45617 - GTFP MIGA

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Summary of Investment Information

Project Number

45617

Company Name

GLOBAL TRADE FINANCE PROGRAM

Date SPI Disclosed

May 5, 2021

Country

World Region

Region

Global

Projected Board Date

May 27, 2021

Environmental Category

FI-3 - No Impact

Status

Pending Signing

Last Updated Date

Jan 19, 2023

Department

Global Trade & Supply Chain

Industry

Financial Markets

Previous Events

Approved : May 27, 2021

Sector

Commercial Banking - Trade

Project Description

The MIGA IFC Trade Finance Guarantee Initiative (the Initiative) is expected to respond to COVID-19 by leveraging IFC’s existing trade solutions platform, to provide trade finance guarantees under IFC’s Global Trade Finance Program (GTFP) to state-owned banks (SOE Banks) to support trade flows of critical goods, equipment and supplies to emerging markets during the crisis. For IFC to implement the MIGA IFC Trade Finance Guarantee Initiative, IFC will temporarily increase the GTFP by up to US$500 million in outstanding balances. This outstanding balances of US$500 million is expected to allow US$1 billion of commitments counter-guaranteed up to 99 percent by MIGA.

By partnering with MIGA, IFC can address trade finance gaps by providing trade guarantees, particularly in IDA/FCS countries where SOE Banks represent a portion of the trade finance market. Through this partnership with MIGA, IFC will contribute further to the economic recovery in IDA/FCS countries and emerging markets developing economies (EMDEs) by promoting the revitalization of private sector value chains during the COVID-19 and the post-COVID-19 period.]

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	500.0
Loan
Equity

Development Impact

GTFP's guarantees on trade finance transactions provide risk mitigation to their cross-border correspondent banks, protecting the essential networks that enable EMDEs to be integrated with the global trade finance network, as well as to participate in global trade. GTFP improves overall market integration by (1) maintaining and expanding trade finance, financial linkages and trade across multiple markets through strengthening these bilateral correspondent banking connections; (2) helping to create new connections between local and international banks; (3) channeling new sources of capital to support trade flow through demonstration and replication of trade finance as a viable investment asset class in EMDEs. GTFP has a particularly strong presence in IDA/FCS markets, where it helps to protect and deepen cross-border trade finance networks, and thus trade corridors. Such support is especially critical in the maintenance of liquidity and essential goods during this crisis, as well as protecting the architecture that is necessary for crisis resilience and recovery.

This joint initiative fits well with IFC development mandate. The end beneficiaries of this program shall be private sector distributors and producers that are part of value chain and MIGA and IFC intend to mobilize such trade through eligible SOE Banks in IDA/FCS countries and EMDEs. During times of crisis, IFC's guarantees play a critical role in enabling correspondent banks maintaining lines with issuing banks in emerging markets, rather than withdrawing from those relationships, which helps trade finance markets and economies to recover and grow more quickly during and after the crisis. Supporting MIGA via SOE Banks will help IFC to reach the ultimate private sector beneficiaries of the trade value chains and to address the economic challenges resulting from the pandemic in select countries. IFC's additionality during crises often takes the form of our countercyclical role. In this instance, IFC's additionality rises from its extensive network of banks that support global emerging markets, which has enabled successful experience with rapid crisis response efforts, especially in the trade finance space. As the largest trade finance provider among all Multilateral Development Banks (MDBs), with the proposed program, IFC is partnering with MIGA, contributing its global network and its operational trade finance expertise through GTFP. IFC has a unique ability to engage with trade finance markets in EMDEs during difficult times, providing rapid support to ensure that critical goods, including food and medical equipment, arrive to their intended destination.

E&S Category Rationale / Risks and Mitigation

GTFP has been classified as a Category FI-3 project according to IFC Sustainability Policy. The investments under GTFP are considered to have low or limited Environmental and Social (E&S) risks and impacts. The applicable E&S requirements are the IFC Exclusion List and any other individual requirements or restrictions identified based on the activities of the client. GTFP will not support trade in coal for use as a fuel or trade in goods produced by companies known for significant E&S impacts. The eligibility of trades supported by GTFP will continue to be verified ex-post by IFC Trade Finance team.

Given the E&S risk nature of this project, development of a robust ESMS was not needed.

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