WASHINGTON, D.C., June 21, 2000 — The
International Finance Corporation and a major European bank, WestLB, will
establish a US$375 million global forfaiting facility to stimulate trade
in emerging markets.
Forfaiting, a trade finance product which introduces trade receivables
into the secondary market, can provide deeper liquidity and longer term
trade finance. WestLB will undertake forfaiting transactions that will
be guaranteed by pre-selected local eligible banks. IFC will back 40 percent
of West LB's exposure to each transaction. The facility will operate for
five years on a revolving basis, with IFC's guarantee on each individual
transaction limited to three years. IFC's partial guarantee will encourage
WestLB to take on more exposure than it otherwise would have.
Under the global agreement, four facilities have already been approved
and will be finalized in the coming months—the China Forfaiting Facility
for China; the Middle East North Africa Forfaiting Facility for Egypt,
Jordan, Lebanon, Morocco, and Tunisia; the South Asian Forfaiting Facility
for India, Bangladesh, and Sri Lanka; and the Thailand & Philippines
Forfaiting Facility for Thailand and the Philippines.
Javed Hamid, IFC Director for East Asia and the Pacific, said the agreement
was based on the success of the Korea Forfaiting Facility, which IFC and
WestLB established in early 1999 in the aftermath of the Asian crisis to
ease Korea's shortfall of trade finance. That Facility increased liquidity
in Korea's trade finance market and improved access for importers and exporters.
The same model will be used under this agreement to promote trade in new
regions, which will encourage growth in the most productive sectors of
local economies, he added.
Ulrich Zierke, Managing Director of International Trade and Commodity Finance
of WestLB, appreciated the recent successful cooperation with IFC in the
Korea Forfaiting Facility and looks forward to implementing this concept
on a global level. Margrith Lutschg, also of WestLB, added that this facility
will benefit the development of trade in participating countries and promote
the export sectors of those economies.
IFC has recently engaged in trade finance activities with other sponsors,
including the Korea Trade Enhancement Facility with Sumitomo Bank; the
Korea Trade Enhancement Facility with Bank of America; and the Pakistan
Trade Enhancement Facility with ABN AMRO Bank, which rely on other instruments
of trade finance, such as confirmation facilities for letters of credit
and bankers acceptances. Another facility, the Indonesian Trade Credit
Facility with Rabobank International, addresses the need for working capital
for the import, pre-shipment, and export cycles.
WestLB is the fourth largest bank in Germany, and one of the world's largest
forfaiting houses, with consolidated total assets of DM700 billion and
total capital of DM15 billion.
The mission of IFC, part of the World Bank Group, is to promote private
sector investment in developing countries, which will reduce poverty and
improve people's lives. IFC finances private sector investments in the
developing world, mobilizes capital in the international financial markets,
and provides technical assistance and advice to governments and businesses.