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Inter-Firm Trade Finance in Times of Crisis

Anna Maria C. Menichini

Università degli Studi di Salerno

November 4, 2009

World Bank Policy Research Working Paper, No. 5112

The paper discusses the main features that distinguish inter-firm international trade finance from alternative sources of financing. On the one hand, inter-firm trade finance could help overcome informational problems associated with other lending relationships; on the other, it may contribute to propagate shocks due to the interconnection among firms along credit chains. The paper evaluates the potential effects of a financial crisis on the use of trade credit for firms operating in developing countries. It argues that while the advantages of trade credit might remain largely unexploited due to poor legal institutions, the disadvantages might be exacerbated because of these firms’ greater exposure to a default chain. Based on these arguments, a menu of choices is identified for what policymakers can do to boost firms’ access to inter-firm trade finance in times of crisis.

Number of Pages in PDF File: 25

Keywords: trade finance, financial crisis

JEL Classification: G01, G32, G33, K22

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Date posted: November 5, 2009  

Suggested Citation

Menichini, Anna Maria C., Inter-Firm Trade Finance in Times of Crisis (November 4, 2009). World Bank Policy Research Working Paper, No. 5112. Available at SSRN: http://ssrn.com/abstract=1499580 or http://dx.doi.org/10.2139/ssrn.1499580

Contact Information

Anna Maria C. Menichini (Contact Author)
Università degli Studi di Salerno ( email )
via Ponte don Melillo
Fisciano, Salerno 80131
+39 089 963167 (Phone)
+39 089 963168 (Fax)
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References:  33
Citations:  7

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