IFC, DBS launch $500M facility for emerging market trade

Published on 1 April 2024
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IFC, DBS launch $500M facility for emerging market trade

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IFC and DBS have signed a $500 million facility under IFC’s Global Trade Liquidity Programme (GTLP).

The facility aims to promote capital and trade flows in emerging markets across Asia, Africa, the Middle East and Latin America, help bridge the record $2.5 trillion global trade finance gap and accelerate economic progress across these regions.

The facility includes IFC and DBS sharing the risk equally on a portfolio of trade-related assets of up to $500 million. This enhances DBS’ capacity to support more trade financing – such as letters of credit – with faster turnaround time to businesses trading with emerging markets counterparts, while better managing risk.

Emerging markets play an important role in achieving a low-carbon future. To accelerate the decarbonisation of trade flows across emerging markets, 20% of the facility will be allocated to climate-eligible trade transactions, such as the trading of renewable energy equipment, energy efficient equipment and climate-smart agriculture certified commodities.

The facility is part of IFC’s GTLP – a product designed to provide a countercyclical solution to the lack of trade financing in emerging markets by helping banks grow their credit limits, manage risk and support trade across developing markets which are often underserved. It is IFC’s first GTLP with a Southeast Asian bank and the first long-term investment project between IFC and DBS.

Sriram Muthurkrishnan, group head of global transaction services product management at DBS Bank said: “As our trade finance exposure to emerging markets continues to grow at pace, we constantly seek innovative ways to support our clients’ evolving requirements. These include a greater focus on strengthening supply chain resilience, diversifying business models, establishing new markets, and capitalising on the significant increase in emerging markets trading and infrastructure activities. This partnership with IFC enables us to support more clients with much-needed trade financing, catalyse opportunities for emerging markets businesses, and foster a more secure and sustainable global trade ecosystem."

Despite the critical role trade finance plays in economic progress, persistent trade finance gaps remain across emerging markets, exacerbated in recent years by heightened economic uncertainty. Small and medium-sized enterprises (SMEs) – which are direct beneficiaries of the financing – are particularly impacted, limiting their ability to participate in global commerce.

Nathalie Louat, director of trade and supply chain finance at IFC, said: “In today's interconnected world, the importance of supply chains cannot be overstated, as they are the foundation upon which successful businesses and thriving economies are built.”

Louat added: “We believe that IFC’s partnership with DBS will unlock opportunities for more businesses to reach new markets and expand their operations, fostering economic growth.”

In 2023, IFC signed a memorandum of understanding (MOU) with Enterprise Singapore (EnterpriseSG) to catalyse financing for Singapore enterprises in emerging markets. This is the first financing engagement facilitated under that MOU.

Geoffrey Yeo, assistant CEO of Enterprise Singapore said: “Enterprise Singapore is committed to supporting the growth of Singapore enterprises globally by providing new financing solutions, and IFC has been a key partner in this effort. Last year, we signed an MOU with IFC to catalyse financing for our enterprises in emerging markets. We are glad to see that this has culminated in this collaboration between DBS and IFC.”

Yeo added: “DBS has been an active financing partner in supporting Singapore enterprises’ overseas expansion. We hope to facilitate more of such collaborations in the future.”

Since inception, GTLP has – through global and regional banks – supported more than 400 financial institutions in 69 emerging market countries with over $53 billion in global trade volume.

Re-disseminated by The Asian Banker