48217 - IDA PSW GTFP LE

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Summary of Investment Information

Project Number

48217

Company Name

GLOBAL TRADE FINANCE PROGRAM

Date SPI Disclosed

Apr 13, 2023

Country

World Region

Region

Global

Projected Board Date

Apr 18, 2023

Environmental Category

FI-3 - No Impact

Status

Pending Signing

Last Updated Date

May 27, 2023

Department

Global Industry, Financial Markets

Industry

other

Previous Events

Approved : May 12, 2023

Sector

Other

Additional Project Attributes

Blended Finance

Project Description

IDA Private Sector Window’s Blended Finance Facility (“IDA PSW-BFF”) is expected to support IFC with a limit enhancement of up to US$400 million (“blended concessional finance co-investment”). Without the support provided by IDA PSW, IFC will not be able to support increase in trade volume, given the banks/countries exposure constraints, and/or high risk in booking trade finance in IDA/FCS countries. This support has become even more urgent in the context of rising commodity prices and declining insurance availability, which has resulted in increased unmet trade finance demand by clients.

The project will not benefit from a subsidy, as it will earn a fee that is comparable to the market. As is the case with all of IFC’s blended concessional finance co-investments, this project has been assessed against the Enhanced Blended Concessional Finance Principles for DFI Private Sector Operations adopted by IFC and more than 20 other DFIs in 2017. Further information on these Enhanced Principles, IFC’s blended finance approach and governance and details and historical information on estimated subsidy levels in IFC’s blended finance portfolio can be found at: www.ifc.org/blendedfinance. To support this increase in trade volumes at this most critical time, IFC is open to engaging with other partner banks.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	400.0
Loan	0.0
Equity

Development Impact

The project builds on GTFP's global platform, increasing access to trade finance to emerging markets. The project will provide increased access to trade finance to the Issuing Bank's customers, including both corporates and SMEs. On the market side, the project will improve overall market integration by (1) maintaining and expanding trade finance, financial linkages and trade across multiple markets through strengthening bilateral correspondent banking connections; (2) serving as an enabling platform to make new connections between local and international banks and their customers; (3) channeling new sources of capital to support EMDE trade flow through demonstration and replication of successful correspondent banking connections and being an example of a successful investment platform. In lower income/ IDA, fragile and conflict-affected countries, and smaller players in middle income countries, the project also builds, protects, and deepens trade finance networks by continually enabling individual trade transactions, which, over time, builds resilience of trade networks, trade, and income growth in these economies.

IFC’s additionality stems from its counter-cyclical role in its ability to continue its engagement with its extensive network of banking clients during crisis times, when other lending institutions or investors’ appetite is subdued, ensuring access to trade finance. This additionality is especially pronounced in the high-risk PSW countries, where the crisis impact is typically stronger than in higher income countries, due to pre-existing vulnerabilities and limited capacity of both governments and banks. Emerging market banks, particularly in PSW eligible countries, are in critical need of limit increases and liquidity to maintain their support to their trade finance clients amid increased risks. Availability of trade finance has decreased, as global banks and insurance companies have either reduced trade exposures or limited their risk exposure to EMDE counterparties, in the face of increasing risk perception following country defaults and downgrades. IFC in conjunction with PSW has a critical role to play in increasing the support to existing and new banks in IDA PSW markets. The project will enable trade financing of about $2 billion in IDA-PSW countries that would otherwise not happen. The Project is expected to help Issuing Banks strengthen their trade finance operations. In addition, issuing banks will benefit from IFC's technical expertise in redesigning its trade solutions and marketing materials.

E&S Category Rationale / Risks and Mitigation

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