Global Trade Liquidity Program. An innovative and unique public-private partnership to revitalize global trade. Presentation by German Vegarra Senior Manager IFC Global Financial Markets, IFC. Historical drop in trade demanded global concerted effort. GLOBAL EXPORT % GROWTH Jan 08-Mar 09.
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Global Trade Liquidity Program An innovative and unique public-private partnership to revitalize global trade Presentation by German VegarraSenior Manager IFC Global Financial Markets, IFC
Historical drop in trade demanded global concerted effort GLOBAL EXPORT % GROWTH Jan 08-Mar 09 We, the leaders of the Group of Twenty, are committed to...Global Trade Liquidity Program which should provide up to $50 billion of trade liquidity support over the next three years, with significant cofinancing from the private sector London, April 2, 2009 DATA: International Financial Statistics & Datastream
The Response: The Global Trade Liquidity Program (GTLP) • Trade finance is critical for SMEs in the developing world to gain/sustain market access for their products, therefore, a core part of IFC’s Access to Finance strategy • Leveraging on IFC’s trade platform, IFC and a group of Governments, DFIs and global/ regional banks came together rapidly and launch the Global Trade Liquidity program in July 2009. • GTLP mobilizes liquidity and guarantee public sector and the private sector • GTLP partners with global, regional or local banks to channel liquidity to banks in the developing world in two ways: i) a 40% risk funded participation, and ii) short term loans • GTLP accommodates Partners’ regional or sectoral requirement • IFC acts as the Agent for the Program Participants
An Unparalleled Effort between Public and Private Sector Commitment of US$ 2.7 billion Funders Banks Best Deal of 2009 Awards
GTLP Reach (as of May 2010) • GTLP has supported trade worth of US$4.8 bn • With an average yield of 2.2% with zero losses • Around 3200 Trade Transactions • 84% of which are supporting SMEs • About 40% of the volume supporting Lower Income Countries
Program adapting to shifting market conditions From liquidity to guarantees and support for agricultural trade • GTLP – G • GTLP – G addresses the Strong demand for risk-mitigation support in the Lower Income Countries • GTLP - G is a portfolio-based, risk-sharing, unfunded program created in response to the increasing demand for unfunded regional solutions in Lower Income Countries. • IFC is looking to raise a pool of US$1 billion. IFC to contribute US$500 million • SIDA and OFID have already provided around US$175 million in Guarantees • GTLP – Agri • Food exports represent ½ of export earnings for about 40 developing countries and 1/3 for another 50 countries • Banks in agri-producing countries are in need of liquidity and risk-mitigation support • GTLP Agri complements the G-8 pledge to invest $18 billion in food security • GTLP Agri will make use of the existing GTLP platform to support agricultural trade and agri-businesses • IFC is looking to raise a pool of US$1 billion. IFC to contribute US$300 million in funding. OFID and Saudi Fund for Development seeding program
GTLP – G: Structure Model: GTLP-G Citibank (Africa) Participants issue US$50 million each as counter-guarantees • Facility size: US$500 million • Target Leverage: [50:50] • IFC fronts 100% of the guarantee of the US$250 million • IFC retains US$50 million for its own account • IFC receives counter guarantee from the other donors for their portion • IFC appraises the UB on behalf of the partners • IFC Role: Agent and Guarantor (fronts) • IFC as an agent, supervises the program and provides quarterly reports to partners • There is a great demand for guarantees in the Lower Income Countries Funder A Funder B IFC Fronts 100% ($250million) of Guarantee Citi extends USD500 million in trade guarantees ([50:50] 121 Banks in Africa
GTLP – Agri: StructureModel: GTLP-Agri BancoGalicia Funder A Funder B • Targeted Short Term loan 1-3 years • Uses the existing GTLP model to support farmers, SMEs and agricultural infrastructure and logistics to increase exports • Risk is on the Bank or the agri-producer • IFC as an agent, supervises the program and provides quarterly reports to partners GTLP Participants US$250 million loan 100% Trade Finance to Agri Traders Agro Exporters
Summary • An unparalleled effort between public and private sector • Strong developmental impact and also financially prudent • Trade is critical for development and continuous challenges require joint action.