Standard Chartered (SCB) and International Financial Corporation (IFC), a World Bank group member, have agreed to continue their trade finance partnership with an additional investment of US$1 billion.
The partnership is under the Global Trade Liquidity Program (GTLP), which aims to boost global trade in emerging markets by increasing the amount of available funds.
The third series of the GTLP comes at a critical time when many global banks are pulling back support because of increasing compliance costs and higher capital requirements for trade under Basel III.
Through SCB’s strong presence in emerging markets and established trade finance capabilities, it will begin a portfolio of trade finance transactions of up to $1 billion through emerging market issuing banks (EMIBs), with the IFC contributing up to 50 per cent of the portfolio, or up to $500 million.
In turn, the EMIBs will extend funds to local importers and exporters in countries where they are present to promote global trade.
Alex Manson, global head of transaction banking at Standard Chartered, said: “Facilitating global trade and commerce is at the core of what we do as an international bank. Renewing the partnership with IFC underscores our commitment to support and promote economic growth and help bridge the global trade finance gap. Through GTLP, we expect to provide more than $5 billion to support trade where our footprints are over the next three years.”
Established in 2009 in response to the global financial crisis, the GTLP has been well-utilised so far, supporting more than $10 billion in trade and creating significant impact by facilitating a large volume and number of transactions in lower-income countries, with about 20 per cent being used to support small and medium enterprises.
The GTLP provides the much needed liquidity, helping commercial utilisation banks raise their credit limits, manage risk and support trade in challenging emerging markets.
“Trade is the lifeblood of the global economy, a key driver of growth and job creation and a direct means of reducing poverty. IFC’s partnership with SCB, and the renewal of the successful GTLP facility is a key part of IFC’s strategy to boost trade globally, creating new markets and new opportunities for lower-income countries,” said Marcos Brujis, global director of financial institutions group at IFC.
GTLP is a portfolio-based trade finance initiative that combines the efforts of IFC and commercial utilisation banks (UBs), such as SCB, to boost trade finance support in emerging markets.
It has proven to be a highly effective means of providing funds to facilitate trade in emerging markets and helps the under-served importers and exporters.
Under the risk-sharing model, IFC invests in eligible trade transactions offered by EMIBs for up to a 50 per cent participation or up to $500 million; the remaining amount is held by the private sector UBs.
Photo: Standard Chartered