Credit assessment and SME inclusion3 The sandbox’s investigation into digital methods to check and prove creditworthiness is of particular benefit to SMEs seeking financing. SMEs face persistent barriers in accessing trade finance, contributing significantly to the estimated $2.5 trillion trade finance gap.3 These challenges are particularly acute for SMEs in emerging markets, where traditional financial institutions often lack the tools, information or incentives to extend credit. The main barriers include: –Traditional credit assessment limitations: Banks typically base lending decisions on historical financial performance, collateral availability and established banking relationships. This approach disadvantages SMEs with limited credit history or those operating in new markets. Credit approvals can take up to four weeks, delaying access to working capital and impeding the flow of cross- border goods. –Documentation and collateral constraints: SMEs often struggle to produce the extensive documentation required by traditional lenders. Their limited assets suitable for collateralization further restrict access to financing. Current risk assessment models frequently fail to recognize the value of operational data, such as shipping records and invoice history, as indicators of creditworthiness. –Risk perception issues in emerging markets: Perceived risks in emerging markets often lead to conservative lending practices. Without mechanisms to validate cross-border transactions or assess counterparty reliability, financial institutions apply stringent requirements or avoid lending altogether. The average rejection rate for trade finance applications can reach as much as seven times higher for women-owned companies and SMEs compared to large, multinational firms, according to the World Trade Organization.4 –Lack of tokenization frameworks and risk mitigation infrastructure: The absence of comprehensive regulatory frameworks for using tokenized real-world assets (RWAs) as collateral, coupled with limited government-backed credit risk tools, deters financial institutions from lending to SMEs – particularly in high-friction trade corridors. Technology-enabled solutions can address these challenges by creating new methods of assessing creditworthiness, streamlining application processes and establishing more transparent risk profiles. By using operational data, digital documentation and alternative credit models, innovative approaches can unlock capital for previously underserved businesses. Advancing Digital Trade: Insights from the UAE TradeTech Regulatory Sandbox 16

Advancing Digital Trade 2025