A significant gap in trade finance is hindering global economic growth, according to a new report from the Asian Development Bank (ADB). Financial institutions worldwide fell short by $2.5 trillion in meeting the financing needs of companies engaged in international trade last year.

The ADB’s survey highlights a concerning trend where businesses, particularly small and medium-sized enterprises (SMEs), struggle to secure the necessary funding to facilitate their trade activities. This shortfall impacts their ability to expand operations, participate in global markets, and ultimately contributes to slower economic expansion.

The report indicates that rising global trade tensions likely exacerbate the problem. Uncertainty surrounding trade policies and potential tariffs can make financial institutions more hesitant to extend credit for international transactions. This creates a vicious cycle where trade disputes lead to reduced trade finance availability, further dampening economic activity.

The $2.5 trillion gap represents a substantial impediment to global commerce, particularly for developing economies that rely heavily on trade for growth. The ADB suggests that addressing this financing shortfall requires collaborative efforts from governments, financial institutions, and trade facilitation bodies to create a more supportive environment for international trade.

The Asian Development Bank is a regional development bank owned by its 68 members, 49 of which are from the Asia-Pacific region. It aims to reduce poverty and promote sustainable economic growth in the region. The report underscores the bank's commitment to identifying and addressing key challenges facing the global economy and providing data-driven insights to inform policy decisions.