The importance of trade finance to economic growth presentation by Edward Faber at the SWIFT Business Forum Philppines.

1. The importance of trade finance
to economic growth

2. ADB Trade Finance Survey (4th Quarter, 2012)
assessed gaps and links to production and jobs
Key Findings
5% trade finance increase would equal
2% production increase
2% more jobs
Trade finance gaps
Unmet global trade finance demand: $1.6 trillion
of which $425 billion in developing Asia
Market Gaps in Trade Finance

3. 1. Low country ratings/ country risk
2. Weak banks in dev. countries
3. AML/ KYC requirements/ costs
4. Capital requirements/ Basel 3
5. Shocks/ Crises
Market Gaps in Trade Finance

4. What are TFP Objectives?
 Fill market gaps
ADB’s Trade Finance Program (TFP) provides
guarantees and loans through banks to support
trade.
 over 200 partner banks
 Issuing banks
 Confirming banks
 guarantees and loans in 24 hours
TFP and Its Objectives

5. Credit Guarantee Product
ADB provides guarantees in 24-48 hours to confirming banks covering up to 100% of non-
payment risk.
Issuing
Bank –
e.g. Bhutan
Exporter -
e.g. Sweden
Importer -
e.g. Bhutan
Confirming
Bank –
e.g. Sweden
 Signs sales agreement
 Requests opening of
a payment obligation
(such as L/C) in favor of
exporter
 Assumes
importer risk
 Issues payment obligation
(such as L/C)
 Assumes political/commercial risk
 Requests credit
guarantee issuance
under TFP limit. Request
can originate from either
issuing or confirming
bank
 Issues guarantee
(for up to 100%) in
favor of confirming
bank
 Confirms/guarantees
issuing bank payment
obligation (such as L/C)
 Ships goods
ADB activity
Confirming/issuing bank activity

6. High Development Impact
6
443
297 263
783
441
277
1,803
1,063
668
2,032
1,366
1,577
2,120
1,672
1,806
Trade transactions Intraregional trade SMEs supported
2009 2010 2011 2012 2013

7. 90 Dev. Country Banks in 18 Countries
Azerbaijan
Afghanistan
Uzbekistan
Pakistan
Sri Lanka
Bangladesh
Nepal
Mongolia
Cambodia
Indonesia
Philippines
Vietnam
Armenia
Georgia
Bhutan
Kazakhstan
Tajikistan
Kyrgyzstan

8. TFP Geographic Overview
 TFP focused on most challenging countries.
Assumes no PRC, Indian, Thai, or Malay risk.
 Top 5 Countries in 2013:
 Viet Nam
 Pakistan
 Bangladesh
 Sri Lanka
 Uzbekistan
 Philippines: small gap: TFP has exited
 Expand into Myanmar and Pacific Islands

9. Results
Growth of Transactions Supported
2004 - 2013
9

10. TFP Works to Make Itself Redundant
 ‘Crowding-in’ banks and insurance: TFP
attracted $2.3 billion co-financing in 2013
 Providing guarantees leads banks into
new markets: concrete examples
 Filling data gap. ICC-ADB Trade Finance
Register: proof to regulators and private
sector of low risk
TFP WEBSITE: www.adb.org/tfp