Absa, a pan-African banking institution, has reaffirmed its commitment to expanding trade financing across Africa by delivering digital solutions to assist reduce barriers to accessing financing products across the continent, particularly for SMEs.
In a recent media-watched article, the top financial institution detailed its digitalization plans.
First, trade finance was selected as a major financial issue because it has the potential to have a greater influence in Africa.
The bank promotes a higher value proposition for trade financing, comparing it to the oil that greases supply chains and guarantees that buyers and sellers keep their promises.
However, the bank further opined that digitisation is a key enabler in democratising trade finance and the pandemic has accelerated the need for wider adoption of digital trade finance solutions by SMEs and corporates.
In the article, Head, Trade Finance and Financial Institutions Trade Sales, Oladapo Adeigbe, Absa, expatiated on some of the impediments to accessing financial products by SMEs. He said, while technology-driven solutions are becoming more and more relevant, much of the trade finance sector is still very paper-driven with manual processes slowing down access to finance.
According to him, “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.”
He added, “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 slows down trade activities by forcing unnecessary supply chain bottlenecks.”
The bank posited that to digitize trade finance, the entire ecosystem needs to support and participate in re-imagining how it unlocks value. This includes integrating activities of all role players; the regulators, the logistic companies, banks and other non-bank financial institutions (e.g., fintechs) Fintech innovators, which will eventually drive the Digital Trade Ecosystem.
It also said facilitating the secure exchange of data between the partners within the ecosystem will catalyse the sector.
However, salient issues such as interoperability of systems to facilitate coherent industry-wide solutions that can operate at scale, standardisation through digital innovation and agility in the regulatory space will impact positively on the digitisation projects being pursued across the continent with the propensity to open up the continent for wider cross-border trade.
The bank thereafter reiterates its commitment to accelerating trade finance solutions on the continent and to be an enabler of the AfCFTA Agreement which is a critical step to building a healthy SME ecosystem for Africa
Ojelabi, the publisher of Freelanews, is an award winning and professionally trained mass communicator and a recipient of the D9112 Superstar Icon Award, who writes ruthlessly about pop culture, religion, politics and entertainment.
