A non-payment guarantee scheme has launched for Singapore exporters.

Government agency, International Enterprise (IE) Singapore, is behind the scheme and will share the risk on credit guarantees provided against non-payment risks of overseas issuing banks with the Asian Development Bank (ADB), and insurance company Swiss Re.

The scheme will be limited to exports from Singapore to emerging markets because the risk of dealing with financial entities in emerging markets tends to be more difficult to assess than in developed markets and can be a real constraint to trade, IE Singapore outlines.

The scheme will also help to address Asia’s trade finance problems, adds Steven Beck, head of trade finance at the ADB: “Trade finance gaps in Asia, which were estimated to be as high as US$425bn in 2012, impede trade, growth and job creation. This partnership will enable us to work together to close these market gaps.”

The markets in the city state that this will impact include the commodities, agriculture, IT, construction and automotive sectors while trading will be with markets such as Bangladesh, Pakistan and Vietnam. The parties also intend to include Myanmar in the list of supported countries.

“Demand for trade finance by Singapore companies has increased as they enter emerging markets for growth opportunities. With this scheme, IE Singapore will help local companies become more globally competitive by boosting access to liquidity to help support new business ventures into less familiar, possibly riskier markets,” comments Terence Seow, Assistant CEO of IE Singapore.

The ADB already operates a trade finance programme that provides support for US$1.7bn of Singapore exports (2012 figures) and IE Singapore anticipates that its scheme will provide support for an additional US$1bn of exports. The new scheme will be operated through the ADB’s programme, through which Swiss Re provides US$250mn of insurance.

The ADB scheme has been in place for several years and, in that time, credit guarantees have risen in popularity in Singapore. In 2010, only 12% of Singapore exports (US$328.05mn) were backed by a credit guarantee but this rose to 55% (US$1.65bn) by 2012.

However, the guarantees were still not sufficient to meet market demands because of credit limits, a fact that encouraged the new scheme, IE Singapore states.