The Asian Development Bank (ADB) and SMBC have signed a risk-sharing agreement aimed at enhancing support for international trade in developing countries in Asia.

The agreement falls under the trade finance facilitation programme (TFFP) which expands trade finance facilities to selected financial institutions on a risk-sharing basis. Transactions range from short term letters of credit to tenors of up to two years.

The aim of the TFFP plays an important role to develop public-private partnerships. It works with private sector financial institutions to support trade in developing countries by sharing the risk of financing and guaranteeing trade transactions.
Philip Erquiaga, director general of ADB’s private sector operations. “We are very pleased to work with SMBC by sharing risk in some of Asia’s lowest income countries to support development through trade.

“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 is working to promote trade by developing, among other things, public -private partnerships that involve risk-sharing arrangements."
The programme will broaden SMBC’s risk mitigation capabilities and will enhance the profile of the underlying trade finance transactions as SMBC will be able to take advantage of ADB’s AAA credit rating.

“Asia’s trade flow remains buoyant and this risk participation agreement enables us to meet our clients’ trade financing requirements,” comments Toshihide Orita, general manager of the global trade finance department of SMBC.

The programme will be introduced in phases, phase one is in Pakistan and Sri Lanka. Phase two will expand to include banks in Cambodia, Laos, Mongolia, Philippines and Viet Nam.