Small and medium-sized enterprises (SMEs) play a vital role in driving economic growth and job creation worldwide. However, accessing financing for international trade remains a significant challenge for many of these businesses.
One of the primary obstacles for SMEs is the perceived higher risk associated with their operations, making lenders more cautious in extending credit. Limited collateral, shorter credit histories, lack of data and weaker reporting mechanisms often raise red flags for financial institutions. These perceived risks can result in high pricing and higher collateral requirements for SMEs seeking trade finance.
The complexity and documentation requirements of trade finance can be daunting for smaller businesses with limited resources, too, and there is often a lack of knowledge of relevant regulatory frameworks in the countries in which they want to do business.
Another challenge is the lack of awareness and understanding of available trade finance products and solutions. Many SMEs may not be familiar with the full range of options, such as letters of credit, bank guarantees, supply chain finance solutions, or the benefits and disadvantages of each of them, depending on the specific circumstances.
Innovative trade finance solutions
As one of the largest banks in UAE, ADCB is an important player in the SME ecosystem. It takes a proactive approach to supporting SME customers with a portfolio of trade finance solutions to suit different circumstances and requirements. And unlike some banks operating in this segment, it offers a full range of products to help SME clients achieve their domestic and cross-border trading objectives.
ADCB also works closely with Abu Dhabi and UAE government entities to increase financial inclusion of SMEs and help the private sector access critical trade finance solutions. The bank is committed to helping build an effective SME ecosystem in the UAE by rationalising SME onboarding processes for banks, optimising processes around periodic account reviews and developing customised credit guarantee and administration programmes.
ADCB's suite of trade finance options include widely utilised instruments such as bank guarantees (BGs) and letters of credit (LCs) which are critical for managing counterparty risks. These instruments offer SME’s potential customers confidence and assurance that contractual obligations will be met.
As one of the largest banks in UAE, ADCB is an important player in the SME ecosystem. It takes a proactive approach to supporting SME customers with a portfolio of trade finance solutions to suit different circumstances and requirements
In addition, ADCB provides a host of working capital solutions to help SMEs manage their finances more effectively. This includes invoice financing solutions, which allows SMEs to make payments to suppliers and receive cash against their sale of goods or services. The bank also helps clients with loans to settle their LC payments and provides loans or discounted payments on shipments under export LCs.
Supply chain finance, like invoice financing and dynamic discounting can also help SMEs optimise their working capital by allowing them to raise finance against their accounts receivable, improving cash flow and liquidity. While short-term trade finance loans, such as pre-shipment finance and post-shipment finance, provide working capital to support the various stages of the trade cycle.
ADCB recently provided trade finance support to a client that trades in stainless steel and ferroalloys. The company procures the goods from its suppliers overseas and ships them directly to the customer’s location. ADCB provided comprehensive trade finance support to the SME, including receivables finance to help it maintain a healthy cash flow. Thanks to the increased access to trade finance, the client has successfully penetrated the Asian market and is looking to expand further globally.
Another SME client undertakes significant work with government and semi-governmental bodies. Many of these customers request bank guarantees for additional assurance, but each has its own specific format and conditions for such guarantees. By taking the time to understand these differing requirements and taking an agile approach, ADCB has been able to support the client by providing guarantees in the required format. This has enabled the client to secure more contracts and achieve growth of over 80% in two years.
Supportive digital solutions
ADCB is also a leader in providing digital platforms that streamline trade finance processes, helping to reduce the burden and complexity of documentation and processing times for SMEs. Its ProTrade platform offers a secure and efficient channel for managing key trade finance documents, such as LCs and BGs.
The platform features innovative digital solutions such as Remote Presentation, which simplifies the document handling process for exporters by eliminating the need for the physical exchange of original export documents with the bank. This innovation leads to faster realisation of export proceeds.
Additionally, ADCB enhances its customer service with offerings like courier pickup of export documents from customers and doorstep delivery of guarantees. These services distinguish ADCB’s value proposition, providing superior and more efficient support to its customers.
Similarly, ADCB’s recently launched FinTrade platform equips businesses with advanced tools for optimising their supply chain finance operations. Through this innovative solution, companies can efficiently manage their working capital needs by drawing on their approved invoice finance facilities and streamline their transactions in real-time.
By addressing the challenges of working capital constraints, risk exposure, and access to new markets, ADCB’s trade finance solutions play a crucial role in enabling SMEs to capitalise on the opportunities presented by international trade and contribute to economic growth and job creation.