ADB Trade Finance Program ready for 2016 trade challenges

Published on Thursday, 21 January 2016

Published by Steven Beck on Thursday, 21 January 2016

Good Brothers Machineries Company at the Mandalay Industrial Zone in Myanmar.
Good Brothers Machineries Company at the Mandalay Industrial Zone in Myanmar.

ADB's Trade Finance Program (TFP) team is honored to have won Global Finance magazine's award for Best Multilateral Institution in Trade Finance in 2016. The team works hard to provide excellent client service, issuing guarantees and loans to partner banks within 24 hours to support trade in developing Asia. The past year had been challenging from a trade finance point of view but to have all these efforts recognized by the market brings a great deal of satisfaction.

Besides the focus on timely support for partners’ trade finance transactions, the TFP team also works to fill in information gaps which contribute to trade finance gaps especially in developing economies.

There is a thirst for information about how to do business prudently in TFP’s 18 countries of operation, including markets such as Bangladesh, Myanmar, Pakistan, Uzbekistan and Viet Nam – and this is an area where the team makes sure it delivers. TFP does not assume risk in relatively developed markets like the People’s Republic of China and India. In addition, the team provides contact information, makes introductions and does whatever it can to facilitate partner banks entering or expanding to support trade in developing Asia.

Good riddance 2015! A dramatic slowdown in trade and plummeting commodity prices made for a tough year for trade finance operations. Contrary to large drops in transaction numbers seen in the market—reportedly in the 40% range—the number of transactions TFP completed in 2015 was stable at almost 2,000. However, the value of trade supported declined materially with commodity prices, which constitute an important part of TFP's portfolio.‎

The value of trade supported in 2015 amounted to $2.5 billion, lower than $3.8 billion in 2014. We predicted this drop and were actually able to surpass our targets slightly, proving that it's not always pleasant to be right. But at least there weren't any shocking surprises. The number of small and medium-size enterprises (SMEs) supported by TFP in 2015—an important metric given the importance of SMEs to Asia’s economies and job creation—was also stable at 1,450. ‎Drawing private sector partners into transactions is likewise important, and TFP mobilized over $1.4 billion in cofinancing in 2015.

Happy New Year? We're moving into 2016 with few signs that trade will pick up, as well as oil prices that continue to decline, now below $30. Come what may, ADB’s TFP team is enthusiastic about tackling the challenges 2016, the Year of the Monkey in the Chinese horoscope, will throw at us.

Three ingredients will help us fill more market gaps and therefore grow our business, despite the gloomy environment. First, we will introduce a new funded risk participation product to address the market's demand for funded 'true sale' risk distribution. Second, we will focus on doing a better job of filling market gaps for medium-term capital equipment transactions. Third, we have a new relationship manager, Nana Khurodze, to grow TFP's business in Central Asia and the Caucasus and bring it closer levels of activity we see in other regions.

TFP’s ultimate mandate is to fill markets gaps that lead to more growth, job creation, and poverty reduction. We do that through transactions, but our knowledge products have been and will continue to be important components to that effort, including our annual Trade Finance Gaps, Growth and Jobs study, in which we quantify trade finance gaps and their impact on growth and jobs. We’ll also continue to support the Trade Finance Register—an important initiative that generates default and loss statistics on trade finance transactions on an industry-wide basis—which TFP created and housed at the International Chamber of Commerce.

Many thanks to all our partners for their excellent collaboration and to Global Finance magazine for the recognition. Goodbye 2015, hello 2016. Bring it on!