Role of IFIs in Enhancing Global Trade
16th Private Sector Meeting for OIC Member Countries
Sharjah, United Arab Emirates
March 19, 2014
Trade Finance at IFC
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.
1
15 January 2014
Our Products for Global Trade & Supply Chain Solutions
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
2
15 January 2014
Our Value Proposition
Our solutions provide essential working capital to emerging market firms,
propelling goods through the economic value chain.
MARKET NEEDS
Inputs, Harvest
OUR SOLUTIONS
Pre- and
Post-Harvest
Financing
Storage,
Transportation
Raw Materials,
Labor, Energy
Inventory and Working Capital and
Warehouse
Supply Chain
Receipts Financing
Financing
Export
Pre-Export
Financing
3
Global Trade Finance Program (GTFP)
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
Cumulative Program Statistics Since 2005
(as of December 31, 2013)
Total # / USD of Gtees
17,552 / $28.8B
No. of Issuing Banks
282 in 96 countries
No. of Confirming Banks
254 in 105 countries
(1,100+ with affiliates)
TOTAL CLAIMS
ZERO
FY13 GUARANTEES BY REGION
(year-to-date; most active countries listed)
Latin America &
the Caribbean
Middle East & North Africa
 Umbrella guarantee covers country and
commercial risk
 Same-day issuance
1. Lebanon
2. Pakistan
16%
Europe & Central Asia
1. Russia
2. Turkey
 Three-year maximum tenor
Sub-Saharan Africa
 L/C applicants must be majority private
sector
1. Brazil
2. Honduras
24%
16%
22%
23%
Asia & Pacific
1. Vietnam
2. Bangladesh
1. Nigeria
2. Ghana
4
Breakdown of GTFP Guarantees
USD Volume by Industry, FY13
Oil, Gas &
Chemicals, 27%
Other, 2%
Textiles & Leather, 2%
Agricultural
Products,
Fertilizer &
Foodstuff,
24%
Plastics & Rubber, 2%
Pulp & Paper, 2%
Telecoms & IT, 2%
Energy Efficiency, 5%
Automotive & Parts, 5%
Consumer
Goods, 10%
Iron, Steel &
Metals, 12%
Industrial Goods &
Machinery, 7%
6
Current Issuing Bank Coverage
281 issuing banks in 96 countries
Updates at ifc.org/GTFP
EUROPE & CENTRAL ASIA
19 countries
63 banks
MIDDLE EAST & N. AFRICA
12 countries
39 banks
LATIN AMERICA &
CARIBBEAN
20 countries
63 banks
ASIA & PACIFIC
14 countries
47 banks
SUB-SAHARAN AFRICA
31 countries
69 banks
6
Working Capital Systemic Solutions (WCSS)
Under our Working Capital Systemic Solutions, we issue shortterm loans to emerging market banks to inject USD liquidity in
markets where macro events have led to a USD liquidity squeeze.
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 exportoriented enterprises, in need of
trade finance and working capital
Program partners
Program partners co-finance
alongside IFC
IFC extends loan to one or more
local banks
Local bank #1
Local bank #2
Local banks extend USD
financing to their SME
clients to support their
working capital needs
Emerging
market SMEs
Emerging
market SMEs
7
Structured Trade Commodity Finance
Funding for commodity players and risk mitigation for partner banks
• 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
IMPORT
EXPORT
Producers
Exporter
Pre-export financing, inventorybased financing, receivablebased financing
Traders
Offtakers
Borrowing base financing:
lending against commodity or
off-take agreements
• 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
Partner
bank
Financing is secured by pledge of commodities as collateral, assignment of
receivables, insurance, cash collection account
8
Global Warehouse Finance Program (GWFP)
Risk mitigation for banks’ food/agriculture portfolio
• 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
Program partners
Bank
2. Warehouse
receipts issued by
warehouse
• Prequalified sub-borrowers
• Funded or unfunded: 50-50 risk
sharing
4. WHR facility
• Facility tenor: one year extendable
up to three years
• Average transaction tenor:
4-6 months
Program partners cofinance with funding or
counter-guarantees
3. IFC channels funding
or guarantees for up to
50% on portfolio of
warehouse receipts
Agricultural
producers
1. Grain/produce
stored in third-party
warehouse
Storage
company
9
Global Trade Supplier Finance (GTSF)
Funding and risk mitigation for banks’ supply chain finance clientele
• Provides banks with additional
credit capacity to support
clients’ suppliers from higherrisk countries
• Provides funded and unfunded
risk-sharing of up to 100% of a
client’s accounts receivable
Buyer
1. Buyer
uploads
invoices
(automated
process)
3. Financier accepts
early payment
requests
• IFC may also provide liquidity
and discount A/R itself
• A/R is discounted using marketbased pricing
• IFC accepts bank proposed
discount rate on risk-shared
receivables
SCF
platform
6. Buyer pays full invoice
amount on due date
(automated transfers
established)
2. Supplier views
invoices and requests
early payment of
approved
invoices
Emerging
market
suppliers
5. Financier pays discounted
invoice amount
Bank
4. IFC provides funding or
guarantee coverage
Mobilization
Program
partners
10
Leading Confirming Banks
For FY14 Q1
By USD VOLUME
By NUMBER OF GUARANTEES
1.
Deutsche Bank
1.
Deutsche Bank
2.
J.P.Morgan
2.
Citibank
3.
Citibank
3.
J.P.Morgan
4.
BNP Paribas
4.
Commerzbank
5.
Scotiabank
5.
BNP Paribas
6.
Banco Pichincha
6.
KBC
7.
Standard Chartered
7.
BTMU
8.
Zenith Bank
8.
SMBC
9.
Commerzbank
9.
Banco Pichincha
10.
BTMU
10.
ABN Amro
11
IFC Guarantees – Trade Instruments
• 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 postimport financing extended by a participating Confirming Bank
12
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
Typical Transaction: Import L/C
L/C in favor of exporter
Payment
Importer
Request
L/C issuance
Payment
Local
Bank
(Issuing)
Payment
International
Bank
(Confirming)
Documents
Documents
Confirm
L/C
Exporter
Documents
Goods
International
Finance
Corporation
IFC guarantee
14
Import Letter of Credit
Grains from Switzerland to Georgia
• L/C issued by Bank of Georgia
• Confirmed by Switzerlandbased bank
• Tenor: 6 months
• Value: USD 5 million
• IFC covers: 100%
Switzerland
Georgia
15
Typical Transaction: Pre-Export Financing
Goods
Pre-export funding
Pre-export funding
Exporter
Request
pre-export
advance
Local
Bank
SBLC/PN for
pre-export
funding
International
Bank
Importer
Request
IFC guarantee for
pre-export loan
International
Finance
Corporation
IFC guarantee
16
Pre-Export Financing
Sugar from Brazil to Japan
• Promissory note issued by
Brazilian bank
• Funded by U.S.-based bank
• Tenor: 6 months
• Value: USD 3.9 million
• IFC covers: 100%
Brazil
Japan
17
Typical Transaction: Post-Import Financing
Goods
Post-import funding
Post-import funding
Exporter
International
Bank
SBLC/PN for
post-import
funding
Local
Bank
Request
post-import
funding
Importer
Request
IFC guarantee for
post-import loan
IFC guarantee
International
Finance
Corporation
18
Post-Import Financing
Cotton from China to Vietnam
 L/C issued by Techcombank
 Funded by Singapore-based
bank
 Tenor: 6 months
 Value: USD 500K
 IFC covers: 100%
Vietnam
China
19