With the issuance of a US$155,000 letter of credit by Tojiksodirotbank of Tajikistan to Fortis Bank, the EBRD’s Trade Facilitation Programme (TFP) has passed another milestone by financing its 6,000th transaction. The letter of credit will cover the import of juices and nectars made in Russia to Tajikistan.
Established in 1999, the TFP supports trade to, from and within the EBRD’s 29 countries of operations. TFP assists participating banks in building track records with their correspondent confirming banks, reducing cash collateral requirements and freeing up clients’ working capital by providing guarantees to the confirming banks for the payment of various trade finance instruments issued by local banks.
Since the start of the programme, in Tajikistan alone, TFP has guaranteed more than 400 letters of credit from four Tajik banks, supporting imports from 30 countries in Europe, Asia and North America.
One goal of the programme is support for intra-regional trade, not only by helping to create jobs but also by supporting the restoration of traditional trade links. In 2006, 234 such transactions were financed under TFP.
Transaction number 6,000 serves as a good example of how the initiative supports the transition and graduation process, says Rudolf Putz, TFP operation leader at the EBRD. Western confirming banks are also increasingly supporting trade among EBRD countries of operations.
The TFP is an important tool of the EBRD’s Early Transition Countries initiative which aims to stimulate market activity in the bank’s poorest countries of operations by financing smaller projects. Transactions benefiting small and medium-sized enterprises form the majority of TFP business: More than 50% of deals concluded since the start of the programme cover transactions below €100,000.
This year the programme is again on course for a new record in terms of completed transactions and business volume. In 2006, the best year so far, the business volume rose to €707mn from €549mn in 2005. The programme now includes more than 100 issuing banks in the region, with limits exceeding €1bn in total, and 639 confirming banks throughout the world.