The IFC and Citi have signed a three-year US$1bn risk-sharing facility to stimulate trade growth in emerging markets.

The facility is the first extension of an existing agreement, signed in 2008 between Citi and the International Finance Corporation (IFC), under the IFC’s global trade liquidity programme.

The extension will expand the availability of trade finance for the bank’s clients in emerging markets through a 50-50 risk-sharing structure. The IFC and its partners, including other development finance institutions, will contribute US$500mn, while Citi will provide the additional US$500mn.

Citi could not disclose the names of the other institutions involved in the programme when contacted by GTR.

Citi will use the funding to originate trade finance transactions in Africa, Asia, Central and Eastern Europe, Latin America, and the Middle East, enabling its clients to extend financing to local importers and exporters.

The funding is expected to support emerging market trade flows of up to US$6bn through 2015.

A spokesperson at Citi told GTR that the average tenor of the loans is approximately 150-days. “If we have full utilisation of US$1bn, and these trades get replenished twice a year – we expect a throughput of approximately US$6bn over three years.”

“We are seeing a need for financing of US dollar trade flows across all countries. The previous IFC GTLP programme was utilised more efficiently by emerging market financial institutions (FIs) and banks,” the spokesperson says.

“This new facility covers banks and FIs in Latin America, Asia and Africa. We are seeing some strong interest from banks who have signed up for IFC’s unfunded GTFP programme.”

However, Citi could not reveal the names of the participating banks for confidentiality reasons.

The IFC and Citi’s initial facility reached US$900mn at its peak and supported US$6bn of emerging market trade over three years. It also financed more than 2,000 funded trade investment instruments through 92 banks in 23 developing countries.

“Citi’s partnership with the IFC has been a tremendous success, helping to stimulate the recovery and growth of global trade in emerging markets,” says Naveed Sultan, global head of treasury and trade solutions business at Citi.

“We look forward to continuing our partnership with banks, corporations and the public sector across emerging markets to continue to stimulate global trade,” she adds.

Citi was the IFC’s first partner bank under its global trade liquidity programme to channel capital from banks and development finance institutions.