fbpx Trade Finance Program Financial Products | Asian Development Bank

Trade Finance Program Financial Products

The TFP works exclusively through banks. The reason for this is two-fold:

  • Banks are important intermediaries in trade and ADB does not want to displace them. It wants to support and broaden their ability to act as intermediaries, especially in the most challenging markets;
  • ADB does not have the staff and extensive branch network of banks, so from a practical perspective ADB works with financial intermediaries (banks), leveraging resources, and complementing respective areas of strength.

Credit guarantee

ADB issues a credit guarantee (CG) in favor of participating confirming bank covering up to 100% of issuing bank risk within 24 hours of request. More than 75% of Trade Finance Program's portfolio is generated through this product.

Sample transaction:
  • Guarantee to a bank in Germany covering 100% of a $600,000 payment risk on an Azerbaijan bank supporting import of fruit and vegetable drying equipment.

Risk participation

ADB enters into a risk participation agreement (RPA) with an accredited RPA bank allowing such to automatically bind the Trade Finance Program to 85% of issuing bank risk in support of trade transactions.

Sample transaction:
  • 50% risk protection on a $16 million export of telecom equipment from the People’s Republic of China to Bangladesh.

Revolving credit facility

ADB provides loans directly to issuing banks in Trade Finance Program countries of operation to support pre-shipment and post-shipment trade transactions.

Sample transaction:
  • $250,000 trade loan to a Sri Lanka bank to on-lend pre-export finance for the manufacture of garments for export to Europe and India

Risk distribution (cofinance)

ADB enters into a risk distribution agreement with insurers, export credit agencies, and other entities developing credit appetite in Trade Finance Program countries distributing and sharing issuing bank risk with them to leverage capital resources and credit limits.

Sample transaction:
  • Cofinance and share risk with distribution partners in all TFP countries.