J P Morgan Chase has said it has joined the International Finance Corporation's (IFC's) Global Trade Finance Programme (GTFP).

The programme offers confirming banks partial or full guarantees to cover payment risk on banks in emerging markets. These guarantees are transaction-specific and may apply to letters of credit (L/Cs) as well as several other trade financing instruments.

Expanding trade flows

According to the IFC, the GTFP allows traders in eligible emerging markets to expand their trade finance transactions within an extensive network of countries and banks.

J P Morgan Chase is one of the first banks to join the programme aimed at supporting trade with developing markets worldwide and promoting flows of goods and services between those markets.

Just operational

Head of marketing and sales for the GTFP, Bonnie Galat, told DC World News that the scheme is "just ready to go operational" and so far the IFC has approved credit lines under the GTFP for over 40 banks in roughly 20 countries.

The initial focus will be in Africa "where the need would be the greatest," she says. "The first issuing banks to sign on are Nigerian while banks from other regions, including South Asia and Latin America, are close to signing on" she added.

GTFP mechanism

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

The 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. In each case, the guarantees are in connection with the export or import of goods, commodities, or services from or to the country of the bank obligor.

Global network

The GTFP is modelled on and dovetails with the European Bank of Reconstruction and Development's Trade Facilitation Programme and similar schemes in the Americas and Asia.

The combination of these programmes could bring about a new trade finance network spread across emerging markets worldwide and based on documentary credits.

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