Trade Facilitation Program
Outline
The EBRD's Trade Facilitation Programme (TFP) aims to promote foreign trade to, from and within Central and Eastern Europe and the CIS (the EBRD countries of operations). Through the programme, the EBRD provides guarantees to international confirming banks, taking the political and commercial payment risk of international trade transactions undertaken by banks in the countries of operations (the issuing banks). The programme can guarantee any genuine trade transaction to, from and within the countries of operations. Over 88 issuing banks in 22 countries of EBRD’s operation participate in the programme with limits exceeding ˆ 700 million. In addition, more than 500 confirming banks throughout the world have joined the TFP, including 128 banks in 22 of EBRD countries of operations. The programme strengthens the ability of local banks to provide trade financing and gives entrepreneurs in Eastern Europe and the Commonwealth of Independent States the support they need to expand their import and export trade.
In 2004 the TFP had its best year so far with a business volume of ˆ 500 million. The total number of transactions increased from 939 in 2002 to 1,089 in 2004.
One goal of the TFP is support for intra-regional trade, helping not only job creation but also cooperation and understanding between countries. It supports the restoration of traditional trade links between the Bank’s countries of operations and, since the start of the programme in 1999, the number of intra-regional transactions has been growing constantly, with more 150 intra-regional transactions financed in 2004.
An example of an intra-regional transaction covered under the TFP in South-Eastern Europe is the import of paper from Croatia into Serbia, financed by a letter of credit issued by Eksimbank Serbia to Hypo-Alpe-Adria Bank Croatia. This transaction is a good example for the transition and graduation process promoted by the programme: While some Croatian banks used the TFP in the past for financing of imports into Croatia, they now do not need the programme any more as issuing banks and use it instead as confirming banks, financing exports from Croatia to other EBRD countries of operation.
Confirming banks shared in 2004 on average already 32% of the risk covered under the programme, as for example in case of export of industrial equipment from Slovenia to Russia in which a confirming bank required EBRD risk cover for only 50% of the transaction amount.
Small and Medium Enterprise (SME) development is a fundamental objective of the EBRD, as SMEs can become an engine of economic activity in emerging nations if developed on a broad basis. SME transactions form the majority of TFP business; more than 50% of all deals concluded since start of the programme in 1999 have covered transactions under ˆ 100,000. In November 2004 the programme signed its 3,000th transaction – financing the import of US$55,000 worth of plastic window parts from Turkey by a private Kyrgyz importer.
Transactions for food, food commodities, agricultural equipment and other agricultural goods account for more than 30 per cent of transactions under the programme. Examples are import of meat from Croatia into Montenegro, export of agricultural machinery from Russia to Kazakhstan, of tractors from Belarus to Moldova, of butter from Lithuania to Uzbekistan, of meat from Hungary and tomato paste from Uzbekistan to Moldova. It shows how the programme enables trade which otherwise would not, in all likelihood, occur.
Important Donors
Many Issuing Banks have only limited experience in trade finance. To address this issue and to increase awareness and technical ability of local banks in handling trade finance transactions, the EBRD initiated a number of documentary and structured trade finance trainings paid with donor funds provided by the Governments of Austria, France, Ireland and United Kingdom. The Training was provided by means of standardised courses of 3-5 days each, held in 13 countries and attended by more than 300 trade finance specialists from 65 banks in 15 countries.
In addition, a need has been identified for consulting services to be provided to banks with limited trade finance experience. Funding has been provided by the governments of the Netherlands for Russia and Ukraine, Switzerland for Central Asia, Canada for Georgia, Germany for Azerbaijan, Ireland for Armenia, Sweden for Serbia and Montenegro and Taipei China for the TFP.
The governments of Switzerland, Germany (KfW), the Netherlands, Norway and Austria financially support the Trade Facilitation Programme through risk-sharing funds. These funds support the programme's activities in south eastern Europe, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, Armenia and Moldova and enable the EBRD to provide longer tenors and take higher exposures in trade transactions.
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