Citi to participate in IFC trade utility

Acting to make trade finance available in developing countries, Citi has signed a memorandum of understanding with the International Finance Corporation (IFC) to support the organisation's global trade liquidity programme.

Under the terms of the agreement, Citi and the IFC will fund a $1.25 billion trade finance facility aimed at boosting trade in emerging markets over a three-year period. The facility will originate funding for local banks in Africa, Asia, Central and Eastern Europe, Latin America and the Middle East.

The bank estimates that the facility will support trade flows of up to $7.5 billion over three years.

"We are very pleased to be establishing this important partnership with IFC to stimulate the recovery and growth of global trade in the emerging markets," said Francesco Vanni d'Archirafi, chief executive of Citi's global transaction services business. "We are firmly committed to restoring the flow of trade and commerce financing around the world."

Citi will provide $750 million in funding for the facility, with the remainder coming from the IFC and other development agencies.

The World Bank estimates that since the credit crunch began in earnest last autumn the shortfall in trade finance has exceeded $100 billion.

"Global trade is facing serious challenges in today's financial environment, given the shortage of liquidity worldwide," said Lars Thunell, IFC's executive vice-president and chief executive.

The global trade liquidity programme was launched by the World Bank and the IFC after the group of 20 nations meeting in London in April. Having begun operations in May, the facility aims to support $50 billion of emerging market trade by bringing together governments, development agencies and private sector banks.

"This programme benefits small businesses in developing countries, which are a major source of jobs and have been hard hit by the global financial crisis," said Thunell.

Support for the facility already includes $1 billion from the IFC, nearly $500 million from the UK government, $200 million from the Canadian government and $50 million from the Dutch government. The World Bank hopes to secure $5 billion in public sector commitments for the facility.

Citi's MOU with the IFC comes after similar agreements were signed with Singapore's DBS and UK-based Standard Chartered Bank. Standard Chartered received financing from the IFC worth $500 million to increase trade financing available in developing countries.

"This is a much-awaited development that will help us leverage our credit and support greater trade volumes for our bank and corporate clients in Asia-Pacific," said Ravi Saxena, Citi's global head of trade services and regional head of trade for Asia-Pacific.

Citi's global transaction services had an average of $278 billion in liability balances under administration at the end of the first quarter.