TradeFlow Capital Management and the International Chamber of Commerce (ICC) are launching a new fund to improve access to trade finance for small and medium-sized enterprises (SMEs) in the commodities sector. The initiative aims to address the challenges SME commodity traders face in securing affordable funding amid fluctuating commodity prices, shipping delays, and tightening credit facilities.
Background: TradeFlow Capital Management’s Non-Credit Approach
1.1. TradeFlow’s Unique Model
Investment management firm TradeFlow takes a non-credit approach to enable physical commodity import and export transactions in products such as cocoa, coffee, beans, rice, oil, energy commodities, and metal. By taking a neutral principal position and direct ownership of the commodities during shipment or a pre-agreed storage period, TradeFlow facilitates trades without relying on traditional credit.
1.2. Previous Funds and Successes
In 2018, TradeFlow launched its first US-dollar denominated fund, followed by a euro version in 2020. Since then, the investment manager has enabled more than $1.5 billion of trades through over 1,000 transactions for SME commodity firms worldwide.
The ICC SME TradeFlow Fund
2.1. Collaboration with ICC’s TradeNow Program
The new ICC SME TradeFlow Fund, advised by TradeFlow’s founders Tom James and John Collis, will follow the same model as the company’s previous funds. In collaboration with ICC’s TradeNow program, which connects SMEs to products and services to help them access international markets, the fund will also focus on capacity building and providing small traders with technical tools to manage their transactions more effectively.
2.2. Addressing the Trade Finance Gap
The fund’s launch comes in response to a recent report by McKinsey estimating that as much as $500 billion of additional financing could be required to support commodity flows due to fluctuations in raw commodity prices, shipping delays, rising interest rates, and inflationary pressures. With large players expressing confidence in their financing options, bank de-risking and high-profile fraud scandals have led to a tightening of credit facilities for smaller traders.
Building a Coalition of Partners
3.1. Unlocking Liquidity for SMEs
John Denton, ICC Secretary-General, highlighted the global business community’s need for new and impactful solutions to address the growing trade finance gap, which disproportionately affects SMEs. The ICC SME TradeFlow Fund can help unlock liquidity for SMEs in the commodities sector by providing an innovative and compelling solution to a broad array of investors.
3.2. Ensuring Growth and Success for Small Businesses
The ICC is now looking to build a coalition of partners within the investor community to ensure that small businesses trading bulk commodities can grow and thrive. By offering an innovative, low-risk, and low-default asset class, the ICC SME TradeFlow Fund aims to make a significant impact on the SME commodity trading landscape.
Conclusion
The new ICC SME TradeFlow Fund, launched by TradeFlow Capital Management and the ICC, represents a promising solution for SME commodity traders struggling to access affordable funding. By providing an innovative approach to trade finance and working alongside the ICC’s TradeNow program, the fund aims to address the trade finance gap and support the growth and success of small businesses in the commodities sector.