Despite the critical role trade finance plays in economic progress, persistent trade finance gaps remain across emerging markets, exacerbated in recent years by heightened economic uncertainty.
The International Finance Corporation (IFC) and Singapore-based bank DBS have signed a $500 million facility under IFC’s Global Trade Liquidity Programme (GTLP), according to a media release sent Monday.
The facility aims to promote capital and trade flows in emerging markets across Asia, Africa, the Middle East, and Latin America, help bridge the record $2.5 trillion global trade finance gap, and accelerate economic progress across these regions.
In More Than 100 Countries
The facility includes IFC and DBS sharing the risk equally on a portfolio of trade-related assets of up to $500 million. This enhances DBS’ capacity to support more trade financing – such as Letters of Credit – with a faster turnaround time for businesses trading with emerging markets counterparts while better managing risk.
IFC is a member of the World Bank and the largest global development institution focused on the private sector in emerging markets. The body works in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries.
Providing Countercyclical Solution
Emerging markets play an important role in achieving a low-carbon future. To accelerate the decarbonization of trade flows across emerging markets, 20 percent of the facility will be allocated to climate-eligible trade transactions, such as the trading of renewable energy equipment, energy-efficient equipment and climate-smart agriculture-certified commodities.
The facility is part of IFC’s GTLP – a product designed to provide a countercyclical solution to the lack of trade financing in emerging markets by helping banks grow their credit limits, manage risk, and support trade across developing markets which are often under-served. It is IFC’s first GTLP with a Southeast Asian bank and the first long-term investment project between IFC and DBS.
Support From More Than 400 Financial Institutions
Despite the critical role trade finance plays in economic progress, persistent trade finance gaps remain across emerging markets, exacerbated in recent years by heightened economic uncertainty. Small and medium-sized enterprises (SMEs) – which are direct beneficiaries of the financing – are particularly impacted, limiting their ability to participate in global commerce.
Since its inception, GTLP has – through global and regional banks – supported more than 400 financial institutions in 69 emerging market countries with over $53 billion in global trade volume.
