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Role of IFIs in Enhancing Global Trade 16 th Private Sector Meeting for OIC Member Countries PowerPoint Presentation
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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. Trade Finance at IFC.

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Role of IFIs in Enhancing Global Trade 16 th Private Sector Meeting for OIC Member Countries


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slide1

Role of IFIs in Enhancing Global Trade

  • 16th Private Sector Meeting for OIC Member Countries
  • Sharjah, United Arab Emirates
  • March 19, 2014
slide2

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.

15 January 2014

slide3

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

15 January 2014

slide4

Our Value Proposition

Our solutions provide essential working capital to emerging market firms,

propelling goods through the economic value chain.

MARKET NEEDS

Inputs, Harvest

Storage, Transportation

Raw Materials, Labor, Energy

Export

OUR SOLUTIONS

Pre- and

Post-Harvest Financing

Inventory and Warehouse Receipts Financing

Working Capital and Supply Chain

Financing

Pre-Export

Financing

slide5

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
  • Umbrella guarantee covers country and commercial risk
  • Same-day issuance
  • Three-year maximum tenor
  • L/C applicants must be majority private sector

Latin America &

the Caribbean

Brazil

Honduras

Middle East & North Africa

Lebanon

Pakistan

FY13 GUARANTEES BY REGION

(year-to-date; most active countries listed)

Europe & Central Asia

Russia

Turkey

Asia & Pacific

Vietnam

Bangladesh

Sub-Saharan Africa

Nigeria

Ghana

slide6

Breakdown of GTFP Guarantees

  • USD Volume by Industry, FY13
281 issuing banks in 96 countries updates at ifc org gtfp
281 issuing banks in 96 countries Updates at ifc.org/GTFP

Current Issuing Bank Coverage

EUROPE & CENTRAL ASIA

19 countries

63 banks

MIDDLE EAST & N. AFRICA

12 countries

39 banks

ASIA & PACIFIC

14 countries

47 banks

LATIN AMERICA &

CARIBBEAN

20 countries

63 banks

SUB-SAHARAN AFRICA

31countries

69 banks

slide8

Working Capital Systemic Solutions (WCSS)

Program partnersco-finance alongside IFC

  • 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.

Program partners

IFCextends loan to one or more local banks

  • 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

Local banks extend USD financing to their SME clients to support their working capital needs

Local bank #2

Local bank #1

Emerging market SMEs

Emerging market SMEs

slide9

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
  • 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

IMPORT

EXPORT

Producers

Exporter

Traders

Offtakers

Pre-export financing, inventory-based financing, receivable-based financing

Borrowing base financing: lending against commodity or off-take agreements

Partner

bank

Financing is secured by pledge of commodities as collateral, assignment of receivables, insurance, cash collection account

slide10

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
  • 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

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

2. Warehouse receipts issued by warehouse

4. WHR facility

1. Grain/produce

stored in third-party

warehouse

Agricultural producers

Storage company

slide11

Global Trade Supplier Finance (GTSF)

2. Supplier views invoices and requests early payment of approved

invoices

1. Buyer uploads invoices

(automated process)

Funding and risk mitigation for banks’ supply chain finance clientele

  • 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

Buyer

SCF

platform

Emerging

market

suppliers

3. Financier accepts early payment requests

5. Financier pays discounted invoice amount

Bank

6. Buyer pays full invoice amount on due date (automated transfers established)

4. IFC provides funding or guarantee coverage

Program

partners

Mobilization

slide12

Leading Confirming Banks

  • For FY14 Q1

By NUMBER OF GUARANTEES

Deutsche Bank

Citibank

J.P.Morgan

Commerzbank

BNP Paribas

KBC

BTMU

SMBC

Banco Pichincha

ABN Amro

By USD VOLUME

Deutsche Bank

J.P.Morgan

Citibank

BNP Paribas

Scotiabank

Banco Pichincha

Standard Chartered

Zenith Bank

Commerzbank

BTMU

slide13

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 post-import financing extended by a participating Confirming Bank
slide14

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

slide15

Local

Bank

(Issuing)

Importer

Exporter

Typical Transaction: Import L/C

L/C in favor of exporter

Payment

Payment

Payment

International

Bank

(Confirming)

Request

L/C issuance

Confirm

L/C

Documents

Documents

Documents

Goods

International

Finance

Corporation

IFC guarantee

import letter of credit
Import Letter of Credit

Grains from Switzerland to Georgia

  • L/C issued by Bank of Georgia
  • Confirmed by Switzerland-based bank
  • Tenor: 6 months
  • Value: USD 5 million
  • IFC covers: 100%

Switzerland

Georgia

slide17

Local

Bank

Exporter

Importer

International

Finance

Corporation

  • Typical Transaction: Pre-Export Financing

Goods

Pre-export funding

Pre-export funding

International

Bank

Request

pre-export advance

SBLC/PN for

pre-export funding

Request

IFC guarantee for pre-export loan

IFC guarantee

slide18

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

slide19

International

Bank

Exporter

Importer

International

Finance

Corporation

  • Typical Transaction: Post-Import Financing

Goods

Post-import funding

Post-import funding

Local

Bank

SBLC/PN for

post-import funding

Request

post-import funding

Request

IFC guarantee for post-import loan

IFC guarantee

slide20

Post-Import Financing

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

Vietnam

China