HSBC and the International Finance Corporation (IFC), a member of the World Bank Group, have announced a joint initiative to provide up to $1 billion in financing for trade transactions in emerging markets. This partnership aims to address the significant funding gap that hinders trade activities in these regions.
The agreement involves equal risk-sharing between HSBC and IFC on a portfolio of trade-related assets held by banks in 20 emerging market countries across Africa, Asia, Latin America, and the Middle East. This collaboration seeks to facilitate cross-border trade and strengthen exports in key industries. The initiative comes at a crucial time as global economies grapple with geopolitical uncertainties and trade barriers, potentially disrupting supply chains and impeding economic growth.
Riccardo Puliti, IFC’s Regional Vice President for Asia Pacific, highlighted the substantial and persistent trade finance gap in emerging markets, particularly within the Asia-Pacific region. This sentiment is echoed by findings from the Asian Development Bank, which estimates the global trade finance gap to be a staggering $2.5 trillion, with demand significantly exceeding supply in emerging markets.
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Addressing this gap is crucial for fostering economic growth and sustainability, not just in Asia but across interconnected global supply chains, according to Aditya Gahlaut, Co-Head of Global Trade Solutions, Asia Pacific, at HSBC. Facilitating access to trade finance is paramount for enabling businesses in these regions to participate effectively in international trade. This new facility operates under the umbrella of IFC’s Global Trade Liquidity Program, a long-standing initiative that has facilitated over $80 billion in global trade volume through nearly 30,000 transactions in the past two decades.
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The collaboration between HSBC and IFC represents a significant step towards alleviating the financial constraints faced by businesses in emerging markets. By providing much-needed liquidity and risk mitigation, this partnership aims to unlock trade potential, stimulate economic activity, and contribute to sustainable development in these dynamic regions. This $1 billion commitment underscores the importance of collaborative efforts in addressing global trade finance challenges and promoting inclusive economic growth.
