Trade Finance: Lifeblood of Asia's Economic Spirit

Broadcasters Resource | 21 May 2014

Head of Trade Finance Steven Beck explains how ADB's trade finance program supports economic growth, job creation and ultimately poverty alleviation efforts in developing countries across Asia and the Pacific.

Transcript

On cam: Steve Beck

Trade Finance is the loans and guarantees that supports imports and exports. Essentially without trade finance, trade doesn’t happen. As a result, if there is a lack of trade finance in developing countries it impedes growth, job creation, and ultimately poverty alleviation. So it’s extremely important for ADB to operate in this space, to ensure that where closing gaps for trade finance so we can support job creation and the poverty alleviation that comes from it.

Q: How does ADB’s Trade Finance Program operate?

A: ADB’s Trade Finance Program provides guarantees and loans through partner banks—within  24 hours, so it is fast-moving—to support trade transactions. Last year alone, 2013, the Trade Finance Program supported over 2,000 transactions that value more than USD 2 billion. The program focuses more on the most challenging markets. It’s currently operating in 18 developing member countries and out of those 18 the most active markets are Bangladesh, Pakistan, Vietnam, and Sri Lanka. We’re also in the process of moving into Myanmar—it’s very exciting.

Q: How successful has ADB’s Trade Finance Program been?

A: Since 2009, the Trade Finance Program has grown exponentially. It supported over USD 16 billion in trade. Now of that USD 16 billion, a bit more than USD 9 billion is co-financed with banks and insurance companies. And as a result of that co-financing, we’ve been able to bring private sector partners into some of these more challenging markets, in some cases for the first time. So we think that’s a real success. Not only by supporting actual transactions but also in terms of bringing the private sector in some of these challenging markets for the first time that ultimately results in closing those trade finance gaps I referred to, which creates more growth in the jobs.

Q: How does the Trade Finance Program support potential co-financiers?

A: ADB’s Trade Finance Program has never had a default or a loss in all of the transaction we’ve done. And that in itself provides a great deal of comfort to our co-financing partners. In addition to that, our due diligence and monitoring processes of our risks are rigorous. They’re rigorous not just because we don’t want to lose any money or we want to do things that will make sense to partners that we know what they’re doing, but also because we want to be able to demonstrate that doing business in this challenging markets is possible and profitable and worthwhile doing. In disseminating that kind of information to our partners around the world, in the private sector, encourages them to move to these more challenging markets to support trade.

Q: Given its success, how can the program be expanded in conjunction with other MDBs?

A: We work closely with IFC, the Inter-American Development Bank on their trade finance initiatives as well. In number of instances we’ve done deals with IFC in Vietnam. We’ve been working with the Inter-American Development Bank to promote south-south trade. And importantly, we helped the African Development Bank create its Trade and Finance Program. We provided them with all of products, our manuals and provided a great deal of training to them. There’s a lot of coordination between the different multilateral development banks to ensure that we’re closing gaps, providing as much support for trade, including south-south trade, as we can, so we can create growth in jobs that’s so important to our developing member countries.