Importers in Jordan and Lebanon could benefit from a new two-year US$70 million trade facility supported by the International Finance Corporation (IFC) as part of its trade enhancement programme for emerging markets.

The facility is structured as a risk sharing arrangement between the IFC and Citigroup. The latter will undertake confirmations of letters of credit (L/Cs) and selected documentary trade transactions originated by at least four local participating banks.

Shared risks

The IFC will guarantee no more than 50 per cent of the total amount of the facility, thus limiting its exposure to US$35 million.

This would counter guarantee half of Citibank's total exposure under the facility, thus allowing the bank to maintain and expand its trade finance exposure to the participating banks.

Longer tenors

The facility should enable access to longer tenors, with an exposure of up to 365 days per transaction and would include L/C confirmations - including standby L/Cs - banker's acceptances and discounting notes.

The facility is designed to support what the IFC and Citigroup describe as continued demand for import trade finance for private sector businesses in the region.

Rollout

The agreement is also intended to allow Citibank to transfer some of its existing portfolio and leverage its exposure in the Middle East at a time when many foreign banks are reducing their exposure limits in the region.

The agreement, which follows a similar IFC and Citibank US$60 million facility in Egypt, is a model that the bank says it would be interested in rolling out across the 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.