The International Finance Corporation (IFC) has announced that its Global Trade Finance Programme (GTFP), which centres on providing guarantees for letters of credit (L/Cs), has notched up its 500th transaction.

The programme, which began operations in September 2005, is aimed at supporting trade with emerging markets worldwide and promoting flows of goods and services between developing countries. In the GTFP, the IFC provides guarantees covering bank risk related to underlying trade transactions for up to three years.

Achievements

According to an IFC statement, the 500 transactions it has booked so far have an average length of six months and a total volume of more than US$455 million.

About 80 per cent of the deals have supported the small and medium enterprise sector, which is a vital source of job creation and a strategic focus for the private sector arm of the World Bank Group.

Global reach

Some 37 per cent of deals were for transactions between emerging markets participants according to the IFC. It says that for China, the programme has supported 56 export transactions through North American and European confirming banks.

With the inclusion of China Construction Bank in the GTFP, the IFC expects to finance more Chinese exports (DC World News, 16 October 2006).

The programme has 36 issuing banks in locations as diverse as Argentina, Azerbaijan, Bangladesh, Kenya and Mongolia as well as 82 international confirming banks.

Transaction guarantees

The GTFP offers confirming banks partial or full guarantees to cover payment risk on banks in emerging markets.

These guarantees are transaction-specific and apply to transactions involving L/Cs, trade-related promissory notes and bills of exchange, bid and performance bonds, and advance payment guarantees or credits to suppliers.

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