JPMorgan Treasury Services has announced that it has joined the World Bank and its funding partners to launch a US$1bn funding facility as part of the Global Trade Liquidity Programme (GTLP), an initiative that brings together governments, development finance institutions, and commercial banks to support trade in emerging markets. The agreement is designed to stimulate trade growth by extending funded trade financing to JPMorgan’s client banks in emerging markets.
The new facility is expected to support estimated trade flows of up to US$6bn annually. Per the agreement, JPMorgan will provide 60% (US$600m), and GTLP programme partners including development finance institutions and governments will purchase participations for the other 40% (US$400m) in the aggregate, for trade assets averaging a tenor of 270 days.
The global financial crisis and its effects on banks around the world are anticipated to cause a market gap in trade finance of approximately US$100bn to US$300bn. With the increase in funding, JPMorgan says that its regional client banks are better positioned to provide trade financing to importers and exporters in their countries and help bolster country and regional commerce during today’s challenging economic conditions. The initiative is expected to have significant development impact by increasing funding for trade of consumer goods, intermediate goods, small machinery and commodities demanded by emerging market enterprises.
The GTLP mobilises funds from international finance and development institutions and governments, and leverage through global and regional banks to extend trade finance to importers and exporters in developing countries. Programme partners include IFC – a member of the World Bank Group, the African Development Bank, the UK Department for International Development and the CDC Group, the Department of Finance, Canada and the Ministry for Foreign Affairs, Netherlands, the OPEC Fund for International Development, and the Saudi Fund for Development. Launched in April 2009, the programme has raised US$2.5bn to date from donor governments and development finance institutions and US$3.6bn from commercial banks. The Japan Bank for International Cooperation agreed to provide US$1.5bn through a parallel arrangement with IFC and China has supported GTLP and other trade initiatives through a US$1.5bn private placement with IFC. The GTLP is expected to support up to US$50bn of trade in emerging markets over three years.
Last year, JPMorgan worked with World Bank’s International Finance Corporation (IFC) to launch a trade finance structure in Asia to help facilitate and boost trade activities in the region. The funded trade advance, a component of the IFC Global Trade Finance Programme, provides cost-effective pre-export and post-import financing to banks. It combines several trade transactions into a single trade facility and provides an innovative approach to raising funds. Habib Bank, Pakistan’s largest privately owned bank, was the first to benefit from this solution. It raised a US$55m trade advance to support its corporate clients’ international trade activities.
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