A Maltese bank is looking to do more trade finance business in Africa in response to what it sees as a declining market for letters of credit (L/Cs) in developed US and European markets.

First International Merchants Bank plc (FIMBank) is reportedly planning to expand the reach and penetration of its trade finance operations into Africa, where the bank wants to establish a comprehensive network of partnerships to serve clients in several import and export sectors.

Short-term opportunities

FIMBank president Claude L Roy told The Malta Business Weekly, that Africa does not yet have a very mature banking system, and that FIMBank's may be able to realise mainly short-term trade financing opportunities in the import and export of foodstuffs and consumer goods.

Africa apparently forms part of FIMBank's future plans to continuously develop working relationships with financially stable banks in developing countries. The bank - which

opened its Malta office in 1995 - is reported as saying its philosophy is to develop trade in regions or clusters thus creating inter-country trade.

Declining L/Cs

FIMBank's bread and butter is L/Cs, and according to the Maltese journal that talked with the FIMBank president, their use is gradually decreasing in mature markets such as Europe and North America.

"A typical example where letters of credit are no longer used is in EU countries. Businesses operating in EU countries trust each other and operate without L/Cs as financial information is available and they no longer have any currency risk problems since the introduction of the Euro," Roy is reported as saying.

Global niche

The FIMBank president is reported as saying that due to globalisation, multinational banks have reorganised their operations and become universal banks and that these banks do not focus on any specific type of banking but provide one-stop banking.

The newspaper report goes on to say that over the last two decades, countries in emerging markets have seen fewer foreign banks operating in their markets as many have merged or closed their operations - the remaining banks have become so big that in some cases their customer follow-up is too weak although their products are very strong.

"The niche for FIMBank was created by the big banks themselves," Roy is reported as saying.

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