Citi and the World Bank Group’s IFC have signed a memorandum of understanding to work on the development of a US$1.25bn funding facility.
Intended to stimulate the growth of trade in the emerging markets over a three-year timeframe, this funding is expected to support estimated trade flows of up to US$7.5bn (through the origination of US$1.25bn six times over during the three-year period).
As a starting point, Citi will provide 60% or US$750mn, and IFC and other development agencies will purchase participations for the remaining 40%, or US$500mn in the aggregate, for trade assets averaging a tenor of 180 days.
This agreement will represent a key extension of the global trade liquidity programme (GTLP), an initiative led by the World Bank Group. This is IFC’s second partnership with a commercial bank since April. Standard Chartered was the first bank to work with the IFC on the funded scheme.
Under this facility, Citi will use the funding to originate trade finance transactions from emerging market banks in Asia, Latin America, Central and Eastern Europe, the Middle East and Africa, allowing these banks to extend financing to local importers and exporters. This in turn will help stimulate country and regional commerce.
"We are very pleased to be establishing this important partnership with IFC to stimulate the recovery and growth of global trade in the emerging markets," says Francesco Vanni d'Archirafi, CEO of Citi's global transaction services business. "Citi has been a trusted partner to banks, corporations and the public sector across the emerging markets for many decades, and through our collaboration with IFC as well as our other development and export credit agency partners around the globe, we are firmly committed to restoring the flow of trade and commerce financing around the world."
"Global trade is facing serious challenges in today's financial environment, given the shortage of liquidity worldwide," says Lars Thunell, IFC executive vice-president and CEO. "This programme benefits small businesses in developing countries, which are a major source of jobs and have been hard hit by the global financial crisis. We appreciate Citi's leadership and look forward to working with them on this key initiative."
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