The International Chamber of Commerce (ICC) is calling on the United Nations (UN) to address a rapidly increasing trade finance gap.

The ICC is particularly concerned about small- and medium-sized enterprises' (SMEs') access to trade finance and the decline in correspondent banking arrangements that underpin letter of credit (L/C) flows.

Correspondent decline

The ICC points out as an example that in Argentina, the number of correspondent banking relationships required to handle basic trade-related services such as international payments or L/Cs held by Argentinian banks dropped from 64 in 2009 to just 13 in 2016.

A dozen countries are now down to a single correspondent banking relationship and risk being entirely cut off from the international finance system the chamber added, noting that these jurisdictions include the Central African Republic, Nicaragua and the Solomon Islands.

Call for UN action

The systemic issues raised by the erosion of correspondent banking relationships on which trade finance depends are global in nature and require a globally coordinated response.

On this basis, the ICC has called on participants at the 2017 Financing for Development Forum in New York to commit to an urgent UN-led review of the trade financing gap.

The ICC has also asked for a particular focus on ways to reverse the ongoing erosion of international correspondent banking networks.

SME concerns

In its call for a UN-led review, the ICC emphasises that access to trade finance is generally recognised to be key to both the future outlook of global growth and the fulfilment of the UN Sustainable Development Goals.

The chamber reckons a shortage of trade finance hurts SMEs the most, which represent around 95 per cent of the world's companies and 60 per cent of private sector jobs.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.