The European Bank of Reconstruction and Development (EBRD) has processed its 5,000th transaction under its apparently very successful L/C-based Trade Facilitation Programme (TFP).

An EBRD official says the milestone transaction provides a good example of how the TFP is helping countries in eastern and central Europe in their transition into market economies and introducing so-called western banks to new emerging market business.

Russia to Tajikistan

A EUR 35,200 L/C by Tojiksodirotbank of Tajikistan to Fortis Bank featured in the TFP's 5,000th transaction. The L/C will cover the import of refrigerators and washing machines made in Russia to Tajikistan.

The transaction is typical for the programme, since it benefits one of the small and medium-sized enterprises that form the majority of TFP business. More than 50 per cent of deals concluded since the start of the programme covered transactions of less than EUR 100,000.

Programme scope

Established in 1999, the TFP supports trade to, from and within the EBRD's 27 countries of operations.

It also assists participating banks to build track records with correspondent confirming banks, reduces cash collateral requirements and frees up clients' working capital by providing guarantees to the confirming banks for the payment of various trade finance instruments issued by local banks.

Good example

Transaction number 5,000 serves as a good example of how the initiative supports the transition and graduation process, according to TFP operation leader at the EBRD, Rudolf Putz.

Putz says that western confirming banks are increasingly supporting trade among the EBRD countries of operations. The refrigerators and washing machines are produced in a factory owned by Italy's INDESIT in Lipetsk, Russia, and imported by a small distributor of household appliances in Dushanbe, Tajikistan.

Worldwide replication

The TFP has spawned similar L/C-based initiatives in emerging markets across the world. The Inter-American Development Bank (IDB) operates its Trade Finance Facilitation Programme (TFFP) in central and south America (DC World News, 17 May 2006) while the Asian Development Bank's TFFP aims to boost liquidity and stability of the trade finance system in the Asia and Pacific region (DC World News, 14 January 2004).

In November 2004, the International Finance Corporation (IFC), approved its largely L/C based US$500 million Global Trade Finance Programme (DC World News, 24 November 2004), which covers worldwide trading rather than focusing on trade with or within a specific region.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.