Citi has entered into a memorandum of understanding (MoU) with IFC, a member of the World Bank Group, to work on the development of a US$1.25bn funding facility. Intended to stimulate the growth of trade in the emerging markets over a three-year timeframe, this funding is expected to support estimated trade flows of up to US$7.5bn (through the origination of US$1.25bn six times over during the three-year period).
As a starting point, Citi will provide 60% and IFC and other development agencies will purchase participations for the other 40% in the aggregate, for trade assets averaging a tenor of 180 days. This agreement will represent a key extension of the Global Trade Liquidity Programme (GTLP), which brings together governments, international development agencies and private sector banks to support trade finance to importers and exporters in the emerging markets.
Under this facility, Citi will use the funding to originate trade finance transactions from emerging market banks in Asia, Latin America, Central and Eastern Europe, the Middle East and Africa, allowing these banks to extend financing to local importers and exporters. This in turn will help stimulate country and regional commerce.
“Global trade is facing serious challenges in today’s financial environment, given the shortage of liquidity worldwide,” said Lars Thunell, IFC executive vice president and CEO. “This programme benefits small businesses in developing countries, which are a major source of jobs and have been hard hit by the global financial crisis. We appreciate Citi’s leadership and look forward to working with them on this key initiative.”
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