The International Finance Corporation (IFC), subsidiary of World Bank has approved to increase FIMBank’s trade facility in its Global Trade Finance Program (GTFP) by an additional USD 10 Millions to USD 20 Millions.
The GTFP was launched in 2005 to support the development of trade with and between emerging economies. Under the US$500 million program, IFC offers full or partial guarantees to confirming banks participating in the GTFP, effectively taking on the payment risk of issuing banks in emerging countries. The GTFP guarantees are transaction specific, and apply to letters of credit, promissory notes, bills of exchange, bid and performance bonds, advance payment guarantees and suppliers’ credit for the importation of capital goods. FIMBank’s status as both a confirming bank and an issuing bank implies that it benefits from both sides of the programme. If so required, IFC is willing to issue its guarantees to other banks to cover the risk of FIMBank. Alternatively, FIMBank can also benefit from IFC’s guarantees when confirming letters of credits issued by banks in emerging countries.
Margrith Lütschg-Emmenegger, FIMBank’s President expressed her satisfaction with this development and stated “The IFC is placing a great deal of trust in FIMBank. This is a show of confidence in both the Bank and in Malta. This, together with the recent affirmation of FIMBank’s rating by Fitch, goes to prove the solid foundation of FIMBank and its activities which are impervious to the current events in the financial markets.”
Banks granted issuing bank status under the GTFP are vetted by the IFC. In order to benefit from the program a thorough due diligence process on the company involved is required. The GTFP supports the development of trade in emerging economies by making it easier for banks to work together. Through the program, the IFC reduces or eliminates the country risk associated with emerging economies and allows banks the opportunity to build up confidence in each other.
Armin Eckermann, Deputy to the President and Head of Global Banking said “The advantage of the guarantee is that it can also be used to generate additional funding between the member banks. In times where banks are reluctant to provide funding and finance, this is an excellent instrument that could be relied on to provide the certain level of confidence in the market.”
To access further information on GTFP, please refer to the following websites: http://www.ifc.org/ifcext/gfm.nsf/Content/TradeFinance