Trading fees are growing across Asia. But SMEs and small businesses are still struggling to gain traction, and complex regulations are holding back progress.
Asian demand for trade finance is expected to remain strong this year, despite uncertainty surrounding US tariffs. Exporters and suppliers in Asia are increasingly seeking access to supply chain finance (SCF), and technological advances including blockchain, digital trading platforms, and shared digital identities, as well as the continued elimination of paper-based processes and administration, are greasing the wheels.
Sustainable and green financing (SSCF), too, is expected to increase as banks look to achieve unattainable goals and multilateral development banks and export credit agencies eye the UN’s sustainable development goals. Asia looks set to take the lead in targeted green financing that includes credit rating pressures as banks reach their sustainability goals.
Given the expected high activity, CAGR forecasts for Asian trade finance range from 18.6% for SSCF in 2033 to 9.8% for all SCF by that date, according to Global Growth Insights. This projection is based on the global market growth forecast — where Asia held about 43.5% shares in 2024 in SSCF, according to Custom Market Insights, and 42% share in SCF, according to IMARC Group.
It’s not that supply chain lending is like a plain-vanilla business, or one that offers a level playing field for everyone.
“Trade finance in Asia has been complicated by the US-China trade tensions, as well as ongoing conflicts in the Middle East and Europe,” said Choon Hong Chua, managing director at Moody’s in Singapore. “This political instability is turning Asian trade finance into a high-risk, high-reward environment where lenders face volatile tax shifts and restructuring of supply chain routes.”
A worrisome issue is the chronic lack of trade finance for small to medium-sized businesses in Asia. Growth is expected in the deep-tier SCF, however, which extends financing down to Tier-2/3 SMEs often overlooked by traditional banks.
The Asian Development Bank (ADB) plays a major role in supporting SCF across Asia and the Pacific through its Trade and Procurement Finance Program. The TSCFP aims to address financial gaps, especially among SMEs, by providing guarantees, loans, and risk-sharing mechanisms to partner banks and financial institutions, with an emphasis on post-shipment financing and digitization of commercial documents and contracts. TSCFP financing provides a AAA credit guarantee and access to ADB’s large financing capacity and its deep local market knowledge. Local banks market the product to export-oriented clients.
“We did $5.7 billion [of financing] by creating more than 20,000 jobs by 2025 through the TSCFP,” reported Steven Beck, director of Trade and Supply Chain Finance at ADB in Manila and head of the TSCFP.
A priority for TSCFP is to scale up its SCF business, he adds: “We have seen about 20% growth in our SCF business by 2025, supporting nearly $1.3 billion. That said, there is still a lot to be done to deepen our SCF operations and go into broader markets.”
In particular, the TSCFP targets the low-income SME and micro-enterprise (MSME) sector, which is often closed to bank financing. Deep-tier supply chain finance (DTSCF) has been used successfully in recent years by China and Singapore; China is the largest market for the product, driven by government policy, fintech innovation, and demand from the manufacturing and agricultural sectors.
“Although the SCF is an important new initiative that can close SME financing gaps, it is often only the first-tier suppliers in the supply chain who benefit,” said Beck. “That’s why we’ve been studying the DTSCF and identified challenges—mostly legal in nature—to scaling it up in various markets. It can have a big impact on reducing SME financing gaps and making supply chains more resilient.”
India Addresses the Needs of SMEs
India is expected to drive APAC’s growth in trade finance and SCF over the next decade or so. The market has been experiencing consistent growth in recent years, supported by an increase in the overall trade volume supported by instruments that include factoring and non-documentary letters of credit, each of these features greatly improved by digitization and regulatory support.
Consultancy Data Insights Market analysis predicts a CAGR of 8.15% for Indian trade finance between 2025 and 2034, growth that will be supported by digital technologies such as blockchain and AI, growing demand for sustainable trade finance products, and reducing trade-related risks through credit and political insurance.
The Reserve Bank of India (RBI) has been instrumental in this expansion through its efforts to internationalize the use of the rupee and to ease restrictions on domestic banks’ access to foreign exchange markets while providing trade facilitation measures such as extending the period for realization of foreign currency and allowing credit restructuring for exporters. The RBI also aims to increase access to trade finance within the MSME sector.
“India’s reforms are driving financial inclusion through Aadhaar [India’s digital identity system]enabling payment systems, UPI, direct benefit transfers, and mobile connectivity,” said Deepali Bhargava, head of research and chief economist, Asia Pacific, at ING in Singapore. The reforms have significantly reduced the cost of access to finance and encouraged a shift to cash.”
Digital trade finance “is becoming a revolution for small businesses, especially in industries like manufacturing and agriculture, in bridging the trade finance gap,” he adds, “These platforms help set the stage by giving small firms easy access to finance.”
MSMEs contribute about 45% of India’s exports and 30% of GDP—according to data from India’s Ministry of Micro, Small and Medium Enterprises. About 60 million MSMEs are registered in the country through the Aadhaar system.
MSMEs however have limited access to trade finance, which is important for working capital, export credit, and managing payment risk, according to the Indian Council for Research on International Economic Relations. ICRIER estimates that 40% of MSME loan applications to banks are rejected. And when credit is extended to export-oriented MSMEs, it is often collateralized against fixed assets at rates well above the nominal repo rate.
In response, India’s Union Budget 2026-2027 aims to increase trade finance for MSMEs through programs such as the Export Promotion Mission (EPM). Launched last November, EPM provides equity support, credit guarantees, and financing tools, supported by the SME Growth Fund, which aims to expand MSME operations, develop technology, and help them achieve compliance with global standards.
‘Smooth Export Process’
Asia’s intra-regional trade often accounts for more than 50% of the world’s total, boosted by the ASEAN+1 (including China) free trade agreements that remain the main framework for regional trade. When the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement, came into effect in 2022, it was expected to boost intra-regional trade, as it welcomed the 10 ASEAN countries along with Australia, China, Japan, South Korea, and New Zealand.
But it started slowly.
Since its inception, take-up of RCEP-specific benefits has been low due to complex birth certificate (COO) and onerous tax schedule documentation requirements. By 2022, only 0.67% of Vietnam’s exports to RCEP members use the agreement’s COO documents.
In Asia, RCEP is accompanied by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), signed by countries including Singapore, Vietnam, and Malaysia. And late last year, the ASEAN-China Free Trade Area (ACFTA/CAFTA, or CAFTA 3.0) was signed, bringing together the digital and green economies and emerging economies. The value of trade under the original CAFTA—signed in 2010 and mainly covering trade in goods—has tripled since its inception. The ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Japan Comprehensive Economic Partnership complement the intra-regional FTA drive in Asia.
Beck notes that the TSCFP has established the first Multilateral Development Bank Working Group on Digital Trade, whose objectives have been to “coordinate reform efforts across development institutions and aim to make trade processes efficient, transparent, and accessible, especially for SMEs and businesses operating in emerging markets. This initiative to digitize the global process of exporting goods, with its completion by 2030, will be in 2030.”
