Southeast Bank has become the first private sector bank in Bangladesh to sign an agreement with the Asian Development Bank (ADB) to operate its Trade Finance Facilitation Programme (TFFP).

Traders in around 10 developing countries in the Asia Pacific region could benefit from improved access to letters of credit (L/Cs) under the TFFP, which was launched by the ADB earlier this year. (DC World News, 14 January 2004).

TFFP facilities

Southeast Bank will be able to provide trade finance products to private sector importers and exporters through two ADB supported facilities, a partial credit guarantee and a revolving credit facility.

Under the partial credit guarantee, ADB will guarantee to confirming banks the payment of L/Cs and other documentary credits issued by accredited local banks in the Asian region.

Through the revolving credit facility ADB will offer short-terms loans to accredited local banks to help fund the hard currency borrowing requirements of their private sector exporter and importer clients.

Capacity building

The programme has been designed to develop and enhance the capability of local banks to provide trade finance products to private sector importers and exporters to facilitate international trade.

It aims to make it easier for local banks to deal with their international counterparts; reduce the need for local banks to provide cash collateral; lower the risk for importers and exporters by encouraging the use of trade finance instruments, and provide more cost-effective trade finance mechanisms.

TFFP roll out

Bangladesh is among the first countries, along with Sri Lanka and Vietnam, where the TFFP is being implemented.

Once the TFFP is fully implemented, more than 35 local banks in 16 countries are expected to participate.

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