2017 - 2023
MEDA, in partnership with Global Affairs Canada, Sarona Asset Management and the University of Waterloo, seek to improve household economic wellbeing for women and men employees and smallholder farmers through advancing trade and economic growth of Small and Medium-sized Enterprises (SMEs) across Africa, Asia and Latin America.
Although developing economies are achieving significant economic advancement, growth is not even and the benefits are not realized by all. The World Bank reports significant income and livelihood disparities within and across low and middle-income countries. These disparities are exacerbated forwomen and youth who face barriers based on their gender and age. According to the United Nations, 1.3 billion people live in multi-dimensional poverty with many middle-income countries like Nigeria, Laos and Philippines having over 50% of their population living in poverty.
SMEs play a significant role in the advancement of trade, boosting economic growth and reducing poverty. However, they are unable to operate at an optimal level due to a lack of trade finance. Trade finance, also known as working capital or short-term financing, is the foundation for many SMEs. Trade finance enables SMEs to:
- Buy needed materials to fulfill orders
- Finance unpaid accounts receivable that can leave small companies hamstrung
- Smooth cash flows and;
- Pay employees and suppliers faster
According to research commissioned by Trading Up, global unmet demand for SME trade finance totals $150 billion in developing markets, with $37 billion in low-income and least developed countries.
Trading Up will address key barriers faced by SMEs through three central components:
- Catalytic Investment: The Sarona Trade Finance Fund will invest $45 million in 10 trade finance intermediaries (TFIs) for onward investment in 5,000 SMEs across Africa, Asia and Latin America. Through a blended finance structure, the fund will use Global Affairs Canada catalytic $11 million contribution to crowd-in private capital into the fund.
- Inclusive Technical Assistance: To augment the impact of the Sarona Trade Finance Fund, MEDA will extend technical assistance to influential private sector actors at multiple levels of the trade finance ecosystem. At one tier, TFIs will adopt gender equality, environment, social and governance and impact measurement and management practices that benefit SMEs. At a deeper tier, MEDA will partner with farmers associations to improve productivity, market linkages and wellbeing of women and men smallholder farmers.
- Industry Relevant Research: There is little available evidence on the local economic impacts of trade finance. In response, UW-SEED will research the effects of trade finance and technical assistance on SMEs, employees, smallholder farmers and their households. Research will be disseminated to the blended finance, impact investment and development community to increase awareness and support for developing the SME trade finance ecosystem.