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ADB boosts support for trade finance with USD 350 mn additional headroom

The increased headroom approved today by ADB’s Board of Directors will help us meet the huge surge we’ve seen in market demand for our trade finance products, says Beck.


ADB Last Updated at 11 Jun 2018, 21:06 IST Armenia, Bangladesh, Pakistan, Sri Lanka, Vietnam
ADB boosts support for trade finance with USD 350 mn additional headroom
  • Supporting more than 12,000 small and medium-sized enterprises (SMEs) in developing Asia since 2009, TFP helps reduce market gaps for trade finance by providing loans and guarantees to financial institutions to support trade activities in the region. (Image Credit: Wikimedia)

The Asian Development Bank's (ADB) Board of Directors has approved USD 350 million in additional headroom to further expand the scope and impact of its Trade Finance Program (TFP), helping to close large market gaps for trade finance that impede growth and job creation.

Supporting more than 12,000 small and medium-sized enterprises (SMEs) in developing Asia since 2009, TFP helps reduce market gaps for trade finance by providing loans and guarantees to financial institutions to support trade activities in the region. The additional financing will increase TFP's limit to USD 1.35 billion, keeping up with the increasing market demand for trade finance from the program, which grew over 50 percent in 2017. TFP is able to support trade financing well above its limit over the course of a year—but not breaching the limit at any one point in time—by recycling transactions with short maturities and leveraging co-financing.

"The increased headroom approved today by ADB's Board of Directors will help us meet the huge surge we've seen in market demand for our trade finance products," said ADB's Head of Trade and Supply Chain Finance Mr Steven Beck. "It is an exciting time for the team, which is known for its excellent client services, including transaction processing in 24–48 hours."

Financial institutions in support of trade, as well as SMEs, play an important role in closing the global trade finance gap, which amounts to USD 1.5 trillion globally, 40 percent of which is coming from the Asia and Pacific region, according to ADB's latest Trade Finance Gap survey. Trade finance is also an important component for countries to achieve the Sustainable Development Goals, as identified by the United Nations' Addis Ababa Declaration on Financing for Development.

TFP has guaranteed or funded 5,583 transactions in 2016 and 2017 alone, valued at USD 7.6 billion, with cofinancing reaching USD 4.6 billion. The program's transaction growth remained robust in the first four months of 2018—comprised of 1,453 transactions valued at over USD 2 billion, USD 1.3 billion of which was co-financed with the private sector. Mobilizing private sector resources is an important metric for ADB as it leverages resources and multiplies the bank's ability to reduce market gaps that impede growth and job creation in its developing member countries.

The additional financing to TFP will complement the USD 100 million in additional support approved by ADB's Board of Directors in March to extend and expand the scope of the bank's Supply Chain Finance Program, which helps SMEs access finance and boosts their contribution to the region's economic growth and development.

TFP currently operates in 21 ADB member countries, with the top five most active markets including Armenia, Bangladesh, Pakistan, Sri Lanka, and Viet Nam. Backed by ADB's AAA credit rating, it provides guarantees and loans to over 200 partner banks to support trade, enabling more companies throughout Asia to engage in import and export activities. TFP complements its financial support with a regular series of workshops and seminars to increase knowledge and expertise in trade finance products and operations, risk management, and anti-money laundering prevention.

COUNTRY :
Armenia Bangladesh Pakistan Sri Lanka Vietnam

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