Washington, D.C., March 29, 2006
—The International Finance Corporation’s Global Trade Finance Program has achieved a milestone of $100 million in guarantees and 100 transactions in less than six months since the launch of the program last September.
Most of the trades are in Sub-Saharan Africa, a region of strategic importance to IFC, the private sector arm of the World Bank Group. However, the program is global and the network of banks is spreading worldwide, covering Latin America, the Middle East, North Africa, and South Asia.
Hugh Baylis, the Global Trade Finance Program’s head of operations, said, “The majority of trades are flowing to Nigeria, but activity is also picking up in Mauritania and Kenya, as well as in other parts of the world. As a development institution, we are pleased that almost half of our guarantees issued on behalf of African banks support trades between developing countries and that the majority cover transactions of less than $1 million.”
Through the program, IFC provides guarantee coverage of bank risk in emerging markets, where confirming banks—typically in North America, Europe, and the more advanced of the developing countries—need risk mitigation to support their export clients because of limited capacity for country and bank exposure.
To date, 22 banks have joined the program as issuing banks, permitting IFC to provide risk mitigation in a variety of countries such as: Argentina, Bangladesh, Bolivia, Kenya, Lebanon, Malta, Mauritania, Nigeria, Pakistan, and Russia. Further coverage is expected soon for banks in Colombia, the Dominican Republic, Egypt, Jamaica, Jordan, Morocco, the Philippines, Rwanda, Tanzania, Ukraine, and Vietnam. The confirming banks total 54 so far.
Interesting trends are emerging from the Global Trade Finance Program:
Number of transactions:
112
Average tenor:
5.5 months
South-South transactions (trades between emerging markets):
38 percent
Small and medium enterprise transactions:
74 percent
Sectors covered include agriculture, pharmaceuticals, industrial machinery, dairy products, natural fibers, oil and gas, leather, edible oils, and electronics.
The volume of the guarantees ranges from $10,000 (import of automobiles from the Czech Republic to Nigeria) to $13.5 million (import of oil from India to Nigeria).
Global Trade Finance Program in Latin America
In Latin America, 90 percent of the guarantees have been issued in Brazil for a total of $8 million in pre-export financing. The guarantees have mainly supported exports of agricultural commodities (frozen meat, sugar, shrimp, wheat, cashew nuts, and chicken) but also paper, plastic, metals, and minerals. The exports have gone to Europe and South Africa, and several countries in the region such as Argentina, Mexico, and Uruguay.
The pipeline in this region is growing steadily and includes banks in Colombia, Dominican Republic, Ecuador, Nicaragua, and Paraguay.
Global Trade Finance Program in South Asia
In South Asia, the program has begun will with $5 million in commitments in Bangladesh. The majority of the guarantees issued are South-South trades such as an import of phosphoric acid from the Philippines to Bangladesh or rock phosphate from Morocco.
IFC is in active discussions with a number of banks in Indonesia, Nepal, the Philippines, and Sri Lanka to join the program.
Global Trade Finance Program in Africa
Africa has been the main focus of the program, particularly Nigeria, where $95 million has been committed, followed by Mauritania with $5 million and Kenya with $1 million. Almost half of the guarantees issued for African banks—46 percent—are South-South deals, and 80 percent are small and medium enterprise transactions (less than $1 million). The sector that has benefited the most from the program in this region has been the automotive (including buses and spare parts), but IFC has also supported imports of resin from Thailand to Nigeria, gasoil (heating oil) to Mauritania, and industrial machinery from Singapore to Kenya, among others.
The prospects of expansion in Africa are robust, with coverage expected in the Democratic Republic of Congo, Ghana, Rwanda, Senegal, Sierra Leone, Tanzania, and Uganda.
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit
www.ifc.org
.
