The Asian Development Bank (ADB) has signed trade finance agreements with two Kyrgyz banks.

Kyrgyz Investment & Credit Bank and RSK Bank have joined over 200 other banks in partnering with the ADB in the Asia Pacific region as part of its trade finance programme (TFP).

The arrangement will see the ADB guarantee payments issued to the two banks by regional and international banks, on a transaction-by-transaction basis. The aim is for international banks to support the flow of exports into Kyrgyzstan and for the two Kyrgyz banks to support local importers.

Victoria Tyo, investment specialist at the ADB, tells GTR that the link-up is designed to boost the economic profile of Kyrgyzstan. She says: “There is broad agreement about the importance of trade to keep the economy going, to create jobs and to bring countries out of poverty. For low-income countries in particular, developing links to international markets for exports, imports and capital plays an important role in economic expansion.

“Trade also provides access to modern technology, know-how and ideas, and is a strong source of competitive pressure for improving efficiency and productivity. We only need to look at the development patterns of countries like South Korea, China and Japan to see that trade plays a key role in the countries’ development. We are confident that the TFP will have a positive effect on economic growth and job creation in Kyrgyzstan.”

Tyo explains that the TFP is designed to introduce foreign banks into Kyrgyzstan, but that the aim is to scale back the incentives gradually. She says: “TFP introduces foreign banks into developing markets by initially providing 100% cover for transactions. However, as the commercial banks gain credit history, experience and confidence in the new markets, they establish their own limits and reduce the 100% cover.

“It means that the private sector may no longer need the ADB to support trade and provide funding in these countries. This is the true mark of sustainable development; being sustainable without requiring the endless participation of a multilateral. The fact that TFP has never had a default or loss and that it operates profitably serves as a good example for the private sector to invest more, even where country ratings may be low.”