The European Bank for Reconstruction and Development (EBRD) is making US$500,000 a year available to the Ashgabat branch of the National Bank of Pakistan (NBP) in Turkmenistan to guarantee trading operations of private businesses.

The facility is made available under the EBRD's Trade Facilitation Programme (TFP) and will guarantee trade instruments issued by NBPT, including letters of credit (L/Cs), guarantees, promissory notes and bills of exchange for up to 180-day periods.

Trade links

The facility will help NBP participate in its efforts to support small Turkmen businesses in their endeavours to develop better trade links with the rest of the world.

The fund will also help EBRD achieve its aim in Turkmenistan to expand the small business sector, improve local access to trade finance and help the country develop trade links with the rest of the world.

Risk sharing

EBRD will not be taking 100 per cent of the risk in this facility, since the Central Asia Risk Sharing Special Fund (CARSSF) will guarantee up to half of any losses in a transaction, thus limiting the development bank's exposure.

The CARSSF supports facilities set up in the Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan and is made available through EBRD by donors including Germany and Switzerland that have contributed to the EUR 8.6 million fund.

The parent bank of the NBP in Turkmenistan, the National Bank of Pakistan Karachi, also guarantees its branch's performance under the facility.

Expanding networks

The National Bank of Pakistan has branches and subsidiaries in 17 countries, including Azerbaijan, Kazakhstan, the Kyrgyz Republic and Uzbekistan. Its Turkmen branch opened in 1996.

The amount of business written under the TFP is increasing on a year-on-year basis, and development banks across the world appear to be realising that this EBRD facility is one worth copying. (DC World News, 20 July 2005)

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