For Hong Kong traders, there may not be a better moment to protect their companies from market volatility and unpredictability.
Hong Kong, albeit modest in size, plays a significant role in international trade. With HK$8.82t (US$1.13t) in total merchandise trade in 2023, the World Trade Organization (WTO) placed it as the 10th largest trading entity in merchandise trade and 21st in commercial services. China, Southeast Asia, states in the European Union, and the United States are some of its main commercial partners.
However, small businesses find it difficult to safeguard themselves since traditional lenders frequently fall short of their requirements, leaving a sizable liquidity gap.
Understanding this, the Hong Kong Export Credit Insurance Corporation (HKECIC) and financial technology (fintech) platform FundPark partnered to provide a first-of-its-kind solution that combines credit insurance and cutting-edge data analytics.
The financial environment for small and medium-sized businesses (SMEs), especially those involved in cross-border commerce, is the specific focus of this collaboration. FundPark has grown its loan distribution volume four times since its first structured asset-backed bond was released in early 2022.
Hay Yip, Chief Strategy Officer and Chief of Staff at FundPark, was quoted Insurance Asia: “We’ve distributed over $2.6b in loans. About two-thirds of that total has occurred in the last 18 months alone. This growth trajectory highlights our status as a scale-up business, and we’re committed to sustaining this momentum in the short and medium term.”
FundPark has facilitated over $2.5 billion in facility advances and secured $500 million in asset-backed securities (ABS) funding, headed by Goldman Sachs, through its financial support of SMEs in the past month alone.
In addition, the business disclosed a $250 million alliance with HSBC to provide more assistance to digital SMEs throughout Greater China, with a focus on the Greater Bay Area (GBA). Yip stated, “We’ve supported more than 17,000 shops in our entire lifetime.”
FundPark doesn’t just concentrate on home markets. Cross-border traders are supported by the platform, namely those who import into or export from Greater China to other countries. This platform’s global reach demonstrates its dedication to helping SMEs seize growth possibilities across many areas.
“They immediately became aware of the obstacles and problems associated with obtaining working capital support from banks and traditional lenders. At FundPark, this occupies a significant portion of our work, according to Yip.
“We recognize that working capital is a huge constraint for SMEs. In fact, many SMEs typically fail in the first three to five years because of challenges around managing cash flow and working capital. Hence, that’s a focus for us.”
Growing at a CAGR of 9.3%, the trade credit insurance market is expected to reach $17.48 billion by 2028. The region with the fastest predicted growth, however, is predicted to be Asia Pacific.
The rise of new market participants, supply chain resilience, digital trade finance, global trade volatility, and post-pandemic strategic risk management are some of the factors propelling this expansion.
There is a rising need for trade credit insurance to shield receivables from credit risks in cross-border transactions, as global trade is expected to exceed $28.5 trillion in 2021.
The role of trade credit insurance in risk mitigation is further highlighted by economic volatility and variations, such as shifts in GDP growth, exchange rate fluctuations, and stock market volatility.
- Published By Team Genuine Reporter