Interview with Beliyou Haile
Beliyou Haile is a Senior Economist at IFC whose research informs investments and strategies for sustainable agricultural development and nutrition security in developing countries. She shares a bit about her recently completed assignment at the World Trade Organization (WTO) and why trade finance is critical to emerging market development.
You recently were on secondment at the WTO in Geneva. What were you focused on while there?
My time at the WTO was part of the IFC-WTO agreement for enhanced cooperation on trade finance. I worked on trade finance research covering Central America and Mexico that was recently published by the two organizations. I also supported IFC-WTO trade finance trainings for banks and SMEs in Mozambique and Zambia, and engaged with Ethiopia’s Permanent Mission to the UN to explore opportunities for similar trainings in Ethiopia.
Why is trade finance so important for countries like Ethiopia?
Let’s start with the fact that trade has been an important driver of economic growth including in developing countries. It has an overall positive influence on GDP, job creation, and poverty reduction. It has also contributed to food security by enhancing the quantity and diversity of agricultural and processed foods available locally.
And trade finance is essential for trade. Unfortunately, there is a lack of trade finance in low-income countries, with 85% of frms in these markets relying on retained earnings to finance working capital needs according to data from World Bank Enterprise Surveys. These financing constraints are especially severe for smaller businesses and agrifood system operators, where risk perceptions are high and capacity to meet collateral requirements can be limited.
For countries such as Ethiopia, where agricultural commodity export accounts for more than 60% of total merchandise export, financing for food traders supports integration into global value chains, which can be especially difficult given the complex web of safety and quality standards exporters need to meet.
Agriculture is one of the critical sectors in Africa that is supported by IFC’s trade finance program. Can you explain why trade finance is so important to this sector?
Agriculture plays a key role for food security, economic growth and job creation in Africa. For example, the sector accounts for 27% of GDP and 55% of employment in low-income Sub-Saharan Africa. However, agricultural productivity remains the lowest in the world and some of the progress in tackling food insecurity has been reversed in recent years.
Countries in the region export raw or lower-value agricultural commodities and import higher-value processed food products. This trend has depleted foreign currency reserves and increased vulnerability to external shocks.
In such a setting, trade and supply chain finance for agrifood operators can improve its contributions to poverty reduction, food security, and job creation by facilitating local value addition. Affordable trade finance to food traders will be key to boosting intra-Africa agricultural and food commodity trade as envisioned in the Africa Continental Free Trade Agreement (AfCFTA).