Sumitomo Mitsui Banking Corporation (SMBC) and the International Finance Corporation (IFC) have invested US$1 billion in the IFC's Global Trade Liquidity Programme (GTLP) with the aim of improving the flow of letters of credit (L/Cs) issued by banks in emerging markets.

One of several IFC initiatives launched in 2009 in the wake of the financial crisis, the GTLP's main objective is to stimulate private sector trade finance across a wide array of developing and emerging economies by providing funding for trade finance transactions through regional banks.

Second tranche

The new investment is the second time SMBC and the IFC have combined. In 2016 the pair announced the establishment of a similar US$1 billion trade financing facility.

The new tranche of US$1 billion can be used to partner with local banks on trade deals, and the IFC calculates that the investment will leverage a total of US$7 billion in trade finance transactions that would not otherwise go ahead.

Typical transaction

In a typical GTLP transaction, an emerging market bank may issue an L/C where the underlying trade is being financed for an emerging market client.

The transaction is then confirmed, discounted or funded by a GTLP partner bank such as SMBC.


Partner banks benefit from risk-reduced exposure due to IFC guarantees and support in deals in regions where they may not venture without such backing.

The new investment by SMBC and IFC applies to more than 20 countries and will cover trades in most goods and commodities.

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