’This will undoubtedly have a positive impact,’ says UK and Ireland chief executive

B2B fintech Trade Finance Global (TFG) has partnered with a series of firms, including credit insurer Allianz Trade, to launch TFG Distribution Finance.

A statement released yesterday (25 July 2023) said the initiative was aimed at driving liquidity into the trade finance market as TFG looks to “bridge the gap” in the sector.

Earlier this year (22 February 2023), Insurance Times exclusively reported that the global trade finance gap was estimated to have increased to $1.7tr (£1.4tr) in 2020 during the Covid-19 pandemic.

TFG said yesterday that this had now risen to $2tr (£1.6tr) and was a “significant barrier to international trade, particularly impacting mid-market companies and small to medium-sized businesses (SMEs)”.

The rise was predicted by the Asian Development Bank in August 2022 – it said that if the merchandise trade value grew to 15% in 2022, maintaining a trade finance gap of 10% – which is where it has historically hovered – would result in such a rise.

Mark Abrams, managing director and global head of trade and receivables finance at TFG, said that launching the initiative was the fintech’s “response to the significant and growing liquidity which is seeking entry into the cross-border trade finance market, as well as escalating demand for private credit from borrowers”.

To action the launch, TFG partnered with insurer Allianz Trade, Stockholm-based technology company Enigio, international law firm Sullivan and Worcester and the International Trade and Forfaiting Association’s (IFTA’s) digital negotiable instruments (DNI) initiative.

In addition to global banks, TFG Distribution Finance will also invite traditional institutional investors, non-bank lenders and alternative credit funds to participate in the trade finance market.

Sarah Murrow, chief executive of Allianz Trade in the UK and Ireland, said it was ”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,” she added.

“This will undoubtedly have a positive impact.”

First transaction

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.

To facilitate the transaction, Allianz Trade provided insurance cover and Enigio used its technology software trace:original for the promissory note.

Trace:original, according to Enigio, is a “solution for creating and managing digital original documents”.

Enigio’s chief executive Patrik Zekkar 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 requirements.

“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, managing director at Casterman Advisory and board member at the ITFA, added that TFG’s progress on the DNI Initiative had 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,” he added.