IFC and DBS Launch $500 Million Facility to Boost Trade Finance in Emerging Markets
The International Finance Corporation (IFC) and DBS have inaugurated a $500 million initiative under the IFC's Global Trade Liquidity Programme (GTLP).
This initiative is designed to enhance trade and capital flows within emerging markets across continents including Asia, Africa, the Middle East, and Latin America. It targets the significant $2.5 trillion global trade finance gap, with the aim of fostering economic development within these regions.
This collaborative effort entails IFC and DBS equally sharing risks on a portfolio of trade-related assets worth up to $500 million. Such an arrangement boosts DBS's ability to offer more efficient trade financing options, like Letters of Credit, to businesses engaged with partners in emerging markets, thereby facilitating a quicker transaction process and improved risk management.
The IFC, part of the World Bank Group, is the largest international institution focusing on the private sector in emerging economies. It operates in over 100 countries, leveraging its capital, expertise, and influence to generate market opportunities and drive development.
A significant portion of the facility, specifically 20%, will be dedicated to supporting trade transactions that are beneficial to the climate. This includes the trade of renewable energy and energy-efficient equipment, as well as commodities certified for climate-smart agriculture, to hasten the shift towards a low-carbon future in these markets.
This initiative is notable for being the IFC’s first GTLP arrangement with a bank from Southeast Asia and marks the first long-term investment project between IFC and DBS. The GTLP was created as a response to the cyclical shortfall of trade financing in developing economies, aiming to extend banks' credit capabilities, manage risks, and enhance trade in regions often neglected.
Trade finance plays a pivotal role in economic development, yet emerging markets continue to face significant financing shortfalls, a situation that has deteriorated with recent economic instabilities. This gap particularly affects small and medium-sized enterprises (SMEs), restricting their access to global trade opportunities.
Since its launch, the GTLP has supported trade totalling over $53 billion by collaborating with more than 400 financial institutions across 69 countries in emerging markets.
Recommended news