Trade Finance Facilitation Program

Trade Finance Facilitation Program – Our Trade Finance Facilitation Program (TFFP) aims to help DMC banks provide trade finance products to private sector importers and exporters. This is a means to facilitate international trade to, from, and between DMCs. The TFFP develops the capabilities of local issuing banks through

• providing partial credit guarantees and revolving credits
• enhancing their ability to offer importers and exporters access to financial services in support of their business
• working in partnership with the private sector to provide capacity, liquidity and stability to the trade finance system.

The TFFP has two main components:

• A revolving guarantee facility, without sovereign counter-guarantee, under which ADB guarantees payment to participating regional and international confirming banks, covering commercial and political risks under a letter of credit or other trade finance instrument; and
• A revolving credit facility, without sovereign guarantee, under which ADB provides short-term loans to each issuing bank that receives guarantee support under the guarantee facility for on-lending to private sector exporters and importers for trade-related purposes.

The TFFP will assist not only local banks in Asian countries that have been slow to integrate with the global trading system, but can also help maintain, reestablish and enhance trade finance lines for local banks hurt by political or systemic crises.

A new product called the Risk Participation Agreement was launched under the TFFP in 2007 and will be implemented through 2008. This product is similar to the abovementioned revolving partial credit guarantee facility in that it shares risks with the private sector in support of trade. It differs from the partial credit guarantee facility in its structure, which is designed to facilitate the rapid expansion of the TFFP into new markets through a closer partnership with international banks. The Risk Participation Agreement will provide its partners with a new and efficient vehicle for trade portfolio management in less-developed markets.