Standard Chartered announced the signing of a memorandum of understanding for the Commonwealth Trade Finance Facility (CTFF) demonstrating a significant step forward with real intent to help those with limited access to international trade finance.
Signed by the Secretary-General for Commonwealth, Bank of Baroda and Standard Chartered on 6 October 2016 in Washington, the Commonwealth Trade Finance Facility aims to persuade major banks to join CTFF to promote international trade and help small Commonwealth states get access to global markets. Through CTFF, a guarantee fund will reimburse banks up to an agreed amount with major banks to help reduce their risk and associated cost of investing in and doing business with these small states. It is expected that small states will have access to up to US$ 100 million of incremental trade finance over a three-year period.
Secretary-General Patricia Scotland said: “Trade is the lifeblood of economies and never more so than for small countries. Yet they simply can’t access the international financial system. According to the WTO, 80 to 90 per cent of world trade relies on trade finance. One of our roles in the Commonwealth family is to champion these small states to make sure they can trade in global markets.”
Alex Manson, Global Head, Transaction Banking, Standard Chartered, said that the role of banks in society is to do good and the Facility is one example. He added: “It’s very important that such facilities are available to small nation states. As a bank we’re all about trade and commerce and facilitating that. In some ways it’s about business as usual but sometimes business as usual can be difficult. This is all about facilitating trade and giving it a boost, so it’s very exciting. We get to make an impact and that impact is a positive one.”
The Bank of Baroda is India’s third largest bank and the memo means that it will extend a US$40 million line of credit to small states. Its managing director and chief executive officer, P.S. Jayakumar, said the Facility ensured further investment in countries where the bank already had connections. He added: “The Bank of Baroda has been present in many of the African Commonwealth countries for many, many years. These are established franchises that we have got. This transaction helps us to support the smaller banks in a manner which serves these customers and markets better. It is a financially well-structured transaction. It is intended to provide these banks with access they don’t have and is commercially structured to be sustainable and will help trade in these countries.”
Trade finance is critically important for the 31 countries of the Commonwealth which are designated as “small states” based on their population size. Some of the reasons why these countries face problems when trying to break into international markets include: the absence of domestic export credit agencies, reluctance of financial institutions to lend money and volatile global economic conditions.
Secretary-General Scotland said: “This is an incredibly important opportunity for small states to come together and share expertise. We were talking a lot today about creating tool kits and best practice. So the Small States Finance Initiative will do all of that and I know this is a very important step forward for the whole Commonwealth to give real concrete help and assistance to small and vulnerable states.”
With support of the government of Malta, the Facility, which was conceived at the Commonwealth Heads of Government Meeting (CHOGM) in 2013, will be based in Malta.
For further information please contact:
Head of Corporate & Institutional Banking Communications
Standard Chartered Bank
+65 6596 9289