Project Rationale:

In the context of the continued volatility in international financial markets and other challenges to the international banking system, access to medium and longer term trade financing for emerging market borrowers has been significantly constrained. However considerable risk capacity for supporting such financing is available with the export credit agencies. Many potential borrowers, especially smaller and medium sized enterprises, in the smaller emerging markets are unable to access ECA supported finance as they are not familiar with the technical and commercial aspects of this type of financing and do not have strong relationships with the institutions involved in ECA supported financing. In this context, there is a need for platform that can provide advisory assistance to facilitate transactions between potential borrowers seeking medium to longer term finance with institutions involved in ECA supported finance.

Project Description: GEFL will be a specialized advisory intermediary and partnership that will serve as an advisory and syndication vehicle for medium- / long-term ECA-backed trade finance transactions. It will provide a means to leverage the origination and funding and risk acceptance capacity of OECD and emerging market banks with risk capacity of ECAs to create win-win solutions for all parties.

The business rationale for GEFL arises from the potential synergy that can be created by combining the comparative strengths of local banks in emerging markets and OECD banks in origination, structuring and financing ECA supported transactions. Regionally focused OECD banks in developed markets have strong domestic networks and close ties with their domestic exporter base. They are very familiar with the procedures and practices of their home ECAs. However they often lack adequate access to importer customers, and close relationships with local banks in a large number of emerging markets. They are less willing to take importer risks in emerging markets. Most domestic banks in emerging markets are not familiar with ECA procedures and are not eligible for ECA cover in several markets. Some ECAs have made efforts to directly engage with local banks but these have met with limited success for various reasons including a lack of familiarity with ECA procedures and lack of direct access to a large number of ECAs necessary to develop a viable ECA backed financing program.

It is proposed that the GEFL project will be implemented in two stages. In the Pilot Stage, GEFL will be established as a pilot program that will engage in the extensive education and marketing process with all stakeholders, develop origination and servicing agreements, and develop a more detailed business strategy (incl. a detailed business plan for the Final Stage). It would provide advice and technical assistance to emerging market banks that would be interested in participating in its programs. GEFL would undertake a few pilot advisory transactions on an advisory basis in this phase to validate the business model and earn adequate revenue (advisory income) to break even. If the Pilot Stage is successful, GEFL would transfer into and continue its activities in the Final Stage and further develop and expand its advisory activities to create a worldwide business.

GEFL will function as an open platform, and it is expected that the circle of shareholders will increase over time. The initial shareholders of , GEFL will be KfW-IPEX, Unicredit Group, Northstar Trade Finance Inc. (a Canadian SME trade finance company) and IFC. A team of experienced bankers would be hired to get GEFL started.