Standard Chartered and IFC, a member of the World Bank Group, have entered into an agreement for a $1bn unfunded risk participation arrangement that will help increase the availability of trade finance in emerging markets.
Standard Chartered will originate a portfolio of up to $1bn in trade finance transactions from banks in emerging markets, with a special focus on the world’s poorest countries. These local banks will in turn extend trade financing to their importer and exporter clients.
IFC will guarantee a portion of a mezzanine tranche of this portfolio providing credit protection and capital relief on the portfolio over three and a half years. This new structure applies synthetic securitization techniques to financing in many of these countries for the first time.
Additionally, Standard Chartered and IFC will be signing an agreement for an innovative syndicated facility to help an agricultural commodity supply chain operator in East and Southern Africa expand its business that includes sourcing produce from small farmers in these regions.
Peter Sands, CEO of Standard Chartered, said: “This arrangement will help boost trade finance in Asia, Africa and the Middle East, which has been sharply curtailed by the global financial crisis, and will support domestic businesses, job creation and private sector development. Standard Chartered is delighted that the IFC agreed to participate in our proposal and we are proud to partner with them, and the World Bank, in supporting cross border trade.”
Lars Thunell, executive vice president and CEO of IFC, said: “This innovative structure will significantly increase the supply of trade finance in emerging markets, and in particular the world’s poorest countries where it is needed most and will have the greatest impact. We are expanding our trade finance solutions and Standard Chartered has been a valuable partner in our initiatives.”