At this week’s Commonwealth Business Forum in Antigua, a roundtable of bankers, funds, development partners and business owners from across the Commonwealth asked a blunt question: are Commonwealth banks SME-ready?
Answering it means addressing what constrains lending: affordable funding, capital, and the ability to assess and share credit risk. For businesses earning local currency, foreign-currency debt adds a vulnerability they may be poorly equipped to manage. One Antiguan business owner put it simply. His barrier was not collateral; it was finding the money to pay an overseas supplier upfront; in a currency he does not earn before he had sold a single unit.
The room also heard, from export credit agencies and commercial banks alike, that the cost of regulatory compliance is now one of the biggest reasons SME lending does not happen. A decade of de-risking has made correspondent relationships expensive to maintain, and that cost lands on the smallest borrowers first.
At Crown Agents Bank, our close relationships with multilateral development banks (MDBs) and local financial institutions help us develop solutions that connect international capital with local financing needs. The focus is on local-currency funding, risk-sharing and strengthening local lenders’ capacity to finance SMEs. Risk-sharing is not theoretical: the room heard how the Eastern Caribbean Partial Credit Guarantee Corporation, backed by the World Bank and the ECCB, has been the difference between a loan and a refusal for small businesses across the region. Several speakers made the case for why that support has to run through local banks: SME lending is small-ticket and bespoke, and no international balance sheet can underwrite it one business at a time. A local lender that knows the borrower can.
We also help advance this agenda through the Trade Finance Conference of Parties (TF COP), whose ambition is to halve the global trade finance gap by 2030 and eliminate it by 2040.
Alongside FCDO and TCX, we partnered on July’s Wilton Park dialogue on local-currency finance, where CAB and TCX signed a letter of intent to combine our strengths in the Unlocking Local Currency Initiative, pairing CAB’s ability to move local and hard currency liquidity in and out of Global South markets with TCX’s experience as a market maker and risk absorber in illiquid currencies.
Our payment corridors, FX services and correspondent banking underpin this work, connecting local institutions to global markets. Keeping those connections open is also where development partners can help most directly: by funding the compliance capacity that keeps correspondent relationships viable.
Becoming SME-ready requires a collective effort from banks, MDBs, governments and investors: equipping local lenders with the funding, capital and expertise to lend better and more, in currencies that match their customers’ revenues.
By Duarte Pedreira, Global Head of Trade Finance at Crown Agents Bank
