SUSTAINABLE TRADE FINANCE

Trade finance is a form of financing the import and export of goods among companies in different countries. It is the action of structuring and providing short term financing instruments to support the physical trade flow of goods while using those goods as collateral.

There are two forms of financing in trade finance:

• a loan disbursement to the supplier/producer on behalf of the buyer/importer
• the purchase of freely negotiable instruments (e.g. letters of credit, bills of exchange, receivables) at a discount from the exporter

Sustainable trade finance provides small and medium enterprises (SMEs) in emerging countries with the financing needed to export their goods and services, expand their business sustainably, and create new jobs.

It focuses on SMEs that are involved in the following areas:

• trade of environmentally friendly goods
• alternative sources of energy and recycled products
• products brought to the market as a result of fair trade practices

Specialized investment firms provide access to sustainable trade finance strategies by financing the production and the shipping of goods directly, or through local microfinance institutions and banks. Sustainable trade finance aims to deliver steady returns to investors, discounting SMEs receivables with a short term maturity of 30 to 180 days