ADB's Trade Finance Program

Video | 2 September 2019

How does ADB's Trade Finance Program work and what role does it play in boosting economic growth in Asia and the Pacific?

ADB is working hard to close the gaps in trade financing, through its Trade Finance Program, or TFP, which provides guarantees and loans to banks to support trade.

Since 2009, the TFP has supported over 21,000 transactions valued at more than $36 billion. More than 15,000 of the 21,000 transactions have supported small and medium-sized businesses, which are employment engines in emerging economies. The TFP currently operates in 21 countries, with the most active markets in Armenia, Bangladesh, Pakistan, Sri Lanka, and Viet Nam.

Closing market gaps to maximize the potential of trade to create growth, jobs, and reduce poverty is what ADB’s Trade Finance Program is all about.

Transcript

Trade is critical to achieving the Sustainable Development Goals, particularly as they concern economic growth, job creation, and ultimately, poverty reduction. But without sufficient financial backing, the full potential of trade to deliver the Sustainable Development Goals will not be realized. 

The ADB’s Trade Finance Gaps, Growth, and Jobs study identifies significant market gaps, the lack of financial support for trade.  Financing trade, or trade finance, consists of loans and guarantees that enable buyers and sellers to do business. 

So, without trade finance, there is very little trade.

There are three main reasons for the trade finance gap: First, low country credit ratings; second, perceptions of risk in underdeveloped banking sectors; and third, challenges associated with due diligence on small and medium-sized companies.

ADB is working hard to close the gaps in trade financing, through its Trade Finance Program, or TFP, which provides guarantees and loans to banks to support trade. With a team of dedicated specialists and a response time of 24 hours, the TFP has established itself as a key player in the international trade community, providing fast and reliable trade finance support to fill market gaps.

Since 2009, the TFP has supported over 21,000 transactions valued at more than $36 billion. More than 15,000 of the 21,000 transactions have supported small and medium-sized businesses, which are employment engines in emerging economies.

The TFP currently operates in 21 countries, with the most active markets in Armenia, Bangladesh, Pakistan, Sri Lanka, and Viet Nam. The TFP also operates where others fear to tread – often in some of Asia Pacific’s most challenging economies, such as Myanmar, Cambodia, Tajikistan, and the Pacific Islands. TFP has never had a default or loss on any of its transactions.

In addition to closing market gaps by providing guarantees and loans to support trade transactions, the TFP also stimulates access to trade finance by creating and sharing information with the private sector.

The TFP created the Trade Finance Register, which for the first time published trade finance default and loss rates on a global industry basis. It is now housed at the International Chamber of Commerce, which publishes these reports annually. This helps bank regulators and financial institutions understand and calibrate risk for trade finance. Initiatives like the Trade Finance Register help reassure financial institutions that trade finance is low risk - hoping to attract billions of dollars of new money to close trade finance gaps.

Some private-sector partners have entered Asia’s more challenging markets for the first time, thanks to the TFP.  The TFP has mobilized over $21 billion in co-financing from its private sector partners since 2009.

Closing market gaps to maximize the potential of trade to create growth, jobs, and reduce poverty is what ADB’s Trade Finance Program is all about.