Aid for Trade by International organizations

Presented by
A.RAJASEKHAR 1226211201(IBF)

Topics discussed
ERBD extends Trade finance aid to VTB Kazakhstan The Financial crisis and Trade Finance EUs Aid for Trade in developing countries Trade Finance in Latin America and the Caribbean

Euro zone debt crisis poses serious threat to emerging markets

ADB offers Trade Finance in Chinese Yuan and Indian Rupee

ERBD extends Trade finance aid to VTB Kazakhstan

EBRD plans to offer $20 million trade finance guarantee facility to

VTB Kazakhstan.
To enhance trade finance services and facilitate transactions with

longer maturities of Kazakhstans exporters and importers.

With this VTB Kazakhstan will be able to support more importers and

exporters in Kazakhstan and increase the volume of trade between

Kazakhstan and other countries in the region.

The Financial crisis and Trade Finance

Post crisis(2009) the world experienced the largest drop in global trade volumes with world trade of goods falling by 23 percent . This is because of lack of trade finance. Availability of trade finance was different in developed and developing countries during the crises. In Advanced and emerging economies, bank-intermediated trade finance largely held up, even as it came under several sources of strain. This was not the case in developing countries.

In 2009 and 2010, the World Bank conducted a firm and Bank survey in 14 developing countries across five regions.

Found that the global financial crisis constrained trade finance in

developing countries for exporters and importers alike.

In particular, the survey showed that small and medium firms (SMEs) were
more affected than larger firms because of their weak capital bases and bargaining power, So banks in developing countries became more risk-averse in light of the drastic reduction in global liquidity and a decline in the number of intermediary players.

IFC's Global Trade Finance Program (GTFP) in Latin America and

the Caribbean

IFCs network in the region includes 58 issuing banks in 21 countries.

The most active banks are in Argentina, Brazil, Guatemala, Honduras,

and Uruguay.
Transactions commonly average $1.2 million for pre-export and import

financing, supporting mainly agribusiness and infrastructure industries.

Costa Rica-based Banco Improsa was at a distinct disadvantage. Lost about 15 transactions each year because did not have relationships with banks in other parts of the world, especially in Asia and India After joining the program , gained access to a global network of

international banks (representing approximately 70 percent of Costa Ricas

GDP).

First transaction- financed a small, family-owned business in San Jose,

which imported notebooks from an SME in Mumbai, India

EUs Aid for Trade to developing countries The EU and its Member States is the largest provider of Aid for Trade in the world , making up 60% of global commitments. In 2008 and 2009 met their 2 billion target and reached 2.6 billion in 2010. Aid for Trade in 2010 by maintaining the all-time high registered the year before and totaling some 10.7 billion committed. Sub-Saharan Africa continues to be the main beneficiary of EU Aid for Trade.

ADB offers Trade Finance in Chinese Yuan and Indian Rupee

The Asian Development Bank(ADB) has decided to offer trade finance in Chinese Yuan and Indian Rupees. To support intraregional trade and combating dollar liquidity shortages.

The ADB had received demand for rupee trade finance from Bhutan and Nepal,
and demand for Yuan trade finance from a number of countries including Vietnam.

The ADBs trade finance program until now operated only in dollars, euros and
yen which supported more than $3.5 billion worth of transactions.

The program provided loans and guarantees to businesses through a network of 200 partner banks and are expanded by 40% in the first half of

2012, compared to the same period last year.

The gaps in trade finance are persistent in these challenging markets and

seem to be growing because of the financial deleveraging thats taking

place.

The requirement for banks to raise more capital, and treating Trade
Finance Basel III regulatory requirements is more difficult compared to Basel II But that effort threatens to raise the cost of trade finance

Euro zone debt crisis poses serious threat to emerging markets

The euro zone crisis poses a greater threat to developing economies than the 2008 financial crisis.

A decline in trade finance affects the trade in goods, because exporters in developing countries rely on international banks to provide them with credit until they are paid.

But banks are becoming increasingly reluctant to provide such credit because of their growing aversion to risk against the backdrop of the euro zone crisis.

Total global trade finance volume fell to $26.8bn in the first quarter of 2012, lowest quarterly volume since the third quarter of 2009 ($24.4bn).

European banks, which provide almost 80% of commodity trade finance,

are likely to sell off as much as $3.8tn in assets over the next few years.

China and the rich Gulf States are not making up for lower financial
flows from Europe. Chinese banks tend to work with Chinese companies or state-owned outlets. Gulf States are unable to step up in a big way. This affected projects.

not just infrastructure, but mining and manufacturing