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IFC, HSBC tie up $1 billion risk-sharing facility to help EM banks support trade
IFC and HSBC will equally share the risk on a portfolio of trade-related assets, valued at up to $1 billion, held by emerging-market banks in 20 countries across Africa, Asia, Latin America, and the Middle East
The International Finance Corporation (IFC) and The Hongkong and Shanghai Banking Corporation Ltd (HSBC) have tied up a $1 billion risk-sharing facility that will help banks in emerging markets increase their lending to support trade.
IFC and HSBC will equally share the risk on a portfolio of trade-related assets, valued at up to $1 billion, held by emerging-market banks in 20 countries across Africa, Asia, Latin America, and the Middle East.
The facility has been set up under IFC’s Global Trade Liquidity Program (GTLP), which was established to address the growing trade finance gap in emerging markets.
“Trade finance is the fuel that powers the global economic engine,” said Aditya Gahlaut, co-head of Global Trade Solutions, Asia-Pacific at HSBC.
“Our partnership with IFC will help ensure that trade finance gets to where it is needed, that funding is directed to a segment crucial to job creation and economic growth in many emerging markets. Reducing the trade finance gap and improving access to finance will be central to fostering growth and sustainability across Asia and the region’s supply chains,” Gahlaut said.
Global trade has increased in the past three decades, growing by an average of 5% a year. However, demand for trade finance far outstrips supply, especially in emerging markets, with the global trade finance gap last estimated at $2.5 trillion.
In response, IFC has been increasing its trade finance support through programs such as the GTLP and with key partners including HSBC.
“Trade finance drives growth and economic development in emerging markets,” said Mohamed Gouled, IFC’s vice-president of industries. “This facility is designed to improve the flow of trade and enable businesses to create jobs and improve livelihoods.”
“There is a substantial and ongoing trade-finance gap in emerging markets in the Asia-Pacific and globally that must be addressed by improving access to financing for importers and exporters,” said Riccardo Puliti, IFC’s regional vice-president for Asia-Pacific. “Our strategic collaboration with HSBC aims to support cross-border trade and bolster exports in critical industries, particularly in countries that need it most.”
GTLP has supported over $80 billion in global trade volume through nearly 30,000 transactions over the past 20 years. Through global and regional facilities, the program has supported more than 400 financial institutions in 74 emerging markets, including 30 International Development Association and nine fragile and conflict-affected countries since its inception.
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets.
It works in over 100 countries, using its capital, expertise, and influence to create markets and opportunities in developing countries.
In fiscal 2024, IFC committed a record $56 billion to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilizing private capital to create a world free of poverty on a livable planet.
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