
The first trade through TFG Distribution Finance was a payment to a Swiss Large Cap corporate, where terms were extended to their UK client. This allowed the UK company to truck Malaysian origin aluminium wire rod to their customer in Italy.
The credit facility demonstrated the global reach and operational capability of the TFG Distribution Finance initiative.
Using Enigio’s trace:original promissory note, the initiative was able to facilitate and secure this transaction, further reinforcing the credit facility through an insurance policy by Allianz Trade.
This transaction underlines the practicality and efficacy of the newly launched initiative, showcasing its potential in addressing the global trade finance gap.
Mark Abrams, MD, Global Head of Trade and Receivables Finance at TFG, commented, “In the face of rising interest rates, trade finance has emerged as an attractive asset class for investors, offering competitive yields. The short-term nature of trade finance, its self-liquidating characteristics, and the backing by specific trade transactions, all contribute to its appeal.
Recognising these market dynamics, TFG Distribution Finance is our response to the significant and growing liquidity which is seeking entry into the cross-border trade finance market, as well as the escalating demand for private credit from borrowers.”
TFG Distribution Finance is working with other providers to build trust and immutability in the ecosystem, leveraging Enigio’s trace:original, which enables the creation and management of digital original documents.
trace:original is designed to be compliant with current UK trade legislation and is fully aligned with UNCITRAL’s Model Law on Electronic Transferable Records (MLETR), and the newly agreed Electronic Trade Documents Act (EDTA).
Patrik Zekkar, CEO, Enigio said, “TFG is taking action and executing on the need to address the SME trade finance gap by designing and leveraging available technology and credit insurance schemes to fulfil the market demands and requirement. Enigio is very proud to be part of building the future of trade with TFG and the DNI Initiative in a collaborative spirit.”
Andre Casterman, MD, Casterman Advisory and Board Member, ITFA said, “Trade Finance Global’s progress on the DNI Initiative has been astonishing. By adopting out the DNI Initiative interoperability model designed around web3 technologies, TFG accelerates engagement with various lenders around the world and contributes to closing the SME financing gap.”
Allianz Trade, an AA-rated insurer, is also contributing to the initiative by insuring relevant trade and receivables assets.
Sarah Murrow, chief executive of Allianz Trade in the UK and Ireland, said, “It’s fantastic that TFG is taking its market leading origination platform to the next level by joining the funding market. Intercompany credit is a key enabler of global trade and TFG’s move will attract new partners and bring more liquidity to the market, enabling businesses to take every opportunity to trade with greater confidence. This will undoubtedly have a positive impact. As the world’s leading trade credit insurer, Allianz Trade is always ready to support firms looking to manage their credit risks.”
Geoffrey Wynne, partner and head of Sullivan’s Trade & Export Finance Group, added, “Finding a new way to bring participants together to help drive liquidity into the trade finance market, both from traditional finance houses and non-bank financial institutions, will help to bridge the trade finance gap by making new sources of capital available and by bringing in new parties. Sullivan is very excited to be involved.”
Abrams concluded, “We are also committed to guiding newcomers, ensuring they navigate the market effectively. Together with our partners, this initiative is not just about facilitating transactions; it’s about shaping the future of trade finance”.