Two banks in Bangladesh have borrowed money from international development banks in order to provide trade finance locally.
In separate transactions, the Asian Development Bank (ADB) and International Finance Corporation (IFC) extended loans to commercial banks in the promising South Asian economy, for the purpose of on-lending to their local clients.
The ADB has provided US$5mn to City Bank as part of its trade finance programme (TFP). The finance will be used to support import and export financing, and marks the eighth time the financiers have collaborated to support trade in Bangladesh. The finance will also be guaranteed, under the terms of the ADB’s TFP.
“We are pleased to be growing the partnership with the City Bank and to support more trade, which is directly linked to job creation and economic growth. With ADB’s backing, the City Bank will be able to increase its financial support to local companies, including small and medium-sized businesses,” says Ed Faber, relationship manager for Bangladesh at the ADB.
Meanwhile, the IFC has credited Bank Asia, a Dhaka-based lender, to the tune of US$40mn. The finance will be used to fund working capital requirements and the foreign currency borrowing needs of local SMEs.
According to the IFC, “the project will increase access to finance for credit-constrained, export-oriented companies and SMEs to meet working capital requirements. It will also expand financial intermediation”.
Bangladesh is commonly cited as an Asian economy with huge potential. Its export base is dominated by its textiles industry, but with a population of 161 million, the growing consumer market is a target for companies and banks alike.
In an interview with Bangladeshi media recently, HSBC’s head of global trade and receivables finance, Stuart Tait, described Bangladesh as “an important market for trade finance within Asia Pacific and within the group”.
He added: “Corporate Bangladesh is very optimistic. The conversations were very open. People talked about their plans and optimism as well as the challenges they face.”
The latest trade data shows that in 2016, exports from Bangladesh hit record levels, of US$34.24bn, driven by stronger garment sales. The government is targeting external sales of US$37bn this year, with the bulk of that – once again – expected to come in the textiles sector.