Washington, D.C., October 30, 2006
— The International Finance Corporation’s Global Trade Finance Program has reached a milestone of 500 trade guarantees totaling close to $500 million in business.
Under the program, which began operating in October 2005, IFC provides guarantees to cover the payment risk of banks in emerging markets. Due to limited capacity for country and bank exposure, international banks conducting trade business in specific countries often need risk mitigation to support their export clients. Supporting trade between emerging markets is an important feature of the program, and more than a third of its guarantees have been issued for "south-south" trade.
The 500th transaction is an IFC guarantee of $180,000 for a letter of credit issued by Orient Bank in Uganda, for imports of industrial goods from Kenya. IFC covered 100 percent of the transaction.
Georgina Baker, IFC’s Senior Manager responsible for the program, said, "The Global Trade Finance Program is making a difference in the markets where we are needed the most, especially in Africa. IFC is also benefiting tremendously from the fact that trade can be used as an entry product to explore new markets and assess new clients. We appreciate very much the strong endorsement we continue to receive from the market, as well as our management and staff."
To date, 42 issuing banks have joined the program, permitting IFC to provide risk mitigation to a variety of countries, including Argentina, Armenia, Bangladesh, Bolivia, Brazil, Kenya, Lebanon, Malta, Mauritania, Moldova, Mozambique, Nigeria, Pakistan, Russia, Tanzania, and Jordan. Over the next 12 months, the program will continue to expand globally given the strong market demand. Already 87 confirming banks have signed on to tap into the program’s risk mitigation.
The program has launched technical assistance courses in Africa and Latin America to increase the trade capacity of local banks. These seminars disseminate knowledge of the different trade structures that can be supported through the program. They also facilitate the establishment of a network of banks in each region, helping increase intra-regional trade flows.
Examples of recent transactions
·Guarantee for a $6 million letter of credit covering exports of hot rolled steel from Ukraine to Morocco:IFC covered 100 percent of the transaction.
·Guarantee supporting pre-export finance of $882,000 worth of coffee, wires, and cooks from Brazil to Panama, Romania, Somalia, and the United States: IFC covered 100 percent of the transaction.
·Guarantee of a letter of credit worth $62,000 of hydraulic cylinders from Brazil to Argentina:IFC covered 100 percent of the transaction.
·Guarantee of a bill of exchange for $360,000 worth of consumer goods from Singapore into Nigeria.
·Guarantee of a letter of credit for $4 million worth of medical equipment from South Africa to Nigeria: IFC covered 58 percent of the transaction.
·Guarantee of a bid bond issued by a Lebanese bank for 10 million Qatari riyals ($2.3 million equivalent) for construction work:IFC covered 85 percent of the transaction.
Development reach to date
·66 percent of guarantees issued for banks in Africa, 18 percent for banks in Latin America, 10 percent in Middle East and North Africa, 3 percent in South Asia, and 3 percent in Southern Europe and Central Asia.
·36 percent of guarantees support trade between emerging market countries
·79 percent of guarantees cover less than $1 million, serving small business importers
·Program facilitated exports from 50 countries, with goods ranging from high technology to foodstuffs
Key features of the program
·Delivers a global network of issuing and confirming banks
·Issues guarantees in 24-48 hours
·Supports import and pre-export financing
·Provides technical assistance and training for issuing banks
About IFC
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit
www.ifc.org
.
