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Role of IFIs in Enhancing Global Trade 16 th Private Sector Meeting for OIC Member Countries Sharjah, United Arab Emirates March 19, 2014.

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Presentation on theme: "Role of IFIs in Enhancing Global Trade 16 th Private Sector Meeting for OIC Member Countries Sharjah, United Arab Emirates March 19, 2014."— Presentation transcript:

1 Role of IFIs in Enhancing Global Trade 16 th Private Sector Meeting for OIC Member Countries Sharjah, United Arab Emirates March 19, 2014

2 The Global Trade Finance Program (GTFP) program provides confirming banks with partial or full guarantees covering payment risk on banks in the emerging markets. These guarantees are transaction specific and apply to: Letters of credit Pre-export financing Trade-related promissory notes and bills of exchange Bid and performance bonds Advance payment guarantees Supplier credits for the import of capital goods The Trade Advisory Program The Trade Advisory Program is an integral component of the GTFP, and is designed to help local banks build their capacity in the areas of trade finance and international trade operations. IFC provides local financial institutions with training and support in order to: Upgrade skills in structuring basic and complex trade finance transactions Improve trade finance risk mitigation techniques Upgrade the operational and technical skills of the trade finance backoffices Transfer current international best practices in trade finance to local markets. Trade Finance at IFC 15 January 2014 1

3 Transactional trade  Global Trade Finance Program (GTFP) Trade portfolio and systemic solutions  Global Trade Liquidity Program (GTLP)  Critical Commodities Finance Program (CCFP)  Working Capital Systemic Solutions (WCSS) Supply chain finance  Structured trade commodity finance  Global Warehouse Finance Program (GWFP)  Global Trade Supplier Finance (GTSF)  Distributor finance Our Products for Global Trade & Supply Chain Solutions 15 January 2014 2

4 Our Value Proposition 3 Our solutions provide essential working capital to emerging market firms, propelling goods through the economic value chain. OUR SOLUTIONSPre- and Post-Harvest Financing Inventory and Warehouse Receipts Financing Working Capital and Supply Chain Financing Pre-Export Financing MARKET NEEDSInputs, Harvest Storage, Transportation Raw Materials, Labor, EnergyExport

5 Launched in 2005, the $5 billion GTFP provides risk mitigation by guaranteeing trade-related payment obligations of more than 275 eligible financial institutions in emerging markets. PROGRAM FEATURES AAA-rated – Basel III benefits Coverage up to 100 percent Umbrella guarantee covers country and commercial risk Same-day issuance Three-year maximum tenor L/C applicants must be majority private sector Cumulative Program Statistics Since 2005 (as of December 31, 2013) Total # / USD of Gtees17,552 / $28.8B No. of Issuing Banks282 in 96 countries No. of Confirming Banks254 in 105 countries (1,100+ with affiliates) TOTAL CLAIMSZERO 4 FY13 GUARANTEES BY REGION (year-to-date; most active countries listed) Global Trade Finance Program (GTFP) Latin America & the Caribbean 1.Brazil 2.Honduras Sub-Saharan Africa 1.Nigeria 2.Ghana Asia & Pacific 1.Vietnam 2.Bangladesh Europe & Central Asia 1.Russia 2.Turkey Middle East & North Africa 1.Lebanon 2.Pakistan

6 Breakdown of GTFP Guarantees 6 USD Volume by Industry, FY13

7 281 issuing banks in 96 countries Updates at SUB-SAHARAN AFRICA 31 countries 69 banks LATIN AMERICA & CARIBBEAN 20 countries 63 banks MIDDLE EAST & N. AFRICA 12 countries 39 banks EUROPE & CENTRAL ASIA 19 countries 63 banks ASIA & PACIFIC 14 countries 47 banks Current Issuing Bank Coverage 6

8 Benefits to Bank: Foreign exchange: fills void left by international commercial banks in the FX market due to concerns over regulatory uncertainty and/or sovereign risk Risk mitigation: IFC’s AAA rating, effective in managing the effects of Basel II & III Ease of administration: deal only with IFC, as agent Structure: IFC provides funding as agent with co-financing from program partners One-year traditional “A” loan with potential to be renewed twice for total of three years Pricing: 6-month Libor + spread Focus Areas: Global: low-income countries where macro factors create USD constraints Sectors: SMEs, including export- oriented enterprises, in need of trade finance and working capital Program partners co-finance alongside IFC IFC extends loan to one or more local banks Local banks extend USD financing to their SME clients to support their working capital needs Emerging market SMEs Local bank #1 Program partners 7 Under our Working Capital Systemic Solutions, we issue short- term loans to emerging market banks to inject USD liquidity in markets where macro events have led to a USD liquidity squeeze. Local bank #2 Emerging market SMEs Working Capital Systemic Solutions (WCSS)

9 Supports large cross-border commodity trade using collateral management to support lending at all stages of the supply chain: exporter/producers, trading companies, importer/processors Emphasis on strategic commodities, such as energy, soft commodities, and agricultural inputs IFC risk-shares by lending in parallel with Bank on underlying assets or by providing credit guarantee Bank should have solid track record in managing the transaction flow and can act as the security agent Environment & social requirements to be met by facility 8 Funding for commodity players and risk mitigation for partner banks Producers Partner bank Financing is secured by pledge of commodities as collateral, assignment of receivables, insurance, cash collection account Exporter EXPORT IMPORT Pre-export financing, inventory- based financing, receivable- based financing Borrowing base financing: lending against commodity or off-take agreements TradersOfftakers Structured Trade Commodity Finance

10 1. Grain/produce stored in third-party warehouse 2. Warehouse receipts issued by warehouse 4. WHR facility Supports banks when lending to the agricultural sector against warehoused commodities Banks can support increased use of WR or CMA by trading companies or producers Prequalified sub-borrowers Funded or unfunded: 50-50 risk sharing Facility tenor: one year extendable up to three years Average transaction tenor: 4-6 months Program partners co- finance with funding or counter-guarantees 3. IFC channels funding or guarantees for up to 50% on portfolio of warehouse receipts Bank Program partners Agricultural producers Storage company 9 Risk mitigation for banks’ food/agriculture portfolio Global Warehouse Finance Program (GWFP)

11 Provides banks with additional credit capacity to support clients’ suppliers from higher- risk countries Provides funded and unfunded risk-sharing of up to 100% of a client’s accounts receivable IFC may also provide liquidity and discount A/R itself A/R is discounted using market- based pricing IFC accepts bank proposed discount rate on risk-shared receivables 5. Financier pays discounted invoice amount 2. Supplier views invoices and requests early payment of approved invoices Emerging market suppliers Buyer SCF platform 6. Buyer pays full invoice amount on due date (automated transfers established) 1. Buyer uploads invoices (automated process) Bank 4. IFC provides funding or guarantee coverage 3. Financier accepts early payment requests Mobilization Program partners 10 Funding and risk mitigation for banks’ supply chain finance clientele Global Trade Supplier Finance (GTSF)

12 By USD VOLUME 1. Deutsche Bank 2. J.P.Morgan 3. Citibank 4. BNP Paribas 5. Scotiabank 6. Banco Pichincha 7. Standard Chartered 8. Zenith Bank 9. Commerzbank 10. BTMU By NUMBER OF GUARANTEES 1. Deutsche Bank 2. Citibank 3. J.P.Morgan 4. Commerzbank 5. BNP Paribas 6. KBC 7. BTMU 8. SMBC 9. Banco Pichincha 10. ABN Amro 11 Leading Confirming Banks For FY14 Q1

13 12 Import Letters of Credit Standby Letters of Credit Guarantees IFC covers the obligation of the issuer of the performance bonds, bid bonds, payment/advance payment guarantees Bills of Exchange/ Promissory Notes for Trade IFC covers the obligation of the issuer for pre-export financing or post- import financing extended by a participating Confirming Bank IFC Guarantees – Trade Instruments

14 Global Trade & Supply Chain Solutions Best Trade Finance Program Best Development Finance Institution Critical Commodities Finance Program Global Trade Supplier Finance Program Structured Trade Commodity Finance

15 IFC guarantee Goods Exporter International Bank (Confirming) Payment Importer International Finance Corporation Confirm L/C Documents Request L/C issuance Payment Documents Payment Documents Local Bank (Issuing) L/C in favor of exporter Typical Transaction: Import L/C 14

16 Import Letter of Credit L/C issued by Bank of Georgia Confirmed by Switzerland- based bank Tenor: 6 months Value: USD 5 million IFC covers: 100% SwitzerlandGeorgia 15 Grains from Switzerland to Georgia

17 IFC guarantee Goods Importer International Bank Exporter Pre-export funding Local Bank Request pre-export advance SBLC/PN for pre-export funding Request IFC guarantee for pre-export loan International Finance Corporation Typical Transaction: Pre-Export Financing 16

18 Brazil Pre-Export Financing 17 Promissory note issued by Brazilian bank Funded by U.S.-based bank Tenor: 6 months Value: USD 3.9 million IFC covers: 100% Japan Sugar from Brazil to Japan

19 IFC guarantee Goods Importer Local Bank Exporter Post-import funding International Bank Request post-import funding SBLC/PN for post-import funding Request IFC guarantee for post-import loan International Finance Corporation Typical Transaction: Post-Import Financing 18

20  L/C issued by Techcombank  Funded by Singapore-based bank  Tenor: 6 months  Value: USD 500K  IFC covers: 100% China Vietnam Post-Import Financing 19 Cotton from China to Vietnam

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