Global trade finance gap reaches $3.6 trillion

The global trade finance gap reached $3.6 trillion in 2025, a figure that highlights a massive disconnect between the credit needed to move goods and the capital available to support that flow. The trade finance story is not really about shipping containers, letters of credit, or the mechanics of cross-border commerce. Investor capital can do something different here: finance the movement of real goods and loosen the grip of the return drivers that dominate most portfolios.

The timing could not be more relevant. Investors are still demanding income, defensive diversification, and a clearer account of what their money is actually financing, and conversations may well begin with the scale of the problem itself. The global trade finance gap was estimated at $3.6 trillion in 2025, a steady increase from $2.1 trillion in 2015. At the same time, 80 to 90 percent of world trade is dependent on some form of financing. The global economy still relies on credit to move goods from seller to buyer. However, the supply of that credit has not kept up with growing demand due to tighter credit conditions for obtaining alternative sources of capital and a complex regulatory environment, coupled with a lack of understanding of the asset class.

Trade finance is hardly new. It is one of the oldest forms of credit, dating back to the 13th century, but it has only become readily accessible as an asset class in recent years. At its simplest, trade finance refers to loans that provide short-term financing to support the physical flow of goods. Each facility directly addresses the risks that cross-border trade throws up, from currency movements and regulatory compliance to documentation risk and non-payment.

The importance of the asset class is that it sits close to the real economy. The underlying goods collateralise these loans, which typically liquidate themselves as delivery completes and payments come in. The lender’s toolkit can include several techniques to reduce risks to an acceptable level, such as permanent control of title over the goods and ring-fenced cash flows. In addition, the arranger of a trade finance transaction, often a bank, holds a significant part of the deal on its own books to maturity, further reducing risks for investors. This gives the asset class a tangibility that most credit lacks: repayment is tied to specific trade flows, not an abstract corporate balance sheet story.

The financing gap bites hardest in emerging markets, where constrained bank credit and thin working capital leave distributors dependent on external liquidity to finance the movement of essential goods. Advancement in developing trade finance as an investable asset class can help bridge this gap, through continuing engagement with investors, as well as the improvement of industry practices around the sale of trade finance assets. The shortage of trade finance exists partly because the asset class is operationally intensive. The opportunity has been largely untapped by asset managers because of high operational costs, asset granularity and short instrument tenors.

This is an important caveat. It is not a generic yield product, it is a specialist credit exposure that depends heavily on sourcing, legal structuring, collateral oversight and risk management. Amid an uncertain economic backdrop, a diversified pool of trade transactions has the potential to deliver the kind of “pure alpha” that many investors are searching for. The potential benefits of trade finance are that alpha potential, diversification, high income potential, low volatility, short duration and uncorrelated returns which can help improve overall portfolio resilience.

Over the last decade, world trade has been up against a variety of economic shocks – collectively referred to as the “polycrisis.” Trade finance has remained resilient despite these series of shocks over the last few years, including the Covid-19 pandemic, supply chain disruption, rising inflation, higher rates, and the Red Sea disruptions. Global trade has also continued to demonstrate resilience despite evolving tariff regimes, supported by adaptive supply chains and the fact that essential goods still need to move, even as the policy and geopolitical backdrop grows more complex. For example, during the aftermath of the 2008-2009 global financial crisis, it was trade finance that helped keep shipments moving, according to the International Monetary Fund. Trade volumes have increased by 6.3% since 2019 and 19.1% compared to the average level in 2015.

A further structural driver is the growth of South-to-South trade among developing countries in the Southern Hemisphere which could be the largest driver of future growth in the near term. Analysis suggests this segment could rise from 17% of total global trade in 2010 to an estimated 40% by 2030. This surge can be closely linked to the international fragmentation of production in the context of global value chains. This data paints a promising picture of the future for global trade.

The default numbers are striking. Trade Finance Global recorded a 0.02% exposure-weighted loss given default rate on export lines of credit in 2023, and 0.10% on imports. Transactions also carry low interest-rate and credit-duration risk, floating at a spread over a short-duration index such as SOFR. Trade finance sits close to the physical world, with loans backed by tangible goods that liquidate as delivery completes. The asset class offers short duration, floating-rate income, and low correlation to mainstream markets. With a loss given default rate of just 0.02 percent on export lines of credit in 2023, the risk profile appears surprisingly stable for a market handling trillions in transactions.

Investors seeking income might find that this specialized credit exposure offers a way to diversify portfolios beyond traditional drivers of yield. The stability of this market makes it an attractive option for those looking to add private real estate offers resilient income to their holdings. Trade finance opens up a vast and underfunded part of the global economy. But the allocation case should be built on evidence, not novelty. The strongest argument is that a $3.6 trillion capital shortage exists in a market that facilitates most of world trade. Likewise, the asset class has historically offered short duration, floating-rate income and low correlation to mainstream markets. All qualities that make this asset class well worth a closer look for clients that are seeking regular income from different drivers of yield.