Bank of Baroda, India’s third-largest bank, is to lend US$40mn to small members of the Commonwealth.

The finance will be guaranteed by the Commonwealth, the member organisation of former countries of the British Empire, and is part of an initiative to stimulate lending to the 31 smallest states in the grouping.

Standard Chartered is also set to lend money into the facility, although Nicolas Langlois, the bank’s global head of trade distribution, tells GTR that no final agreement has been reached around how much will be lent, or what the terms of the finance will be.

In the case of Bank of Baroda, the US$40mn will be disbursed through banks in member states.

“This transaction will help us to support the smaller banks in a manner which serves these customers and markets better. It is a financially well-structured transaction. It is intended to provide these banks with access they don’t have and is commercially structured to be sustainable and will help trade in these countries,” Chairman PS Jayakumar said at the signing ceremony in Malta.

The Commonwealth secretary general Patrician Scotland says that the CTFF will better connect Commonwealth countries to an international trade finance system they often sit on the outside of.

“Trade is the lifeblood of economies and never more so than for small countries. Yet they simply can’t access the international financial system. According to the WTO, 80 to 90% of world trade relies on trade finance. One of our roles in the Commonwealth family is to champion these small states to make sure they can trade in global markets,” she said.

Over three years, the CTFF is expected to make US$100mn of incremental trade finance available to the grouping known as the Commonwealth Small States.

Typically, these nations have populations below 1.5 million, although Botswana, Jamaica, Lesotho, Namibia and Papua New Guinea, are classified as small states as they share similar characteristics.

Initial equity funding has come from the governments of India, Sri Lanka and Mauritius.

The Commonwealth fund was launched in December 2015. GTR reported at the time that there was an initial target of US$20mn.

Commonwealth spokesperson Hannah Murphy said that the facility “could have a trade creation effect of 1:20 which implies that a facility backed by US$20mn is potentially able to generate additional trade of US$400mn annually”.

The 31 “small states” are: Antigua and Barbuda, the Bahamas, Barbados, Belize, Botswana, Brunei, Dominica, the Gambia, Grenada, Guyana, Jamaica, Kiribati, Lesotho, Mauritius, Maldives, Malta, Namibia, Papua New Guinea, Samoa, Seychelles, Solomon Islands, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Swaziland, Tonga, Trinidad and Tobago, Tuvalu and Vanuatu.