TRADE FINANCE | 25 October 2023

The digital bridge for
Africa’s trade finance gap


Michelle Knowles

Managing Director: Pan Africa Head
of Trade and Working Capital Product


Trade is a crucial driver for Africa’s economic growth and recovery – and digitalised trade finance is key to making that happen

Before the Covid-19 pandemic, Africa’s trade finance gap was narrowing, shrinking from $120 billion in 2011 to about $81 billion in 2019. However, the macroeconomic disruptions and geopolitical uncertainties that followed have caused that gap to widen again. Through all this, a beacon of hope has provided promise for banks and SMEs alike: the digitalisation of trade finance.

“Through all of this, we can see the transformative potential of digital trade solutions, which is helping Absa’s concerted efforts to bridge this gap and empower businesses through technological innovation and collaboration,” says Michelle Knowles, Head of Trade and Working Capital Product and Digital solutions at Absa CIB. “By automating and streamlining trade finance processes, digital tools can significantly reduce costs, foster inclusivity and enhance the availability of financing for African businesses.” Through collaboration with other key players in the Trade Ecosystem there is a further opportunity to increase the amount of liquidity available and deploy innovative solutions that increase access to the much needed trade finance

Driving through collaboration

“Absa’s approach to digitalising trade is rooted in a multifaceted strategy, reflecting our commitment to innovation and seamless integration across the complex landscape of platforms and players,” Knowles says. Central to that strategy is a client portal built on open-source architecture. This portal empowers the bank to seamlessly integrate with various ecosystems through application programming interfaces, ensuring it can connect with strategic partners and systems efficiently.

“Absa is also harnessing the power of big data and artificial intelligence to optimise key processes,” Knowles adds. “By leveraging these technologies, we are not only staying ahead of increasing regulatory demands but are also automating checklist processes, leading to lower overall client costs.”

Innovative technologies are readily available, but as Knowles points out, their efficacy hinges on regulatory and legal reforms. This makes collaboration among policymakers, financial institutions,  development finance institutions and Fintechs paramount.

“Initiatives like the African Continental Free Trade Area (AfCFTA) provide a further avenue for collaboration and establishing standards tailored to African trade while remaining aligned with global standards,” she says. “AfCFTA, underpinned by robust political momentum, offers a prime opportunity to dismantle barriers to regional trade, with digitalisation as a cornerstone. Ongoing efforts within the AfCFTA framework actively address policy recommendations, regulatory adjustments and the establishment of digital standards, fostering an environment conducive to digital trade.”

The ESG convergence

In the post-pandemic, AfCFTA-enabled, hyper-digital world, trade technologies and environmental, social and governance (ESG) principles are converging. This, Knowles says, is paving the way for impactful and sustainable transformation across economies and societies.

“Digital trade technologies hold significant benefits from an ESG perspective,” she says. “As a notable example, Absa’s sustainable financing solutions are geared towards supporting SMEs, including women and youth, who constitute a significant portion of the economy.”

This commitment is mirrored in Absa’s emphasis on addressing environmental and social imperatives – especially given Africa’s priority to alleviate poverty and drive economic growth in line with the United Nations Declaration on Financing for Development.

“One of our central focuses is empowering SMEs with more inclusive access to finance,” Knowles adds. “This is exemplified by initiatives like the Supplier Financing solution, which directly influences supply chains and aligns with sustainability principles. Through this digital platform, corporate buyers can accelerate the payment collection of trade receivables for their suppliers, offering instant liquidity. This approach not only bolsters the sustainability of suppliers’ financial wellbeing but also contributes to a more robust and resilient supply chain for corporate buyers.”

A promising future

As Africa continues its development journey, the synthesis of trade technologies, innovation and ESG principles paints a promising picture for the continent’s future.

“Despite hurdles posed by global geopolitical shifts, inflation and supply constraints, Africa’s steadfast commitment to economic growth through trade remains unwavering,” she concludes. “Absa’s approach to digitalising trade finance emerges as a beacon of hope in the face of these challenges. By harnessing the transformative power of technology, we are committed to bridging the trade finance gap that hampers SMEs’ growth potential.”

Michelle Knowles

Managing Director: Pan Africa Head of Trade and Working Capital Product

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