The Asian Development Bank's (ADB's) Trade Finance Programme (TFP) has made its first foray into Pacific markets with the signing of guarantee and loan agreements with the National Bank of Samoa and Samoa Commercial Bank.

The agreements will see the TFP provide up to US$12 million annually to support letter of credit (L/C) transactions and other trade activity in the South Pacific island nation.

Pacific first

The agreements mark the first time that banks from Pacific countries have participated in the TFP and follow extensive due diligence and a training workshop for 18 banks in the region conducted in Fiji last December.

The TFP expansion into the Pacific is supported and co-funded by the Government of Australia's Department of Foreign Affairs and Trade.

Trading difficulties

Expanding trade in the Pacific is hampered by its geography and some of the highest trade costs in the world.

A 2015 Pacific exporters survey found that access to finance is consistently identified as one of the greatest barriers to business and that trade finance guarantee programmes are relatively limited.

Programme advantages

"Currently many Samoan importers pay for goods upfront, which can mean strained cash flows and a risk of not receiving goods," said Edward Faber, TFP relationship manager for the Pacific.

"Under the TFP, ADB will work with the local banks to increase the use of financial products such as L/Cs, which will enable importers to pay safely, while ADB will also look at ways to support exporters through products like loans for pre-export finance," Faber concluded.

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