The Inter-American Development Bank (IADB) and the OPEC Fund for International Development (OFID) have signed a co-lending agreement, building on the trade finance facilitation programme (TFFP) for Latin America and the Caribbean (LAC).

IADB and OFID will co-fund commercial banks in the region that are part of the TFFP to broaden the sources of trade finance available for LAC importing and exporting companies. The partnership will allow banks to borrow on commercial terms to meet the needs of under-served trade clients. OFID will be able to leverage on IADB’s knowledge of the region and the TFFP extensive financial intermediaries network. IADB will be able to catalyse further trade financing to Latin America and the Caribbean by raising the credit capacity and liquidity of banks in the region.

“This groundbreaking partnership furthers the efforts of IADB to reach out to strategic partners such as OFID in its quest to increase the amount of available financing for trade activity in LAC. Since trade is a fundamental economic driver for the region, this partnership between OFID and IADB will have far-reaching effects,” says Gema Sacristán, chief of financial markets division at IADB. She tells GTR that IADB and OFID will participate with up to the same amount of financing on each transaction, which will be reviewed on a case-by-case basis.

OFID director general Suleiman J. Al-Herbish comments on the agreement: “In a globalised world, we need to work together and build effective partnerships. OFID welcomes the emergence of new directions of trade and investments and of a new development co-operation landscape. A partner such as IADB with its vast range of market knowledge in LAC will enable OFID to step up its activities to reach more beneficiaries in the region.”

This is the third co-lending agreement that the IADB, through the TFFP, has signed with partner financial institutions. The first partnership was signed in 2010 with Standard Chartered to provide up to US$200mn in financing to LAC banks in support of import and export transactions. A second co-lending partnership was signed in 2011 with China’s Export Import Bank (China Eximbank), to enhance south-south trade between LAC and Asia.

The TFFP offers co-lending facilities, A/B loans and guarantees to cover letters of credit, bills of exchange, promissory notes, bid bonds, performance bonds, advance payment bonds and other instruments used in international trade finance transactions. In the 10 years of TFFP existence, more than 1,300 credit guarantees have been issued to cover LAC trade finance risk. 75 loans have been disbursed to fund LAC’s international trade, US$1.26bn disbursed directly by IADB and US$638.25mn mobilised through B lenders and the Standard Chartered co-lending partnership. In total, 6,067 individual trade transactions have been supported for US$5.70bn.