Following this announcement, the new facility is expected to bridge the record USD 2.5 trillion global trade financial gap, while a total of 20% of the facility will also target climate-eligible trade transactions.
IFC and DBS signed the USD 500 million facility under the IFC Global Trade Liquidity Programme (GTLP). The solution was developed in order to promote capital and trade flows in multiple emerging markets across several geographical areas around the world. This includes Asia, Africa, the Middle East, and Latin America, while the facility will also focus on accelerating economic progress across these regions as well.
Throughout this collaboration, the facility will include IFC and DBS sharing the risk equality on a portfolio of trade-related assets of up to USD 500 million. This is expected to optimise DBS’ capacity to improve more trade financing, such as Letters of Credit, with a faster and safer turnaround time for businesses trading with emerging markets counterparts, while also better managing risk and fraud.
As emerging markets play an important role in the process of achieving a low-carbon future, 20% of the new facility will be allocated to climate-eligible trade transactions, such as the trading of renewable energy equipment, climate-smart agriculture-certified commodities, as well as energy-efficient equipment. This is expected to accelerate the overall decarbonisation of trade flows across emerging markets as well.
Persistent trade finance gaps remain across emerging markets despite the critical role trade finance plays in the overall economic progress. Small and medium-sized enterprises (SMEs), while being the direct beneficiaries of the financing process, are currently particularly impacted, while having a limit to their ability to participate in global commerce.
With this in mind, the partnership between the IFC and DBS is expected to support more clients and customers with secure trade financing capabilities, catalyse opportunities for emerging market businesses, as well as foster a more safe and more sustainable global trade ecosystem.
The facility represents a part of IFC’s GTLP, a product that was developed to provide a countercyclical tool to the lack of trade financing in the markets by optimising the manner in which banks and financial institutions grow their credit limits, manage risk and fraud, as well as support trade across the development markets which are underserved and underbanked often. At the same time, this process represents IFC’s first GTLP with a Southeast Asian bank, as well as the first long-term investment project between IFC and DBS.
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