Rise in the financial risk involved in business transactions, quick processing of documents by banks, and rise in adoption of financial guarantees by SMEs drive the growth of the global financial guarantee market.
Allied Market Research recently published a report, titled, “Financial Guarantee Market By Product Type (Bank Guarantees, Documentary Letter of Credit, Standby Letter of Credit (SBLC), Receivables Financing, and Others), Enterprise Size (Small Enterprises, Medium-sized Enterprises, and Large Enterprises), and End User (Exporters and Importers): Global Opportunity Analysis and Industry Forecast, 2021–2030“. As per the report, the global financial guarantee industry was accounted for $28.70 billion in 2020, and is expected to reach $71.93 billion by 2030, growing at a CAGR of 9.6% from 2021 to 2030.
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Drivers, Restraints, and Opportunities
Rise in the financial risk involved in business transactions, quick processing of documents by banks, and rise in adoption of financial guarantees by SMEs drive the growth of the global financial guarantee market. However, strict assessment by the banks before offering a financial guarantee and collateral demands hinder the market growth. On the contrary, increase in import and export activities in developing countries and surge in digitalization of banking procedures are expected to open new opportunities for the market players in the future.
Covid-19 Scenario:
· The rise in uncertainty and protectionism in global trade, shift in supply chain demands, and business closures have negatively affected the financial guarantee market.
· To curb the spread of the virus, several countries imposed strict restrictions and lockdown across the countries, which created geopolitical tensions and shift in trade patterns.
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The Documentary Letter of Credit Segment Held the Largest Share
By product type, the documentary letter of credit segment held the largest share in 2020, accounting for nearly three-fifths of the global financial guarantee market, due to differing laws of countries and the difficulty of knowing each party personally. However, the receivables financing segment is expected to register the highest CAGR of 15.0% during the forecast period, as it allows to accept large, bulk one-time orders and allow traders to earn greater profits.
The Large Enterprises Segment Dominated the Market
By enterprise size, the large enterprises segment held the lion’s share in 2020, contributing to nearly three-fifths of the global financial guarantee market, owing to rise in preference of a financial guarantee among major organizations to make immediate payments across countries. However, the small-sized enterprises segment is estimated to manifest the highest CAGR of 13.7% from 2021 to 2030. Due to lack of credit worthiness and limited access to huge funds, small banks cannot take loans from banks but a financial guarantee allows them to acquire products and pay later.
Asia-Pacific, followed by Europe and North America, held the Largest Share
By region, the global financial guarantee market of Asia-Pacific, followed by Europe and North America, dominated in 2020, holding nearly two-fifths of the market, due to rise in demand for digitalized financial guarantee using new technologies such as machine learning automation, optical character recognition, and distributed ledger. Moreover, the market across North America is projected to portray the CAGR of 5.5% during the forecast period.
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Major Market Players
- Asian Development Bank
- BNP Paribas
- Barclays
- Bank of Montreal
- Citibank
- HSBC
- ICBC
- National Bank of Canada
- SINOSURE
- Scotia Bank
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