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IFCWhy Trade Finance matters for Trade

World Trade Organization Public Forum 2014

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Conciliation and

arbitration of investment

disputes

Guarantees of foreign direct investment’s

non-commercial

risks

Interest-free loans and grants to

governments of poorestcountries

Loans to middle-income

and credit-worthy low-

income country

governments

Solutions in

private sector

development

IBRD

International Bank for

Reconstruction and

Development

IDA

International Development Association

IFC

International Finance

Corporation

MIGA

Multilateral Investment and

Guarantee Agency

ICSID

International Centre for

Settlement of Investment

Disputes

IFC: a member of the World Bank Group

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IFC’s vision

People should have the opportunity to escape poverty and improve their lives

PAKISTAN

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IFC’s purpose

• To promote open and competitive markets in developing countries

• To help generate productive jobs and deliver essential services to the underserved

• To support companies and other private sector partners where there is a gap

• To catalyze and mobilize other sources of finance for private sector development

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IFC Investments by Industry, FY14COMMITMENTS FOR IFC’S ACCOUNT: $17.3 BILLION

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IFC Investments by Region, FY14COMMITMENTS FOR IFC’S ACCOUNT: $17.3 BILLION

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• 108 regional offices in 98countries worldwide, AAA credit rating

• 3,879 staff (59% are based outside Washington DC) of 140 nationalities

IFC’s Global Reach

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Wholly owned subsidiary of IFC

Private equity fund manager

Invests third-party capital alongside IFC

Firm-level advice

PPP transaction advice

In partnership w/World Bank, advice on broader market development and enabling environment for private sector

Loans

Equity

Trade Finance (TF)

Syndications

Securitized finance

Risk management

Blended finance

Integrated Solutions, Increased Impact

IFC ASSET MANAGEMENT

COMPANY

$6.4 bn under mgmt(FY14)

INVESTMENT

$51.7 bn portfolio (FY14)

ADVICE

720 projects valued at $1.1 bn (FY14)

What we do

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Our solutions provide essential working capital to emerging market firms,propelling goods through the economic value chain.

OUR SOLUTIONS Pre- and Post-Harvest

Import Financing, i.e. GTFP, Structured

Trade, GTLP

Inventory and Warehouse Receipts

Financing

Working Capital and Supply Chain

Financing

Pre-ExportFinancing, i.e. GTFP,

Structured Trade, GTLP

MARKET NEEDS Inputs, HarvestStorage,

TransportationRaw Materials, Labor, Energy Export

TF: Trade and Supply Chain Value Proposition

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IFC’s Global Trade Finance Program (GTFP)GTFP delivers risk mitigation for counterparty bank risk, in trade

transactions in over 90 emerging markets globally.

IFC issues its corporate guarantee for:

•The facilitation of confirmation of Letters of Credit and Guarantees (Bid Bonds, Performance Bonds)

•The facilitation of Import or Export Financing (Pre/Post)

-> Herewith IFC covers country and commercial risk of trade transactions, normally difficult to materialize

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IFC’s Global Trade Finance Program (GTFP)

Launched in 2005, the $5 billion GTFP provides risk mitigation by guaranteeing trade-related payment obligations of over 275 eligible financial institutions in emerging markets.

PROGRAM FEATURES

AAA-rated – Basel III benefits

Coverage up to 100 percent

Umbrella guarantee covers countryand commercial risk

Same-day issuance

Three-year maximum tenor

L/C applicants must be majority private sector

Cumulative Program Statistics Since 2005(as of June 2014)

Total # / USD of Gtees 19,300 / $32.4B

No. of Issuing Banks 277 in 97 countries

No. of Confirming Banks 269 in 101 countries(1,100 with affiliates)

TOTAL CLAIMS ZERO

FY14 GUARANTEES BY REGION (most active countries listed)

Latin America & the Caribbean1.Brazil2.Argentina

Sub-Saharan Africa1.Nigeria2.Ghana

Asia & Pacific1.Vietnam2.Bangladesh

Europe & Central Asia1.Turkey2.Russia

Middle East & North Africa1.Lebanon2.Pakistan

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IFC’s Global Trade Finance Program (GTFP)

L/C issued by Techcombank Funded by Singapore-based bank Tenor: 6 months Value: USD 500K IFC covers: 100% by issuing its

corporate guarantee to the confirming bank > confirmation would be difficult to materialize without GTFP coverage China

Vietnam

Cotton from China to Vietnam – confirmation Import Letter of Credit -

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IFC’s Global Trade Finance Program (GTFP)

Brazil

Promissory note issued by Brazilian bank

Funded by U.S.-based bank Tenor: 6 months Value: USD 3.9 million IFC covers: 100% by issuing its

corporate guarantee to the financing bank > operation would be difficult to materialize without GTFP coverage Japan

Sugar from Brazil to Japan – Export funding operation -

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IFC’s Global Trade Liquidity Program (GTLP)

GTLP: 50% funded or unfunded risk sharing on trade portfolio with FI’s

GTLP partners supporting this award-winning program

GTLP Trade Supported by Region

Volume of Trade Supported ~ $ 25.4 billion# of Trade Transactions ~ 15,150SMEs financed (Txns <1 million) 79%Trade supported in Lower Income Countries 35%Trade supported in IDA Countries 27%Portfolio defaults None

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Example – Oil import into Mauritania• Mauritania’s economy is largely dependent on imports of refined oil

products, which directly supply close to 80% of the electricityproduced in the country.

• The Government of Mauritania (GoM) needs to maintain a supply ofaffordable petroleum products and control inflation.

• The deleveraging process to reach Basel III capital requirementsresulted in large reductions in cross-border lending from WesternEuropean banks in Mauritania, especially with relation to USD-denominated lines.

The Project:

• Structure: US$400 million secured revolving facility to finance the import of oil into Mauritania;

• Tenor: Two years;

• Lead lenders: IFC (US$127.5 million) and a Western European bank acting as facility agent(US$127.5 million);

• Co-lenders: other commercial banks and DFIs;

• Borrower: Trading house, winner of the 2012-2014 import tender. The borrower will source oil toMauritanian oil marketing companies, a Mauritanian power company and a Mauritanian miningcompany.

Structured Trade in Mauritania (STF)

Impact:

1. Ensuring availability of energy products in the local economy, criticalfor consumption, power and other energy needs.

2. Maintain the availability of trade finance for trade businesses inMauritania.

3. SME Development.

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Structured Trade in Mauritania

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Structured Trade in Cote d’Ivoire (STF)

Example – Oil import and refining in Cote d’Ivoire• Cote d’Ivoire is a post conflict country, its economy is

gradually recovering from a civil war ended in 2011;

• The country is entirely dependent on fuel produced by onecompany, the only importer and refinery in the country.

• The company needed access to trade finance to ensure regularand adequate supply of crude oil to operate efficiently andsupply fuel to the country, at a time when it had lost access tocredit lines from international banks due to the political crisis.

The Project:

• Structure: US$100 million in an uncommitted fully secured revolving facility of US$300 million, tofinance crude oil imports to be refined in Cote d’Ivoire;

• Tenor: Two years;

• Lead lenders: IFC (US$100 million), a Western European bank acting as security agent (US$100million), and a syndicate of participant banks (US$100 million);

• Borrower: The only importer of crude oil and refinery in Cote d’Ivoire

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Impact:

1. Increased Access to Finance

2. Support to the borrower and downstream operators

Structured Trade in Cote d’Ivoire

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Example – Cotton in Mali• Agriculture is one of the pillars of the Malian economy and

cotton is the most important cash crop which makes the livingof up to 3 million livelihoods, representing 40 % of the ruralpopulation.

• Mali is a post conflict country, its economy is graduallyrecovering from 2 years of political turmoil.

• Mali’s largest cotton exporter needed access to internationallenders offering lower interest compared to local financing, inorder to pay the farmers in time (30 days from delivery) andcontribute to guarantee their income.

The Project:

• Structure: US$9.2 million participation in a committed fully secured pre-export facility, behind aWestern European bank;

• Tenor: One year;

• Lead arranger: A European bank and a Malian bank;

• Risk participants: IFC and Global Agriculture and Food Security Program (GAFSP), the latter with asubordinated risk participation of 50% of IFC’s total amount;

• Borrower: Mali’s largest cotton exporter. The borrower will collect, gin and export cotton producedby Malian farmers.

Warehouse Finance in Mali

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Impact:

1. Maintain/create jobs in the agricultural sector in Mali

2. Improve the livehoods and income of the farmers

Warehouse Finance in Mali

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Take Aways: Multilaterals Additionality

• Door opener: Opportunity for Issuing Banks in Emerging Markets to build working partnerships with a vast number of confirming banks via a global network.

• Filling the Gap: In light of the increasing regulatory constraints, on top of the higher capital standards resulting of Basel III, banks are withdrawing from the emerging markets for cost issues, particularly in fragile countries. IFC focuses on the markets where the private sector has withdrawn and is looking for other partners to co invest.

• Multilateral guarantees provide capital relief and risk sharing opportunities for Confirming/Funding Banks, which enhances their capacity to support trade finance transactions that would otherwise be challenging if not impossible to book.

Thank you!