Standard Chartered and UK development institution CDC have signed a US$100mn risk participation arrangement to increase the availability of trade finance in developing countries.
Specifically the agreement will offer importers and exporters in 19 South Asian and African countries greater opportunity to access finance for their trade in goods and services.
This is CDC’s first bilateral risk-sharing transaction.
“It’s a natural fit. Both Standard Chartered and CDC have Asian and African markets as key geographies,” Joshua Cohen, Standard Chartered’s managing director, transaction banking, global head of liability & RWA management, tells GTR.
The transaction is likely to generate an estimated US$1bn in trade volume over its three-year life. As part of the arrangement, the two institutions will bear the risk of local banks involved in supporting trade flows. In turn, the local banks will be able to offer trade finance to their clients.
According to Cohen, the programme will benefit over 150 banks in Algeria, Angola, Bangladesh, Bhutan, Botswana, Egypt, Ethiopia, Gabon, Ghana, Kenya, Malawi, Namibia, Nepal, Nigeria, Pakistan, Tanzania, Uganda, Zambia and Zimbabwe.
It is anticipated that the funds will be disbursed from mid-May.
Diana Noble, CDC’s chief executive, comments: “Growing businesses in Africa and South Asia continue to find it difficult to get the finance they need from local banks to help them reach international markets. Our arrangement with Standard Chartered will help boost trade finance which is fundamental to economic development.
“This is a new way for CDC to get its capital to work and with Standard Chartered we have a partner with an excellent network and understanding of our markets. By working together we can support exporters and importers in poorer countries.”