Five Philippine banks have signed the country's first trade finance agreements with the Asian Development Bank (ADB) to provide more support to Philippine companies engaged in international trade.
The banks signing the agreements under ADB's trade finance facilitation programme (TFFP) are Allied Banking Corp, Development Bank of the Philippines, Metropolitan Bank and Trust Company, Philippine National Bank and Rizal Commercial Banking Corp.
"In the Philippines, small and medium-sized firms employ around 77% of all those working in the manufacturing sector. If those firms can access more trade finance, they will be able to expand and employ more workers. That would boost personal incomes and help to reduce the country's poverty levels," says Philip Erquiaga, director general of ADB's private sector operations department.
To address the dearth of trade finance, the US$1bn TFFP provides loans and guarantees through, and in conjunction with, international banks and ADB's developing member country banks to support trade transactions in developing nations. Last year, around 55% of the TFFP's portfolio supported international trade conducted by small and medium-sized enterprises.
In addition to providing the finance, the programme links banks and firms in developing economies with their counterparts in other developing and developed economies.
"In today's world, it's critical that companies and banks reach beyond their borders. Such regional and global integration and cooperation helps economies and the people within them to reach their full potential," comments Neeraj Jain, ADB's country director for the Philippines.
Banks from 61 economies – including 20 from Asia – are now participating in the programme, and ADB expects banks from Central Asia and Mongolia to join by April 2010. Signing on to the program means those banks will also be able to swiftly access trade finance if there is a credit crunch in the future, avoiding the difficulties that befell many during the global crisis in 2007-2008.
In 2009, the TFFP provided support for US$1.9bn in trade transactions, 300% more than in 2008. By attracting private sector financing and because the portfolio can roll over once a year, the programme could generate US$15bn in trade finance through 2013.
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