The IFC, the private sector arm of the World Bank Group, is the sponsor of the GTLP. The book value of IFC’s total shareholders’ funds is approximately USD 18 billion and its total portfolio of assets in emerging markets is USD 21 billion, of which approximately 12% is in Africa. In FY2008, the IFC originated USD 12 billion of new operations.
Although the IFC has traditionally been a long-term financier, since 2005 it has gained good experience in the trade finance sector with its flagship program called the Global Trade Finance Program (GTFP). The GTFP is a USD 3 billion guarantee program that extends and complements the capacity of banks to deliver trade financing in emerging markets. The GTFP offers international confirming banks partial or full guarantees covering payment risk on issuing banks in the emerging markets. Currently, the IFC covers the risk of 143 banks with approved trade lines located across 68 emerging market countries. Since the inception of the GTFP in September 2005, cumulative guarantee volume has reached USD 3.9 billion, of which the Africa region represents USD 1.6 billion (41% of global operations). Reflecting the strong demand for trade finance products, the GTFP commitments represent the single larges contributor to IFC’s overall Sub-Saharan African commitments. Furthermore, IFC has found that its trade finance products are strongly aligned to its development objectives. Since inception, 75% of GTFP’s transaction volume has been in support of SMEs; 53% in low-income countries; 34% supporting south–south trade, and 28% in support of agriculture.
Despite the past success of the GTFP, the IFC has observed that somewhat counter-intuitively, the global financial crisis has actually weakened demand for this unfunded trade finance product. Closer examination has revealed that liquidity constraints caused by the global crisis have squeezed out many financiers from the trade finance market. These financiers may have the appetite for the low-credit risks that are typical of the trade finance sector but they cannot access adequate liquidity at a reasonable cost. It is in this context that the IFC and other DFIs determined that a funded product such as the GTLP would be required to complement the GTFP as a temporary crisis response facility.
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