The International Chamber of Commerce’s 10th annual Global Survey titled ‘Global Trade: Securing Future Growth’ has revealed that counter-terrorism and other international regulations are significantly inhibiting the ability of SMEs to trade internationally.
According to the latest ICC Global Survey, of 251 banks in 91 countries, trade finance remains constrained, with a key reason for the constraints being lenders’ requirements to comply with international regulations.
Of particular concern are regulations countering the financing of terrorism (CFT) as well as international sanctions stipulations. Some 87% of the respondents reported that complying with counter-terrorism and international sanctions regulations is a “major challenge” with respect to their ability to offer trade finance. And that this is especially harmful for small and medium-sized enterprises (SMEs).
The constraints arise from the huge increase in resources banks must invest to ensure compliance with a wide range of often inconsistent regulatory requirements and expectations across jurisdictions. Perhaps more challenging, the interpretation of regulatory requirements can vary between senior policymakers and examiners assessing compliance. The effect is that banks apply large internal resources and incur cost to ensure compliance with standards that are at times unintended and unnecessarily stringent – a burden banks increasingly consider only worthwhile for their largest clients, leaving SMEs unsupported.
“Everyone accepts that access to finance is critical for business growth, particularly for SMEs,” says Chris Southworth, ICC United Kingdom’s Secretary General. “Yet here we see an example of well-meaning regulation having unintended consequences in the real economy. So while innovation and digital trade continue to support financial inclusion for SMEs by providing new ways of delivering finance to business, a more proportionate regulatory regime for the treatment of low risk trade finance would unlock more resource to fund trade, which will benefit the global economy.”
Writing in Global Survey, World Trade Organization Director General, Roberto Azevêdo, added his concern regarding financial inclusion for SMEs. Including micro companies (with less than 10 employees), he said: “Around half of MSME requests for trade finance are rejected by banks, and in more than 70% of the cases they seek no alternative financing, simply because it is not available. Persistent gaps in trade finance can mean exclusion from the trading system and that major trade and development opportunities are missed”.
The Global Survey concludes that SME exclusion is a major cause of the “trade finance gap” (calculated by the ICC and Asian Development Bank at US$1.5 trillion in 2017) between the demand and supply of trade finance.
“This year’s Global Survey consistently shows that regulatory issues are among respondents’ top concerns,” wrote John Denton, General Secretary of ICC in the survey’s foreword. “Looking at further research from ICC and other actors, it is also clear that some financial regulations governing banks have had the unintended consequence of widening the trade finance gap, making it more difficult for smaller companies and traders in the developing world to access much needed financing.”
However, the Global Survey findings also reveal strong positivity among trade-supporting lenders with respect to trade finance growth trends. Nearly three quarters of banks presented an optimistic outlook for the next 12 months, with respondents headquartered in Africa and Asia Pacific the most positive, at 89% and 81% respectively.
Nigeria Can Solve FX Crisis With Adequate Agricultural Financing—Heritage Bank
By Modupe Gbadeyanka
The foreign exchange (FX) crisis that is putting pressure on the Nigerian Naira, making the prices of goods and services rise in the country, can be solved if attention is paid to agricultural financing, Heritage Bank Plc has submitted.
The lender, through one of its executive directors, Mr George Oko-Oboh, pointed out that if players in the agricultural sector are supported with funds, they will produce crops that can be exported and generate forex for the country, making the domestic currency stronger at the currency market.
At the 15th Annual Banking and Finance Conference of the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja, he noted that adequate agricultural financing was critical in defining the country’s trade competitiveness, which guarantees sustainable agricultural systems. This critical aspect equips the financial sector to respond to changing market requirements and address critical sector needs for global competitiveness.
He disclosed at the programme tagged Repositioning the Financial Services Industry for an Evolving Global Context that Heritage Bank has been at the forefront of financing agric value chains that have upped its competitiveness in the global market and helped to boost local production, conserve scarce foreign exchange and enhance food security, and ultimately result in the creation of hundreds of new jobs.
According to Mr Oko-Oboh, the bank’s involvement in the sector dates back many years ago. It has always been at the forefront of ensuring the overall growth and development of commodities products in Nigeria. For these feats, Heritage Bank disbursed the N41 billion intervention of the Central Bank of Nigeria (CBN) in wheat production in Nigeria for commodity associations and anchor companies.
“We have continued to create market linkages between smallholders’ farmers and anchors/processors, create an ecosystem that drives value chain financing, improves access to credit by the smallholders’ farmers by developing credit history through the scheme and many more.
“As a bank, we partnered CBN and other stakeholders such as wheat farmers association of Nigeria, wheat farmers, processors and marketers’ association of Nigeria, Lake Chad Research Institute and other development partners, flour mills of Nigeria and several seed companies and others to support over 100,000 farmers in wheat production.
“Also, Heritage Bank further factored consideration of value addition of financial services and products flowing to and/or through value chain participants to address and alleviate constraints to growth that have distorted product financing, receivables financing, physical-asset collateralization, risk mitigation products and financial enhancements,” said the executive director.
Also, the Chairman, Union Bank of Nigeria Plc, Mr Farouk Gumel, has said Nigerian banks must invest in modernising agriculture, helping it to be more resilient, more dynamic and better able to adapt for the banking sector to compete in the evolving global context favourably.
“Modernisation means much more than technology alone; it is also about farming techniques,” he said.
Mr Gumel noted “to reposition the industry for a ‘Glocal context, we also need to look more inwards,” saying repositioning is not an option. It is a necessity that Nigeria has begun an agricultural renaissance over the past seven years. To be truly Glocal, we must commit the same resources and investments to rural-local customers as we have done to urban global clients.”
He agreed that the local players must keep an eye on what global happenings to stay in tune with international best practices while asking that local/rural farmers should never be forgotten.
President/Chairman of the council for CIBN, Dr Ken Opara, said the financial services industry needs to adapt to a much faster pace of change in advancement in technology and innovation, saying services, products, and technologies that were new and useful in the past will not necessarily be so soon.
Mr Opara said advancement in technology and innovation is bringing about another wave of revolution that will change the landscape of the financial services sector more than ever.
CBN Grants License to Gabsyn Microfinance Bank
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has granted Gabsyn Microfinance Bank the final approval to operate as a microfinance bank in Ikorodu, Lagos State.
With this approval, Gabsyn MFB joins over 876 licensed microfinance banks to operate in that space, to deliver the much-needed financial services to the unbanked, which according to EFInA (2020 survey) shows that about 38 million citizens (35.9 per cent of the adult population), do not have access to financial services in Nigeria.
As a partner in the actualisation of the objectives of the National Financial Inclusion Strategy (NFIS), Gabsyn MFB affirmed its commitment to creating a better everyday life for all stakeholders in line with the financial inclusion agenda of the CBN and Nigeria and expressed excitement at the opportunity to support its fulfilment.
“The bank is well positioned in a strategic location in Ikorodu where it can use its well-trained, motivated, young and dynamic staff as well as its experienced management team to design and offer flexible, value-adding and sustainable financial services to the communities. There are millions of Nigerians who are yet to tap into the immense benefits available in the financial sector because they are currently excluded.
“Gabsyn MFB will open a viable avenue for all to access a broad range of financial and social services such as loans, savings, alternate payment services, money transfers, improve financial literacy, etc, some directly and others through strategic partnerships,” a statement from the small lender said.
Microfinance Banks (MFBs) are critical to Nigeria’s financial inclusion goals, particularly because of their role in providing financial services to the underserved segments of the Nigerian economy.
In a demonstration of its acknowledgement of the importance of the sector, the Nigerian government launched the National Financial Inclusion Strategy in 2012 (NFIS 2012), to achieve 80 per cent inclusion by 2020. The NFIS was reviewed in 2012, and the CBN and its stakeholders came up with the Revised NFIS document which targets a 95 per cent financial inclusion threshold in Nigeria by 2024. This is ambitious given that the financial inclusion index moved from 57.3 per cent in 2010 to 60.3 per cent in 2012 and 63.2 per cent in 2020, a growth of about 5.9 per cent in 10 years. Achieving a 31.8 per cent increment in 4 years is indeed ambitious, but not impossible.
According to the Managing Director of Gabsyn MFB, Mr Waheed Odekale, “Our mission is to use simple financial solutions, strategic alliances and partnerships to improve the socio-economic status of our stakeholders.
“Our services will empower low-income households, enhance their productive capacity and consolidate their economic base.
“We are very excited by the opportunity to be practically and productively driving the financial inclusion agenda of the Central Bank of Nigeria.”
While leveraging the use of technology to improve customers’ experience, on the one hand, the bank said it will be going the extra mile with the introduction of Saturday banking services.
CBN Advocates Collaboration to Grow Payments Ecosystem
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) is moving to strengthen the digital payments ecosystem and position Nigeria firmly on the global payments landscape with more collaboration.
This is in line with its commitment to deepen and stimulate the growth of digital payment in Nigeria and beyond.
This was the crux of a two-day event tagged Collaborating for Industry Growth and Profitability held by integrated digital payments and e-commerce company, Interswitch Group, where industry players gathered to discuss how to strengthen the ecosystem.
The industry leaders, drawn from banks, fintechs, micro-finance banks, telcos and other financial institutions, reached the resolve that designing innovative financial products which speak to the needs of customers will spur growth and economic prosperity.
The experts also noted that players in the financial space need to synergize to explore avenues for mutual growth, which will in turn create a robust payment ecosystem.
Speaking at the event, Mr Jimoh Musa, Director, Payment System Management Department, CBN, said the lender’s responsibility as a regulator is to create an enabling environment where all the entrants can thrive and compete healthily.
“We understudy all the interoperable operations of each technology company, and all the participants generally. And from time to time, we bring all these entities together to dialogue to enable us to decide what the best industry practice is in relation to Nigeria’s payment ecosystem.”
During the two-day event, Interswitch officially unveiled eight new products designed to address prevailing issues within the payments ecosystem, enhance business development and boost customer experience.
The products include Fintech-in-a-box; Fraud Solution-as-a-Service (FSAAS); Banking-as-a-Service; Payment-as-a-Service; Interswitch Security-as-a-Service; Mobile Banking-as -a-Service, and Biometrics on POS and Value financing.
These products are tailored to provide seamless payment solutions to banks, fintechs, micro-finance banks, other financial institutions and their customers. Essentially, these products will help to improve the digital payment solutions that financial institutions offer to their customers.
Critical points the products will be solving include protecting customers against digital payment fraud, effective value financing tools for lenders, seamless integration to payment channels, enhanced customer experience etc.
Speaking during the panel session, Mr Akeem Lawal, Managing Director, Interswitch Purepay, said players in the payment industry must collaborate to provide opportunities to co-create solutions that make digital payment safer and further drive profitability.
He said “Interswitch is committed to partnering with stakeholders to drive financial inclusion through its innovative products and solutions continuously. These products reaffirm the company’s continued drive to improving Nigeria’s digital payments landscape through innovation and the development of first-rate solutions and infrastructure that address pressing needs in the payments ecosystem”.
Mr Lawal further said Interswitch would continue to enter partnerships that will not only simplify payments but also drive prosperity across the continent.
The panellists noted that partnerships would allow players to increase revenue and grow faster, avail them opportunities to leverage one another’s infrastructure, drive financial inclusion and build a robust ecosystem, urging players to collaborate more to provide quality service for the end users to enhance growth and more opportunities.
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