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WTO Working Papers

WTO working papers usually represent research in progress. Such research may be conducted in the preparation of WTO Secretariat reports, studies or other material for WTO members. The papers are circulated for comment because the WTO considers critical review of professional research to be extremely important.

English

Supply Chain Finance and SMEs

Evidence from International Factoring Data

The unbundling of trade across regions offers unique opportunities for SMEs to integrate into global trade notably through their involvement into supply-chains. With supplychains shifting and expanding into new regions of the world, the challenge for SMEs to accessing financing remains an important one; in many developing and emerging market economies, the capacity of the local financial sector to support new traders is limited. Moreover, after the financial crisis, several global banks have "retrenched", for various reasons. In this context, supply-chain finance arrangements, and other alternative forms of financing such as through factoring, have proven increasingly popular among traders. This paper shows that factoring has a positive effect in allowing SMEs to access international trade, in countries in which it is available. Factoring also appears to be employed by firms involved in global supply chains. We employ for the first time data on factoring from Factor Chain International (FCI), the most extensive dataset on factoring available at the moment, for the period of 2008-2015. Using an instrumentation strategy we identify a strong, stable effect of factoring on SMEs access to capital for some of the main traders in the world.

English

Keywords: small and medium-sized enterprise, "factoring, trade finance, global supply chains, financial crisis
JEL: F13: International Economics / Trade / Trade Policy; International Trade Organizations; G23: Financial Economics / Financial Institutions and Services / Non-bank Financial Institutions; Financial Instruments; Institutional Investors; G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages; F34: International Economics / International Finance / International Lending and Debt Problems
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