Mitali Nikore, Economist and Founder of Nikore Associates told Times Now Digital, “Why does the trade finance gap arise? I think the first step to understanding how the BRICS can close it is to understand why it arises. The main reason the trade finance gap arises is that trade finance is not like standard financing for a manufacturing or even services business. You don’t actually have a very clear mechanism of I am giving you $100 to invest in a brick and mortgage facility. Often, it’s about sourcing and creating a value chain, and then the logistics of actually transporting a good or even a service to another country. The risk involved is completely different from the risk involved in traditional manufacturing and services businesses. That makes it harder for MSMEs to access trade finance at low interest rates and results in trade financing gaps often being higher. The way BRICS can include MSMEs in trade and value chains is by creating a trade finance working capital fund. I do recommend that the BRICS, in this particular meeting, should think about a trade finance fund with preferential lending to MSMEs for concessional working capital trade loans. The MSMEs that want to trade with entities within the BRICS countries should be able to access these kinds of trade financing loans: quick loans with low interest rates, so that they can bridge their working capital requirements and expand trade, especially within the BRICS region and amongst the BRICS countries. This would be a game changer!”
