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Trade Finance Program
Edward FaberRelationship Manager
ADB Trade Finance Program
About the ADB
Founded 1966
AAA-rated multilateral
development bank
Products: loans, guarantees,
equity, policy advice, and
technical assistance
Vision: Asia and Pacific
region free of poverty
Trade Finance Program
What is the Trade Finance Program (TFP)?
ADB’s Trade Finance Program (TFP) provides
guarantees and loans to banks to support trade
Loans and guarantees within 24 hours
Works with over 200 banks
Bank risk only
Fills market gaps growth, jobs
Trade Finance Gap
ADB Trade Finance Study (2016)
$1.6 trillion global trade finance gap
$692 billion in developing Asia
56% of SME proposals for trade finance rejected
25% more Trade Finance 20% more staff
Why is trade finance important?
WTO estimates that 80% to 90% of trade relies on
some form of trade finance:
Inter-firm, trade credit
Insurance
FI guarantees & loans
Trade Finance Program – how it works
Main products:
Credit guarantee product
ADB issues a guarantee to cover risk of
non-payment by a bank
Revolving Credit Facility
ADB provides direct loan to local bank
Knowledge/Training
How does ADB provide the support?
TFP’s Credit Guarantee Product
ADB provides guarantees in 24-48 hours to confirming banks covering up
to 100% of non-payment risk.
Issuing
BankNational Bank of
Samoa
Exporter(China)
Importer(Samoa)
Confirming
BankChina Bank
Signs sales agreement
Requests opening of
a payment obligation (such as L/C) in favor of exporter
Assumes
importer risk
Issues payment obligation
(such as L/C)
Assumes political/commercial risk
Requests credit
guarantee issuance
under TFP limit. Request
can originate from either
issuing or confirming
bank
Issues guarantee
(for up to 100%) in favor of confirming
bank
Confirms/guarantees
issuing bank payment obligation (such as L/C)
Ships goods
ADB activity
Confirming/issuing bank activity
Borrowing Bank(National Bank of Samoa)
TFP’s Revolving Credit Facility
ADB provides import and export financing through local banks.
Exporter/Importer(Samoan company)
Requests for export or
import financing
Submits documentation
detailing proposed transaction(s)
ADB assumes bank risk, not
exporter/importer risk
On-lends to
exporter/importer*
*Endorsed limit renewed back to prior arrangements (amount, duration) once loan is repaid, hence ‘revolving’ nature.
ADB activity
Local bank activity
1
23
4
ADB TFP’s Transactions
Growth of Transactions Supported, 2004 - 2015
Results— High Development Impact
443
297 263
783
441
277
1,803
1,063
668
2,032
1,366
1,577
2,120
1,672
1,806
1,937
1,463 1,549
1,908
1,498 1,467
Trade transactions Intraregional trade SMEs supported
2009 2010 2011 2012 2013 2014 2015
80+ Developing Country Banks in 20 Countries
Azerbaijan
Afghanistan
Uzbekistan
Pakistan
Sri LankaBangladesh
Nepal
Mongolia
Cambodia
Indonesia
Viet NamArmenia
GeorgiaBhutan
Kazakhstan
Tajikistan
Kyrgyz Republic
Myanmar
Samoa
Vanuatu
140+ Confirming Banks in 98 countries
Russia
New Zealand
Papua-New Guinea
Australia
Philippines
Japan
Brunei
Taiwan
South Korea
North Korea
Indonesia
Malaysia
Vietnam
Cambodia
LaosMyanmar
Sri Lanka
Madagascar
India
Mongolia
China
Mozambique
South Africa
Malawi
Pakistan
Zimbabwe
Botswana
Kirgistan
Tadschikistan
Somalia
Afghanistan
Tanzania
Namibia
Sambia
Kenya
Dschibuti
Qatar
Yemen
Uganda
Ethiopia
Usbekistan
Angola
Turkmenistan
Eritrea
Iran
Zaire
Saudi-Arabia
Sudan
Iraq
Kazakhstan
Azerbaijan
Congo
Argentina
Jordan
Central Africa
Chile
Gabun
Israel
Syria
Lebanon
Georgia
Cameroon
Chad
Egypt
Cyprus
Nigeria
Turkey
Benin
Togo
Ghana
Libya
Greece
Niger
Bulgaria
Ivory Coast
Burkina Faso
Liberia
Ukraine
Serbia
Romania
Tunesia
Sierra Leone
Belarus
Mali
Guinea
Brazil
Hungaria
Algeria
Lithuania
Italy
Guinea-Bissau
Estonia
Latvia
SenegalGambia
Poland
Mauretania
Finnland
Bolivia
West Sahara
Germany
Marocco
Sweden
Denmark
Spain
France
Belgium
Netherlands
Portugal
Peru
Norway
French-Guayana
United Kingdom
Guyana
Ireland
Columbia
Ecuador
Venezuela
Trinidad
Panama
Puerto Rico
Costa Rica
Dominican RepublicHaiti
Nicaragua
Jamaica
Honduras
El Salvador
Iceland
Belize
Cuba
Mexico
USA
Greenland
Canada
NepalBhutan
Bangladesh
Thailand
Uruguay
Guatemala
Kuwait
Oman
United Arab Emirates
Lesotho
Swaziland
Burundi
Rwanda
Croatia Bosnia-Herzegovina
Austria
Switzerland
Luxemburg
Moldawia
Albania
Macedonia
Montenegro
Slovenia
Czech Republic
Slovakia
Armenia
Paraguay
Surinam
*Full list of partner banks at www.adb.org/tfp
TFP Geographic Overview
Top 5 Countries in 2015:
Pakistan
Viet Nam
Bangladesh
Uzbekistan
Sri Lanka
TFP focused on most challenging countries.
Assumes no PRC, Indian, Thai, or Malay risk.
Pricing: Guarantee (CG) & Credit (RCF)
Market-based, but competitive pricing
Pricing information obtained from market participants
Varies according to transaction details (e.g. tenor)
1
2
3
TFP’s expansion to the Pacific
Trade Finance in the Pacific :
Limited trade finance. Mostly cash-based.
Example: Samoa
TFP in the Pacific Disadvantages of cash-based transactions:
Collateral needed
High interest rate – local currency
Risk of fraud
Risk of seller not sending goods
Strain on cash flows
Advantages to Letters of credit:
Secure payment method
Deferred payment periods
Lower interest – foreign currency
More access to working capital
TFP in the Pacific
How can TFP help?
In-house assistance:
Letter of credit
Extended tenors
Operational assistance
Training
TFP loans and guarantees
Networking
Benefits of TFP
To Customers/Businesses:
Get access to more working capital expand
and grow
Safe payment mechanism & reduced risk of
fraud
Better interest rate
New markets/networks
RCF in AUD and NZD
☛ To Customers/ Businesses:
To Issuing Banks:
New relationships with correspondent banks
Increases credit lines and/or reduces cash
collateral requirements
Boosts non-interest (fee) income
Provides critical support in times of crisis
Provides feedback following each annual review
that helps set benchmarks for improvement
☛ To Issuing Banks:
Benefits of TFP
To International Banks:
Direct payment from ADB if the local bank
does not pay
AAA rating and rigorous due diligence gives
confidence
Builds correspondent banking relationships
and credit lines that might not otherwise exist
☛ To International Banks:
Benefits of TFP
TFP in the Pacific
Where is TFP now?
Stage 1 – Samoa, Vanuatu
Stage 2 – Fiji, Tonga, Timor Leste,
Cook Islands, PNG
Stage 3? – Marshall Islands, FSM
More training:
Feb 2017, Fiji
Market Recognition
☛ Watch: TFP Clients’ Testimonials
http://players.brightcove.net/791607097001/default_default/i
ndex.html?videoId=5124267911001
Visit our website: www.adb.org/tfp
Thank You
Trade Finance UnitADB Headquarters
6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
Email: [email protected]
Website: www.adb.org/tfp
☛ Contact Us
