WASHINGTON, D.C., June 23, 1998 --- The International Finance Corporation has signed agreements to establish a trade enhancement facility of US$100 million with Sumitomo Bank Limited to expand trade finance to Korea. IFC will guarantee Sumitomo 40 percent (US$40 million) of the US$100 million exposure taken by Sumitomo.
The facility will support the growth of Korean exports by broadening the availability of short-term trade finance to import capital goods and raw materials. It will give selected Korean banks better access to letters of credit, confirmations, and bankers acceptances. IFC’s guarantee will cover documentary credits originated by Shinhan Bank, KorAm Bank, Kookmin Bank, Hana Bank, and Korea Long Term Credit Bank. IFC is enabling Sumitomo to undertake a larger volume of trade finance transactions than it would undertake on its own, owing to country exposure limits. The facility will be available for up to three years with individual transactions limited to six months. IFC designed similar trade enhancement facilities for Russia, Kazakhstan, and East European countries.
The agreements were signed in Seoul by IFC Vice President for Investment Operations, Mr. Jemal-ud-din Kassum and Mr. Kiyotaka Kurokawa, Assistant to the President, The Sumitomo Bank, Limited.
Mr. Kassum noted that Korean trade has declined substantially because foreign commercial banks have significantly reduced trade finance lines to Korean commercial banks due to perceived higher credit risk. The facility is critical because growth in exports is a prerequisite for Korea to recover from the current foreign exchange and debt crisis. He added that the facility is one of several projects that IFC is undertaking to build up Korea’s financial sector and, as such, would send a strong signal to the international community about the Corporation’s commitment to Korea.
Sumitomo Bank Limited, a leading Japanese commercial bank with total assets of US$465 billion and equity of US$16 billion as of September 30, 1997, is a leading arranger of international syndicated credits with a strong emerging markets orientation. It was ranked number one in the area of trade finance among Japanese institutions by the Nikkei industry survey in 1997. Sumitomo has a branch office in Seoul and is a major supplier of trade finance in Korea.
IFC, part of the World Bank Group, fosters economic growth in the developing world by financing private sector investments, mobilizing capital in the international financial markets and providing technical assistance and advice to governments and businesses.
