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Washington D.C., January 24, 2007
—The International Finance Corporation, the private sector arm of the World Bank Group, has approved a $500 million increase to its Global Trade Finance Program, bringing the program ceiling to $1 billion. The program has shown itself to be an effective risk mitigation tool by facilitating trade in the emerging markets, with a focus on small and midsize importers and exporters.
This is IFC’s largest financing program to date. It marks a vote of confidence for the initial results of the Corporation’s significant engagement in trade finance. Under the Global Trade Finance Program, IFC issues guarantees on the payment risk of local financial institutions. In most cases, the underlying transaction is a documentary credit; however, a growing component of the trade support has been directed to pre-export financing.
In addition to trade finance, the program includes technical assistance to local financial institutions that need either training to upgrade their technical skills or assistance in capacity building. This technical assistance helps local banks provide better trade solutions for their customers, which are mainly small and medium enterprises.
“This program has delivered early on its promise to support nascent trade channels and provide liquidity for imports and exports,” said Jyrki Koskelo, IFC’s Director for Global Financial Markets. He added, “It includes a technical assistance and training component for local banks to achieve best industry standards in trade. The Global Trade Finance Program is playing an important role in reaching smaller, underserved clients globally and, specifically, in South-Southtrade. The program has also shown itself to be a powerful entry product into very challenging markets, including post-crisis countries in Africa.”
The Global Trade Finance Program is continuing to build the number of participating financial institutions. To date, 48 banks in over 25 emerging markets and over 90 international banks in 62 countries have joined the program, highlighting one of its major benefits – a network of potential partnerships that both global and local banks can access to deliver trade finance solutions.
With the additional $500 million, the program will be able to continue expanding its coverage globally, particularly in frontier markets such as Cambodia, Nepal and Yemen. It will also provide support to banks in post-conflict countries such as the DRC, Liberia, Rwanda, and Sierra Leone.
The Global Trade Finance Program is designed to be commercially responsive and efficient, with a dedicated, experienced trade finance team and a rapid response time. In its first 16 months of operation, over 600 guarantees have been issued. 65 percent of the trade transactions have supported in Africa, which is a continuing priority. Nearly one-third of the transactions have involved South-South trade (between emerging markets); and 79 percent have been transactions supporting small and medium sized importers and exporters.
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
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