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Kimura Capital, a private commodity financier, has announced the closure of its London-based trade finance business, marking a significant shift in the landscape of commodity trading finance. The decision comes as the sector grapples with increasing fraud and a retreat of traditional banking support.
Key Takeaways
- Kimura Capital is shutting down its trade finance operations and returning funds to investors, including Goldman Sachs.
- The closure is part of a broader trend of capital flight from the trade finance sector, exacerbated by recent fraud cases.
- Kimura will continue its other ventures in commodity logistics and sports management, but a proposed hedge fund will not proceed.
Background on Kimura Capital
Founded as a private lender to commodity trading companies, Kimura Capital had established itself as a significant player in the trade finance market. However, the company’s recent decision to close its lending arm reflects the challenges faced by the industry, particularly in the wake of the COVID-19 pandemic, which exposed vulnerabilities and led to a series of high-profile fraud cases.
The Impact of Fraud on Trade Finance
The trade finance sector has been under scrutiny due to rising incidents of fraud, particularly involving logistics providers and exporters manipulating shipping documents to defraud banks. The International Maritime Bureau (IMB) has highlighted these emerging threats, which primarily affect transactions involving importers in West Africa and exporters in China. This environment of risk has made banks increasingly cautious, leading to a significant pullback in lending to the sector.
Recent Developments in the Sector
Kimura’s exit is not an isolated incident. The trade finance landscape has seen other notable changes, including:
- Stenn Technologies, a provider of invoice financing, was placed into administration after concerns about its client list were raised by its main lender, HSBC.
- Traditional banks are retreating from large portions of the commodity trading industry, leaving smaller traders to seek financing from private credit providers at higher interest rates.
Future of Kimura Capital
Despite the closure of its trade finance business, Kimura Capital will continue to operate in other areas, including commodity logistics and sports management. However, plans for a new commodity hedge fund in collaboration with Gaspara Asset Management have been scrapped. Gaspara decided to exit the proposed joint venture, although it will continue managing its existing fund with the same strategy and team.
Conclusion
The closure of Kimura Capital’s trade finance business underscores the ongoing challenges within the sector, particularly as fraud cases continue to rise and traditional banking support wanes. As the industry adapts to these changes, the focus may shift towards more secure and innovative financing solutions to mitigate risks and restore confidence among investors and lenders alike.
Sources
- Report: Kimura Capital Closes Trade Finance Business, PYMNTS.com.
- Lender Kimura to Close Trade-Finance Business, Return Money to Goldman Sachs, Yahoo Finance.
