Citi and the Asian Development Bank (ADB) have signed a risk participation agreement aimed at boosting supply chain finance for SMEs across the Asia Pacific region.

Under the deal, Citi will extend early payment to suppliers of larger buyers through its supply chain finance (SCF) platform and will offer a group of discounted payables to ADB on a regular basis.

Suppliers’ invoices will be uploaded to Citi’s platform for discounting, approved by the anchor buyer and then discounted. At a later stage, Citi will offer “some of these invoices” to ADB, a Citi spokesperson says.

“Buyers and suppliers only need to interact with one entity [Citi] for the discounting of invoices and repayments at maturity,” they tell GTR, thereby ensuring a “high degree of operational efficiency”.

The percentage of each programme that is retained by Citi or sold to ADB is to be agreed between parties and will be dependent on considerations such as the bank’s appetite, or the size of an individual SCF programme.

ADB is providing funds through its trade and supply chain finance programme, which since its launch in 2009, has extended loans and guarantees to over 200 partner banks and backed US$57bn in trade.

The partnership will boost trade across the Asia Pacific region and enable companies of all sizes – including SMEs – to access an additional US$100mn in supply chain financing, the spokesperson says.

“This partnership harnesses Citi’s expansive network and origination capabilities alongside ADB’s extensive presence in the Asia Pacific region’s developing countries, amplifying the developmental impact of trade and supply chain finance,” says ADB vice-president for market solutions Bhargav Dasgupta.

According to the ADB, the so-called trade finance gap – the difference between supply and demand – is estimated to stand today at US$2.5tn, up from US$1.7tn in 2021. SMEs, particularly in emerging markets, are acutely affected.