Trade finance is a specialised area of financing that is tailored to and supportive of international trade. According to the World Trade Organisation, an estimated 80% of world trade is financed, making it almost certain that many of the everyday goods we rely on have benefited from either domestic or international financing.
In the trading of goods there is typically a time lag between the dispatch of goods by an exporter and their receipt by the importer. Normally, exporters require payment upfront / at dispatch, whilst importers would ideally pay only on arrival.
In its simplest form, trade finance reconciles these timing lags by providing a short-term customised credit facility. These are generally intermediated by specialised third party financial institutions and collateralized by the underlying goods as well as by additional guarantees.
Unlike traditional credit that is built on a bilateral agreement between the lender and borrower, trade finance involves three parties: the exporter (seller), the importer (buyer) and the financier.
This triangulation is one of the main factors explaining the extremely low default rates in comparison to other forms of credit. In fact, neither exporters nor importers are incentivised to interrupt the transaction as doing so would have irreversible consequences on their businesses.
Qbera originates investment opportunities, by financing real economy businesses through trade finance.