Himalayan News Service
Singapore, May 30
Asian Development Bank (ADB) has launched its $150 million Trade Finance Facilitation Programme (TFFP), which will boost liquidity and stability of the trade finance system in the Asia and Pacific region.The TFFP marks ADBâ€™s first use of its partial credit guarantee (PCG) to support and encourage a large number of international and regional confirming banks to take commercial and political risk on local banks that are in countries vulnerable to crisis or less well known, states a press release issued here. More than 40 leading international and regional confirming banks were designated as â€˜Founding Partner Banksâ€™ at the TFFP launch.
In addition, by the end of the year some 30 local banks in priority emerging markets should be accredited under the TFFP as issuing banks, making them eligible for ADB guarantee support and direct loans. These markets include Afghanistan, Bangladesh, Bhutan, Cambodia, Lao PDR, Mongolia, Nepal, Philippines, Sri Lanka, and Viet Nam. Modeled closely on EBRDâ€™s Trade Facilitation Programme, â€œthe ADB programme, a reflection of the close and growing high-level collaboration between ADB and EBRD, aims to help local banks in challenging markets of the region establish track records with international banks,â€ says Philip Erquiaga, principle director of ADBâ€™s Office of Cofinancing Operations. In the past, many international banks have had limited appetite for taking unsecured risk on certain local banks even when the risk was associated with short term trade finance.
The lack of correspondent banking lines with international confirming banks has restricted the ability of local banks in certain developing countries to provide trade finance to their exporting and importing clients, inhibiting trade and economic expansion. â€œThe TFFP will encourage confirming banks and exporters to expand their business with local banks they are not familiar with because of the ADB accreditation under the TFFP,â€ notes Alfredo Pascual, director of ADBâ€™s Private Sector Operations Division, â€œBy supporting a large number of issuing banks in developing countries, the benefits will filter down to an even larger number of entrepreneurs and businesses.â€
Martin Endelman, senior cofinancing officer of ADBâ€™s Office of Cofinancing Operations, says, â€œThrough this programme, ADB can work through established commercial market mechanisms to help keep confidence levels in place during economically turbulent periods to avoid having to use more aggressive solutions.â€ The TFFP also complements ADBâ€™s public sector loans to banking sectors around the region. The programme is part of a broader strategy to use financial intermediation to promote private sector development, and, through this, economic growth.