The US International Development Finance Corporation approved a $500 million trade-finance facility on 16 September. The board-backed structure will provide a counter-guarantee to the International Finance Corporation for its Global Trade Finance Program. DFC said the partnership would share risk on guarantees issued exclusively for US exports. Chief executive Ben Black told Reuters the facility could enable up to $20 billion of exports.
The transaction formed part of more than $8 billion of new investments approved by the DFC board. The agency said the trade-finance project would help foreign banks expand their capacity and facilitate purchases of US goods. It is intended to connect local companies and issuing banks with US exporters and confirming banks.
GUARANTEES TARGET UNDERSERVED BANKS
The facility will support small banks and financial institutions in Central and South America, Southeast Asia and Africa. Black said these lenders needed lending support to finance purchases of US goods. DFC said the facility would be especially helpful for small US businesses entering riskier new markets that could not afford the risk of a default on importer payments.
DFC identified agriculture, primary metals, computers, electrical products, light vehicles and industrial machinery among the sectors expected to benefit.
IFC PLATFORM PROVIDES EXISTING NETWORK
IFC’s Global Trade Finance Program provides guarantees through a network of issuing and confirming banks in emerging markets. Black said the programme had funded $141 billion of trade over 20 years with zero losses.
The approval establishes the facility but does not identify the first participating banks or the timing of initial guarantees. DFC said it would begin with institutions in countries that have previously imported US goods.
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