Trade finance is booming across Asia. But SMEs and micro enterprises still struggle for attention, and complex rules hold back progress.
Asian demand for trade finance is expected to remain robust this year, despite uncertainty surrounding US tariffs. Asian exporters and suppliers are increasingly looking to access supply chain finance (SCF), and technological advances including blockchain, digital trade platforms, and shared digital identities, along with the steady elimination of paper-based processes and bureaucracy, are greasing the wheels.
Sustainable and green trade financing (SSCF), too, are set to increase as banks look to hit net-zero targets and multilateral development banks and export credit agencies eye hitting the UN’s sustainable development goals. Asia looks set to lead the way in target-based green financing involving loan-margin compression as banks achieve their sustainability targets.
Given the expected flurry of activity, CAGR forecasts for Asian trade finance range from 18.6% for SSCF by 2033 to 9.8% for overall SCF by that date, according to consultancy Global Growth Insights. These projections are derived from the forecast for market growth globally—in which Asia held an approximate 43.5% share in 2024 in SSCF, according to Custom Market Insights, and a 42% share in SCF, according to IMARC Group.
Not that supply-chain lending is anything like a plain-vanilla business, or one that offers everyone a level playing field.
“Trade finance in Asia has become increasingly complex because of US-China trade tensions, alongside ongoing conflicts in the Middle East and Europe,” says Choon Hong Chua, senior director at Moody’s in Singapore. “This geopolitical instability is transforming Asian trade financing into a high-risk, high-reward environment where lenders are faced with navigating shifting tariffs and adjustments in supply chain routes.”
A nagging issue is the chronic unavailability of trade finance for Asia’s small to midsized enterprises. Growth is expected in deep-tier SCF, however, which extends trade financing down to Tier-2/3 SMEs that are typically ignored by traditional banks.
The Asian Development Bank (ADB) plays a major role in supporting SCF across Asia and the Pacific through its Trade and Supply Chain Finance Program. The TSCFP aims to address financing gaps, particularly among SMEs, by providing guarantees, loans, and risk-sharing mechanisms to partner banks and financial institutions, with an emphasis on post-shipment financing and digitalization of trade documentation and contracts. TSCFP financing offers a AAA credit guarantee and access to the ADB’s mammoth funding capacity as well as its deep local market knowledge. Local banks market the product to export-focused clients.
“We did $5.7 billion [of financing] through over 20,000 transactions in 2025 via the TSCFP,” reports Steven Beck, director, Trade and Supply Chain Finance at the ADB in Manila and head of the TSCFP. “The reason for the success of the program is that we address market gaps, delivering quickly what the market needs to support trade, trade diversification, and resilience in supply chains.”
Top priority at the TSCFP is scaling its SCF business, he adds: “We saw about 20% growth in our SCF business in 2025, supporting about $1.3 billion in supply chains. That said, much more needs to be done to take our SCF activities deeper and broader into markets.”
In particular, the TSCFP is targeting the lower reaches of the SME and micro enterprise (MSME) arena, which are typically shut off from bank financing. Deep-tier supply chain finance (DTSCF) has been utilized 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.
“While SCF is an important innovation that can really dent SME financing gaps, generally it’s only the first-tier suppliers in a supply chain that benefit,” says Beck. “That’s why we’ve been studying DTSCF and identifying challenges—mostly legal in nature—with scaling it in various markets. It could have a material impact on reducing financing gaps for SMEs and making supply chains more resilient.”
India Addresses SME Needs
India is expected to anchor APAC’s growth in trade finance and SCF over the next decade or so. The market has been experiencing consistent expansion in recent years, underpinned by a volume increase in overall trade backed by tools including factoring and non-documentary letters of credit, with each of these inputs exponentially boosted by digitization and regulatory support.
Analysis from consultancy Data Insights Market forecasts a CAGR of 8.15% for Indian trade finance between 2025 and 2034, with the growth set to be powered by digital technologies such as blockchain and AI, rising demand for sustainable trade finance products, and trade-related risk mitigation via the use of credit and political risk insurance.
The Reserve Bank of India (RBI) has been pivotal to this expansion through its efforts to internationalize the use of the rupee and ease restrictions on domestic banks’ access to global foreign-exchange trading platforms while offering trade relief measures such as extending realization timelines for export proceeds and allowing debt restructuring for exporters. The RBI is also aiming to boost access to trade finance within the MSME sector.
“India reforms are driving financial inclusion through Aadhaar [India’s digital identity system], which enables payment systems, UPI, direct benefits transfers, and mobile connectivity,” says Deepali Bhargava, head of research and chief economist, Asia Pacific, at ING in Singapore. “The Goods and Service Tax (GST) has led to the digitization of documents and data in India—because all relevant transactions must be digital rather than paper-based as was the case prior to the introduction of GST in 2017—and these reforms have significantly reduced the cost of financial access and promoted a shift away from cash.”
Digital trade finance “is becoming a game changer for small businesses, especially in industries like manufacturing and agriculture, in bridging the trade finance gap,” she adds, “These platforms help level the playing field by giving smaller firms easier access to capital.”
MSMEs contribute around 45% of India’s exports and 30% of GDP—according to data from India’s Ministry of Micro, Small and Medium Enterprises. Almost 60 million MSMEs are registered in the country via the Aadhaar system.
MSMEs nevertheless have limited access to trade finance, which is essential for working capital, export credit, and the management of payment risks, according to the Indian Council for Research on International Economic Relations. ICRIER estimates that 40% of MSME credit applications to banks are refused. And when credit is provided to export-focused MSMEs, it is frequently collateralized against fixed assets at rates well above the benchmark repo rate.
In response, India’s Union Budget 2026-2027 aims to boost MSME trade finance through initiatives such as the Export Promotion Mission (EPM). Launched last November, the EPM provides equity support, credit guarantees, and liquidity tools, underpinned by the SME Growth Fund, which aims to scale up MSME operations, upgrade technology, and help them achieve global standards compliance.
‘A Seamless Export-Import Process’
Asian intra-regional trade regularly accounts for more than 50% of the global total, boosted by 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, became effective in 2022, it was expected to energize intra-regional trade as well, given that it embraces the 10 ASEAN countries plus Australia, China, Japan, South Korea, and New Zealand.
But it has been off to a slow start.
Since inception, the take-up of RCEP-specific benefits has been low due to complex certificate of origin (COO) and onerous tariff schedule documentation requirements. In 2022, just 0.67% of Vietnam’s exports to RCEP members used the pact’s COO documentation.
In Asia, the RCEP is complemented by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which has been 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, covering the digital and green economies as well as new economies. Trade value under the original CAFTA—signed in 2010 and mainly covering trade in goods—has tripled trade value since 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 established the first Multilateral Development Bank Working Group on Digital Trade, its goals being to “coordinate reform efforts across development institutions and aiming to make trade processes more efficient, transparent, and accessible, particularly for SMEs and businesses operating in emerging markets. This initiative to digitalize the global import-export process, with its target completion in 2030, will be transformational.”
