Asian Development Bank (ADB) and Citi have signed a risk-sharing pact that could provide over US$1.5bn through to 2013 to support trade in developing Asia.
Under the risk participation agreement, part of ADB's recently expanded trade finance facilitation programme (TFFP), the two banks will share the risk on trade finance advanced to exporters and importers in frontier markets in Asia. The agreement comes at a time when the global financial crisis has significantly slowed the supply of trade finance, in particular to emerging market countries.
"Ensuring continued trade flows is key to helping developing countries boost economic growth and alleviate poverty," says Philip Erquiaga, director general of ADB's private sector operations department. "The partnerships between international and local banks enabled by the programme can result in expanded trade finance lines and lead to knowledge exchange and technology transfer."
TFFP, which started operations in 2004, provides loans and guarantees through, and in conjunction with, international banks and developing member country banks to support trade. Transactions can range from short-term letters of credit to maturities of up to three years. Because the TFFP portfolio can roll over, and given that it attracts private sector participation, the programme could provide up to US$15bn in trade finance by the end of 2013.
"Global trade has been significantly impacted by the international financial crisis and in entering into this agreement, Citi has demonstrated its commitment to companies in Asia Pacific’s more developing markets, now and in the future," says Ravi Saxena, managing director, global head of trade services and Asia Pacific trade head, global transaction services, Citi. "We are honoured to partner with the ADB on this important pact and to expand our reach in this region."
"Citi has a long history of partnering with Asia Pacific’s most progressive public sector entities and this latest agreement with the ADB further supports our leadership role in this market segment," says Michael Paulus, managing director, Asia Pacific public sector head, Citi. "The combined strengths of Citi and the ADB will ensure the success of this project and create large benefits for importers and exporters in this region."
In the past few months, ADB has expanded its TFFP to support more trade in Pakistan and Vietnaam. The TFFP continues its rapid expansion in markets such as Bangladesh, Indonesia, Philippines, Sri Lanka and soon throughout Central Asia.
ADB is forging other partnerships in support of trade. ADB and the Inter-American Development Bank recently agreed to share access to their trade programmes, a move that should spur more trade between the two regions that have done very little business until now.
Reader Comments