Development banks in Asia and the Middle East are making hundreds of millions of dollars available through new trade finance facilities to help mitigate the impact of Covid-19 on supply chains across member countries.

The Islamic Development Bank (IsDB), which is headquartered in Saudi Arabia and represents 57 countries in Asia, Africa and the Middle East, announced this week it has launched a “strategic preparedness and response facility” of US$730mn aimed at softening the health and socio-economic impact of the outbreak.

US$300mn has been pledged by the international Islamic Trade Finance Corporation (ITFC) to support trade finance. A further US$280m will be provided by the IsDB and the Islamic Solidarity Fund for Development to support sovereign projects and programs, with US$150mn in insurance coverage coming from the Islamic Corporation for the Insurance of Investment and Export Credit.

“The facility will support strengthening of the health systems, funding of national epidemic preparedness and response plans, community awareness and education, disease surveillance, data collection and analysis, sustained provision of essential social services, provision of social safety nets, and support private sector activity,” IsDB says.

The facility is available to public and private sector entities, and will take the form of grants, concessional resources, private sector lending and risk insurance coverage. It will also support investment in research and development, with a focus on innovative solutions for containing the pandemic.

Its trade financing support “shall be in the form of short-term rapid response initiatives, mainly aimed at enabling the member countries to purchase emergency Covid-19 preparedness-related medical equipment and supplies”. The package will make a total of approximately US$300mn available, and will also aim to support smaller businesses’ attempts to recover from the crisis.

The development bank adds that the support of ITFC “will enable revival of trade and sustenance of supply chains in strategically important sectors”.

Further ahead, IsDB says it is speaking with potential donors and development partners about the possibility of mobilising additional resources. It says the Asia Infrastructure Investment Bank and the OPEC Fund for International Development have expressed an interest in supporting its efforts, along with sovereign funds in Saudi Arabia and Kuwait.

Meanwhile, the Manila-based Asian Development Bank (ADB) announced last week it has made US$200mn available through its existing supply chain finance programme to companies involved in manufacturing and distributing goods needed to combat the virus.

“Companies manufacturing and distributing products, including medicines and personal protective equipment, are increasingly strained as production and distribution ramp up to address Covid-19,” it says.

The ADB has already estimated that the impact on global GDP could be anywhere between US$77bn and US$347bn, depending on how long travel bans and low demand remain in place around the world.

Steven Beck, the ADB’s head of trade and supply chain finance, says: “The support will target companies in the supply chain that are critical to fighting the virus. We’re looking to support companies that want to ramp up production and therefore need to engage suppliers.”

The ADB says funds will be made available to selected companies “within weeks”. It adds that because a single pool of supply chain finance typically supports activity over a period of several months, a US$200mn facility could in effect facilitate more than US$400mn in financing over the next year.

“Fifty-fifty risk sharing from partner commercial banks could boost support under the facility to $800 million over the same period,” it adds.

The commitment follows other efforts by the ADB to mitigate the outbreak’s impact. Initiatives unveiled in February included a US$2mn fund to help China enhance its detection and prevention of the virus and a US$18.6mn private sector loan to a pharmaceutical group based in outbreak epicentre Wuhan.

Globally, the International Finance Corporation has pledged billions towards helping countries cope with the spread of Covid-19, while the World Bank announced this month it would make available US$12bn to mitigate the health and economic impacts of the outbreak.