Kathmandu, June 18:

JP Morgan and the Asian Development Bank (ADB) announced that they have entered a risk-sharing agreement that will enhance support for international trade in developing countries in Asia.

The Risk Participation Agreement initiative, which falls under the umbrella of ADB’s Trade Finance Facilitation Programme (TFFP), will expand trade finance facilities to selected financial institutions on a risk-sharing basis, with the transactions ranging from short-term letters of credit to tenors that last up to two years.

TFFP plays an important role in ADB’s efforts to develop public-private partnerships through risk mitigation. TFFP works with private-sector financial institutions to support trade in developing

countries by sharing the risk of financing and guaranteeing trade transactions. These types of risk-sharing agreements can be particularly important in developing intraregional trade between smaller developing countries, and in supporting the growth of small and medium-sized enterprises (SMEs) that are involved in international trade, states a press release.

“We are very pleased to work with JP Morgan to share risk in some of Asia’s lowest income countries to support development thr-ough trade,” said S Chander, deputy director general of ADB’s Private Sector Operations. “ADB aims to attract private capital to support development in the poorest countries of Asia. Trade is an important component of economic development and ADB works to achieve this, in part, by developing public-private partnerships that involve risk-sharing arrangements.”

It will broaden JP Morgan’s risk mitigation capabilities and will enhance the profile of the underlying trade finance transactions as JP Morgan will be able to benefit from ADB’s AAA credit rating.

The programme will be introduced in phases. Phase I will be launched in Pakistan, Bangladesh and Sri Lanka.

Phase II will extend coverage to include financial institutions in Vietnam, the Philippines, and Indonesia.