The Global Trade Finance Program (GTFP) extends and complements the capacity of banks to deliver trade financing by providing risk mitigation in new or challenging markets where trade lines may be constrained. Under GTFP, IFC has issued guarantees covering over 68,000 transactions to date for more than $66.5 billion.
GTFP offers confirming banks partial or full guarantees covering payment risk on banks in emerging markets for trade related transactions. These guarantees are transaction-specific and may be evidenced by a variety of underlying instruments such as: letters of credit, trade-related promissory notes, accepted drafts, bills of exchange, guarantees, bid and performance bonds and advance payment guarantees. The guarantees are available for all private sector trade transactions that meet IFC's eligibility criteria. A price incentive or longer tenors may be available for equipment and projects that have clearly defined climate change benefits as part of our Climate Smart Trade initiatives or that support sustainable global value chains with Sustainable Shipment LCs.
Through the GTFP bank network, local financial institutions can establish working partnerships with a vast number of major international banks in the Program that can broaden access to finance and reduce cash collateral requirements. This enables the continued flow of trade credit into the market at a time when imports may be critical and the country’s exports can generate much-needed foreign exchange.
Among the noteworthy transactions supported by GTFP are cancer-screening equipment for women in Gaza; antiretrovirals for HIV patients in the Democratic Republic of the Congo; energy-efficient machinery for Armenia’s first and only steel production facility; turbines and other equipment for a hydroelectric dam in Honduras; and the relocation of an entire power plant to Pakistan from Germany.
Program Structure
GTFP offers confirming banks partial or full guarantees to cover payment risk on banks in the emerging markets. These guarantees are transaction-specific and apply to:
- letters of credit
- trade-related promissory notes and bills of exchange
- bid and performance bonds
- advance payment guarantees
- supplier credits for the import of capital goods
In addition, IFC provides funding to banks for short-term pre-export financing.
GTFP combines global reach and maximum flexibility to assist trade finance deals by:
- delivering trade solutions through a global network of participating banks
- covering large and small transactions in challenging countries
- using master agreements, which facilitate 24-48 hour response time via SWIFT for individual transactions
- having in place a dedicated trade unit to serve business needs
- offering commercial pricing with no commitment fees
- supporting all valid private sector trade transactions meeting IFC criteria
- covering up to 100 percent of transaction value
- providing tenors of up to three years to support capital goods imports.
Trade Development through Trade Finance Training
Technical training for issuing banks represents an integral part of the Global Trade Finance Program. Technical assistance modules comprise basic and intermediate courses on trade finance. On a selective basis, IFC places experienced trade finance bankers with issuing banks to help them develop trade finance and other banking skills. In addition, IFC assists in arranging training at major international trade banks for trade officers of issuing banks.
Advantages for Banks
Issuing Banks
The Global Trade Finance Program supports issuing banks by:
- providing access to a global network of confirming banks
- facilitating transactions under limited trade lines
- promoting competitive financing and responsive services
- reducing cash collateral needs
- offering technical assistance
- offering an opportunity to build a relationship with IFC and with correspondent banks
Confirming Banks
For confirming banks, the Global Trade Finance Program:
- extends the geographical coverage for export finance
- provides risk coverage for challenging trade transactions
- offers competitive terms for export clients doing business in the emerging markets
- builds correspondent bank relationships with new institutions on a low-risk basis
Results
As of end of FY20, GTFP has covered over 68,000 trade transactions and supported over $66.5 billion in emerging market trade, without a single loss since inception in 2005. In FY20, GTFP has supported over $3 billion in trade in IDA countries.
How to Join the GTFP
Banks based in emerging markets should contact a GTFP representative in their region to determine whether they may qualify to participate as an Issuing Bank.
Potential Confirming Banks should contact the Global Banks Business Development Team to discuss their needs and the program eligibility criteria.
After completing a thorough due diligence and risk assessment, we may extend an invitation to sign our master documentation and formally welcome the bank into the GTFP.
For banks that have recently joined, our team is happy to provide additional guidance to help them get started originating, initiating and processing specific transactions through the Program.
Sustainable Shipment LCs
IFC has partnered with the Banking Environment Initiative (BEI) , a group of banks working with their clients to direct capital toward environmentally and socially sustainable economic development, to develop a new financing solution to expand the global trade of sustainably sourced commodities and encourage the growth of sustainable global supply chains. The BEI is convened by the University of Cambridge Institute for Sustainability Leadership (CISL), which provides the BEI's Secretariat.
As a first step in this effort, the Sustainable Shipment Letter of Credit (LC) was launched at the World Economic Forum. This LC designation allows for preferential treatment for trade in agricultural goods that meet internationally-recognized sustainability standards.
Similar to the successful and industry-recognized model of IFC Climate Smart Trade , IFC may provide a price incentive for commodities guaranteed under the Global Trade Finance Program (GTFP) and shipped with a Sustainable Shipment LC. Participating banks could therefore choose to share some or all of these economic benefits with their clients. To qualify, evidence of the appropriate sustainability stamp must included as part of the LC documents.
Eligible goods: Palm oil with an RSPO (Roundtable on Sustainable Palm Oil) certificate is the first commodity eligible for this program. More commodities are expected to be included at a later stage.
GTFP Climate Smart Trade
Banks play a central role in helping confront the challenge of climate change. As a development institution, IFC works with our bank partners to support the trade of goods and services that enable their corporate clients to adopt energy efficient technologies, cut carbon emissions, and ensure the sustainability of their operations and their supply chains.
Through the Climate Smart Trade initiative, IFC may provide a price incentive or longer tenors for equipment and projects guaranteed under the Global Trade Finance Program (GTFP) that have clearly defined climate change benefits. Banks may be asked to provide additional information to ensure that the goods qualify under international protocols.
Eligible goods include:
Renewable Energy (RE)
Parts and equipment for any renewable technology, including:
Biomass & biogas
- Biodigesters
- Biomass heating systems
- Biomass combustion boilers
- Cogeneration units
Ethanol*
Geothermal
- Heat pumps
- Compressors
- Heat exchangers
Hydro Power
- Turbines (Kaplan, Francis, Pelton, Turgo)
- Control systems
- Pipes for hydro power plant
- Power generators for hydro power plant
- Power transformers for hydro power plant
Solar PV, Solar Heat
- PV solar panels
- Solar cells (PV)
- Solar glass tubes
- Converters for PV plants
- Solar hot water heaters, tanks
- Support equipment
Wind Power
- Wind Turbines
- Blades
- Construction bases
- Control systems
- Transmission
- Poles
- Power transformers for wind power plant
In addition to the information required as per the GTFP agreement, we may ask for:
- Country of installation (if different from country of import)
- Installed equipment capacity
- Expected annual power output
For ethanol:
- Country of origin
- Country of end use
- Specification of end use
* Only ethanol exports from Brazil are eligible
Energy Efficient Goods (EE)
Parts and equipment for any energy efficient goods, including:
- Fluorescent tubes
- EE light bulbs, CFLs, LED lights
- EE windows and doors
- Household appliances (with US Energy Star label or EU Energy label of A and above)
- Hybrid vehicles, electric bicycles
- Heat exchangers
- Insulation materials (for boilers & pipes or for building envelope)
- LPG buses
- Steel for recycling (e.g. shredded steel scrap)
- Thermostats
In addition to the information required as per the GTFP agreement, we may ask for:
- Equipment type/model
- Expected energy savings
- Type of fuel/energy saved
Energy Efficient (EE) Replacement Goods
Parts and equipment eligible if they replace older models:
- Air conditioners
- Boilers
- Compressors
- Electric motors (high efficiency)
- Energy meters
- Generators (gas, electric, power)
- Heaters
- Machinery
- Manufacturing devices
- Production lines
- Steam/gas turbines (to be installed to existing boilers)
- Ventilation systems
*Confirmation that new equipment replaces the existing one
- Type/model of the new equipment
- Type/model of the equipment which is being replaced
- Average energy consumption of the original equipment (MWh/year)
- Expected energy savings from new equipment ( % or MWh/year)
- Type of fuel/energy which has been saved
Climate Smart Agricultue
- Certified crops (RTRS, Bonsucro, BCI, RSB, Global GAP)
*Documents confirming certification (e.g. pro forma invoice, etc)