The UK's development finance institution, CDC Group, has announced a US$30 million trade finance loan to City Bank in Bangladesh that aims to help facilitate trade finance through usance paid at sight (UPAS) letters of credit (L/Cs).

The loan facility aims to inject liquidity to support continued import and export activities and help bolster the country's economic growth.

Facilitative UPAS L/Cs

The loan from CDC will help facilitate trade finance through UPAS L/Cs which in turn, will enable corporates and small- and medium-sized enterprises (SMEs) to optimise working capital management according to additional managing director at City Bank, Sheikh Mohammad Maroof.

"City Bank will assist Bangladeshi businesses in meeting exporters' requirements of payment at sight and clients' needs for timely goods receipt while enhancing overall competitiveness in international commercial activities," he says.

Import and export support

CDC says its investment will enable City Bank to extend foreign currency trade credit to local banks as well as local importing and exporting businesses, and is expected to generate up to US$100 million of additional trade every year.

The loan aims to strengthen City Bank's ability to meet the needs of its over 17 million retail and SME clients, facilitating increased trade and supporting key sectors of Bangladesh's economy such as the ready-made garment, manufacturing and food processing and production industries.

Export orientation

Trade is an essential driver of Bangladesh's export-oriented market. With almost all trade imports denominated in US dollars, stable sources of short-term funding are essential to ensure that demand for financing trade can be met.

Local banks often face difficulty accessing short-term funding and in recent months, the coronavirus pandemic has further tightened access to foreign currency funding on appropriate terms.

CDC's loan facility aims to close the gap by providing a stable source of trade finance funding that will keep trade flowing across the country and support Bangladesh's economic development.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.